WEBVTT - First Republic Rescue and Continuing Credit Suisse Fallout

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<v Speaker 1>This is Bloomberg Gay Break Asia for this Friday, March

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<v Speaker 1>seventeenth in Hong Kong, Thursday March sixteenth in New York

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<v Speaker 1>and coming up today, US equities rally after a major

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<v Speaker 1>deposit injection at First Republic Bank. Credit suis and UBS

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<v Speaker 1>is said to be opposed to the idea of a

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<v Speaker 1>forest combination, and the European Central Bank stays the course

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<v Speaker 1>in raising rates, but it offers few clues about the future.

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<v Speaker 1>Leaders of Korean Japan hold a historic summit in Tokyo,

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<v Speaker 1>Poland sending fighter jets to its neighbor Ukraine. I'm Dan Schwartzman.

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<v Speaker 1>I'll have news coming up that's all straight ahead on

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<v Speaker 1>Bloomberg Daybreak Asia, The business news you need to start

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<v Speaker 1>your day in just one fifteen minute podcast available on Apples, Spotify,

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<v Speaker 1>the Bloomberg Business app and everywhere you get your podcasts.

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<v Speaker 1>Good morning, I'm Brian Curtis and I'm Doug Krisner. Here

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<v Speaker 1>are the stories we're following today. Top stories here the

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<v Speaker 1>biggest banks agreeing to deposit sixty billion dollars with First

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<v Speaker 1>Republic Bank. It's an effort supported by the US government

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<v Speaker 1>to help stabilize the California lender after the collapse of

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<v Speaker 1>three regional banks, JP Morgan Chase, Bank of America's City

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<v Speaker 1>Group and Wills Fargo contributing deposits of five billion dollars each, Goldman, Saxon,

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<v Speaker 1>Morgan Stanley kicking in two and a half billion, and

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<v Speaker 1>then there were a number of other banks providing one billion.

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<v Speaker 1>We heard earlier from Bloomberg's sermon, chan, I think what

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<v Speaker 1>the government, in conjunction with the private sector banks are

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<v Speaker 1>doing is drawing a line in the sand, saying that

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<v Speaker 1>SVB happened, signature happened. We're not going to let First

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<v Speaker 1>Republic become a failed bank. Shares of First Republic, has

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<v Speaker 1>mentioned swung pretty wildly today, plunging about thirty six percent

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<v Speaker 1>early in the day, then surging as much as twenty

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<v Speaker 1>eight percent as details of this plan were first reported,

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<v Speaker 1>and as mentioned during the regular session when it was

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<v Speaker 1>all said and done, First Republic shares up ten percent,

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<v Speaker 1>and just now checking again twenty three point eight percent

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<v Speaker 1>in late trading. Rish are dug And then after the

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<v Speaker 1>ballot we learned how much should banks have been borrowing

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<v Speaker 1>from two FED backstop facilities during the most recent week.

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<v Speaker 1>The number close to one hundred sixty five billion dollars

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<v Speaker 1>that story from Bloomberg's and Kate's. Data published by the

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<v Speaker 1>FED show almost one hundred and fifty three billion dollars

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<v Speaker 1>in borrowing from the Discount Window, the traditional liquidity backstop

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<v Speaker 1>for banks, and the week ending March fifteenth. That is

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<v Speaker 1>a record high. The prior all time high was reached

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<v Speaker 1>during the two thousand and eight financial crisis. The numbers

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<v Speaker 1>also showed just under twelve billion dollars in borrowing from

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<v Speaker 1>the new emergency backstop known as the Bank Term Funding Program,

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<v Speaker 1>which launched Sunday. Taken together, the amount of credit extended

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<v Speaker 1>shows a banking system that are still fragile. After the

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<v Speaker 1>collapse of two financial institutions in Washington and Kate's Bloomberg Daybreak, Asia,

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<v Speaker 1>Treasury Secretary Janet Yellen tried to reassure US lawmakers about

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<v Speaker 1>the collapse of SVB and Signature Bank. Here she is

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<v Speaker 1>testifying before the Senate Banking Committee. I can reassure the

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<v Speaker 1>members of the committee that our banking system is sound

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<v Speaker 1>and that Americans can feel confident that their deposits will

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<v Speaker 1>be there when they need them. This week's actions demonstrate

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<v Speaker 1>our resolute commitment to ensure that our financial system remains

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<v Speaker 1>strong and the depositors savings remained safe. Yellen said that

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<v Speaker 1>regulators must re examine banking rules and supervision and make

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<v Speaker 1>sure that they're appropriate. He added that liquidity in this

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<v Speaker 1>instance had played a very important role in the recent

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<v Speaker 1>bank failures. Well, the European Central Bank wind ahead today

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<v Speaker 1>with its planned half point increase in its key rate,

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<v Speaker 1>the rate now lifted to three percent, even though we've

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<v Speaker 1>been talking about the turbulence and financial markets as it

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<v Speaker 1>results from some of the liquidity problems in the global

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<v Speaker 1>banking system. Now. During a press conference, President Christina Legarde

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<v Speaker 1>said the ECB has a lot of confidence in European banks.

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<v Speaker 1>In Europe, we have strong supervision, we have strong capital,

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<v Speaker 1>and we have solid liquidity positions and as the vice

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<v Speaker 1>president said, exposures are not concentrated and based on the

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<v Speaker 1>work that has been conducted by the SSM, we don't

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<v Speaker 1>have similar occurrence as the one that occurred in California

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<v Speaker 1>for instance. Le guard went on to say that it

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<v Speaker 1>wasn't necessary to give guidance on what the ECB will

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<v Speaker 1>do at its next meeting. She essentially declined that question.

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<v Speaker 1>She went on to say the elevated level of uncertainty

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<v Speaker 1>does reinforce the importance of being data dependent, and she

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<v Speaker 1>added that ECB officials won't wane on their commitment to

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<v Speaker 1>fight inflation. We're hearing Credit Suite and UBS are opposed

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<v Speaker 1>to any kind of forced combination. This comes even as

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<v Speaker 1>a scenario planning for our government orchestrated tie up continues.

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<v Speaker 1>We get more from Bloomberg Sonali Basak, BBS Credit Sue.

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<v Speaker 1>This was the merger of dreams for a very long time,

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<v Speaker 1>but the moment in time we find ourselves in now.

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<v Speaker 1>If UBS were to buy a Credit Squees, they would

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<v Speaker 1>also take on all the risk tied to Credit Swees

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<v Speaker 1>and would also probably also needs some support from the

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<v Speaker 1>Swiss National Bank. We hear that UBS would prefer to

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<v Speaker 1>focus on its own wealth centric standalone strategy and Credit

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<v Speaker 1>Sweez is seeking some time here to sort through its

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<v Speaker 1>turnaround after winning a liquidity backstop from the Swiss National Bank.

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<v Speaker 1>The Swiss government and the lenders are running through a

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<v Speaker 1>whole range of scenarios and it remains to be seen

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<v Speaker 1>which additional steps will be taken. All right, doug, Let's

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<v Speaker 1>take a closer look here at First Republic share. So

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<v Speaker 1>a lot of listeners might be wondering, well, what does

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<v Speaker 1>First Republic have to pay to get that kind of injection.

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<v Speaker 1>I mean, it's just a deposit really of thirty billion dollars,

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<v Speaker 1>and it's kind of buried in our story. But First

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<v Speaker 1>Republic actually will just be paying market rates on that

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<v Speaker 1>thirty billion. And if you think about it, all of

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<v Speaker 1>Silicon Valley banks depositors were confirmed as whole by the

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<v Speaker 1>federal authorities, and yet nobody wants to buy the bank,

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<v Speaker 1>So it can kind of understand this is just deposits

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<v Speaker 1>at First Republic. Doesn't really change the cash posi position

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<v Speaker 1>of the company all that much, and so you might

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<v Speaker 1>wonder if that's why the shares are down so much

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<v Speaker 1>in after hours. And on top of that, initial commitments

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<v Speaker 1>from these eleven banks that are supplying the deposit injection

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<v Speaker 1>that initially will only extend for around one hundred and

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<v Speaker 1>twenty days. It could go beyond that, but at this point,

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<v Speaker 1>I think the focus is on just the next four

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<v Speaker 1>months or so. Now, maybe the market is concerned about

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<v Speaker 1>the longer term condition of this bank. We'll have to

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<v Speaker 1>wait and see on that. Yeah, yeah, I mean I

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<v Speaker 1>think what's interesting is that First Republic since March ninth,

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<v Speaker 1>so basically just a little over a week, was borrowing

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<v Speaker 1>money from the Federal Home Loan Bank. It borrowed ten

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<v Speaker 1>billion dollars at a rate of five point zero nine percent,

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<v Speaker 1>So that's what it was costing it to get money

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<v Speaker 1>into the system. Now you get thirty billion. And I

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<v Speaker 1>went on their website to see what they're paying for deposits,

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<v Speaker 1>and of course it's not posted. And even if you

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<v Speaker 1>try to get the one hundred twenty days in a seed,

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<v Speaker 1>you don't see the numbers, but you know it's going

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<v Speaker 1>to be way less than that. So it's good for

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<v Speaker 1>First Republic. They're getting cheaper cash, as it were. But

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<v Speaker 1>the other thing to kind of put your finger on

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<v Speaker 1>is this idea that consumer sentiment, even business sentiment, may

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<v Speaker 1>shift in such a way where people feel more confident

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<v Speaker 1>in being exposed to or deposited having their deposits with

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<v Speaker 1>a larger lender rather than a small, boutique regional bank. Yeah,

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<v Speaker 1>that is a very good point, because this is really

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<v Speaker 1>about depositors and stomping runs on the banks. It's not

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<v Speaker 1>for saving the equity investors in these banks. You know

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<v Speaker 1>that is a sort of distant down the road thing,

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<v Speaker 1>but keeping the system working and stopping the bank runs

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<v Speaker 1>and that's what these deposits will help dot at first Republic.

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<v Speaker 1>But it's a story. As I mentioned, you know, looking

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<v Speaker 1>at the action after hours shows you that these trends

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<v Speaker 1>don't last very long, and we don't know exactly where

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<v Speaker 1>we'll be. The FED has a lot to think about

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<v Speaker 1>over the next many days before next week's meeting. All right,

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<v Speaker 1>time for Global News. An important summit occurs in Tokyo.

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<v Speaker 1>Dan Schwartzwen with details and the news from the New

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<v Speaker 1>York Newsroom. Dan, Yeah, definitely, Brian who was a thong

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<v Speaker 1>of relations in Tokyo between two Asian powers. South Korean

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<v Speaker 1>President yunsuk yul meeting with Japanese Prime Minister of Fumio

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<v Speaker 1>Kishida as the two countries held their first formal summit

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<v Speaker 1>since two and eleven. The two leaders agreed to restart

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<v Speaker 1>a security dialogue as well as advancing military intelligence sharing.

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<v Speaker 1>Japan also announcing it would be lifting export controls on

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<v Speaker 1>three key materials used by Korean chipmakers. The US has

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<v Speaker 1>wanted the two countries to begin warming relations to counter

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<v Speaker 1>the threat of North Korea and China. Poland sending fighter

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<v Speaker 1>jets to Ukraine. Polish President Andre Duda says his country

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<v Speaker 1>is sending four Soviet era MiG twenty nine to Ukraine

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<v Speaker 1>in the next few days. Poland has already begun sending

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<v Speaker 1>Leopard two tanks to its eastern neighbors, with a total

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<v Speaker 1>of fourteen expected across the border. US Secretary of State

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<v Speaker 1>Anthony Blincoln, commenting on the delivery of the jets, different

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<v Speaker 1>countries are doing different things in response to what they

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<v Speaker 1>have and what the perceived needs are. Lincoln was speaking

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<v Speaker 1>from the West African nation of Niger. China and Ukraine's

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<v Speaker 1>foreign ministers holding rare talks ahead of a possible conversation

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<v Speaker 1>between the country's two presidents, King Gang telling Demitro Kuleba

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<v Speaker 1>that China is committed to promoting peace while also wanting

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<v Speaker 1>to advance negotiations. Kuleba said he discussed with Gouging the

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<v Speaker 1>quote significance of the principle of territorial integrity. Ukrainian President

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<v Speaker 1>Vladimir z Lenski and his counterpart Shijinping could talk for

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<v Speaker 1>the first time as early as next week, after she

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<v Speaker 1>is expected to be visiting Moscow. Russia's looking to recover

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<v Speaker 1>the wreckage of the US drone that went down in

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<v Speaker 1>the Black Sea. The US says that anything sensitive on

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<v Speaker 1>the craft would have either sank into the ocean or

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<v Speaker 1>was destroyed, as the drone operators took mitigating measures. Video

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<v Speaker 1>of the intercept by two Russian SU twenty seven fighter

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<v Speaker 1>jets showed the plane spraying jet fuel on the drone

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<v Speaker 1>before one of the planes appears to clip the propeller

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<v Speaker 1>of the drone. Russia claims that drone went down due

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<v Speaker 1>to quote abrupt maneuvering. Pentagon spokesman Brigadier General Pat Rider

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<v Speaker 1>on why Russia can't get much info from the wreckage.

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<v Speaker 1>I'm not going to go into details, but that we

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<v Speaker 1>took steps to protect information aboard that aircraft and to

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<v Speaker 1>the fact that it crashed and extremely deep water. General

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<v Speaker 1>Rider was speaking to reporters at the Pentagon. California's crippling

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<v Speaker 1>drought that has lasted three years is close to ending,

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<v Speaker 1>as strong storms over the past few months have left

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<v Speaker 1>behind a record snowpack in the Sierra Nevadas. California relies

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<v Speaker 1>mainly on snow and rain for the bulk of its

0:10:30.040 --> 0:10:34.000
<v Speaker 1>water to feed its large agricultural industry, Global news twenty

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<v Speaker 1>four hours a day, powered by more than twenty seven

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<v Speaker 1>hundred journalists and analysts in over one hundred and twenty countries.

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<v Speaker 1>Dan Schwartzman, and this is Bloomberg. This is Bloomberg Daybreak Asia.

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<v Speaker 1>I'm Brian Curtis in Hong Kong alongside Rashad Salama. So

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<v Speaker 1>let's welcome to the airwaves. Ann Barry, founder and managing

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<v Speaker 1>partner at Threadneedle. And we appear to be at the

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<v Speaker 1>ad or near the end of the rate hiking cycle,

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<v Speaker 1>regardless of what the FED does next week. I mean,

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<v Speaker 1>we're getting somewhere close. So I get the enthusiasm today,

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<v Speaker 1>a little bit of a relief rally with the deposit

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<v Speaker 1>story at First Republic. But doesn't the downside risk outweigh

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<v Speaker 1>the upside possibilities at the moment? Sell come back later, Brian, Wow,

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<v Speaker 1>did you meet my mind and sort of take my

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<v Speaker 1>talking point and say it right there? Selling? Come back later?

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<v Speaker 1>I think, Brian, the question around the FED is the

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<v Speaker 1>really critical one. Particularly enlightened what happened with the ECB

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<v Speaker 1>making the choice to hike rates if the FED doesn't

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<v Speaker 1>hike next week, Given that the inflation data here in

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<v Speaker 1>the US was pretty strong. Is that the FED going

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<v Speaker 1>to be perceived to be as having a vote of

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<v Speaker 1>no confidence in the US banking system? Does it almost

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<v Speaker 1>need to hike at this point because if it doesn't,

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<v Speaker 1>people are saying it sends the wrong signal. I think

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<v Speaker 1>it's tricky. I think we are going to have to

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<v Speaker 1>anticipate a great hike coming through no matter what's going

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<v Speaker 1>on right now with FARB. I mean that is I

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<v Speaker 1>think you hit the nail on the head that they

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<v Speaker 1>are caught within the rock and a hard play, so, yeah,

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<v Speaker 1>they really are. There's no win. Some humility could be

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<v Speaker 1>in order. I mean, nobody saw this coming, really. I

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<v Speaker 1>mean there may have been a few people out there

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<v Speaker 1>shorting these regional banks so because they saw the mismatch.

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<v Speaker 1>But for the market's point of view, I mean, and

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<v Speaker 1>we didn't really see this coming, and the FED wasn't

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<v Speaker 1>really talking about this and warning about it. Wouldn't it

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<v Speaker 1>just be a humble move to say, yeah, I mean,

0:12:24.520 --> 0:12:27.679
<v Speaker 1>we're confident in the banking system, but we've seen some

0:12:27.800 --> 0:12:30.120
<v Speaker 1>ructions here. We've had three bank feel here. Is it's

0:12:30.200 --> 0:12:32.720
<v Speaker 1>prudent to pause here and assess and we'll see what

0:12:32.720 --> 0:12:35.720
<v Speaker 1>happens next. I think that would be a real admission

0:12:35.800 --> 0:12:38.640
<v Speaker 1>of failure that the SAID can't really afford to do

0:12:38.720 --> 0:12:42.040
<v Speaker 1>from a credibility perspective right now, Brian. When you think

0:12:42.080 --> 0:12:46.199
<v Speaker 1>about the Fed's focus, it has been consistent that it

0:12:46.240 --> 0:12:51.120
<v Speaker 1>has to be uniformly focus on making sure that inflation

0:12:51.200 --> 0:12:55.480
<v Speaker 1>comes down, maximum possible employment at the lowest possible inflation rate.

0:12:56.000 --> 0:12:59.480
<v Speaker 1>If they do not believe, if the street doesn't believe,

0:12:59.480 --> 0:13:01.680
<v Speaker 1>if the market doesn't believe that there's a fundamental risk

0:13:01.760 --> 0:13:04.760
<v Speaker 1>to unemployment right now and inflation continues to be high,

0:13:04.800 --> 0:13:08.200
<v Speaker 1>I don't think the FED has any choice, particularly particularly

0:13:08.559 --> 0:13:10.800
<v Speaker 1>since there have been a number of statements coming out

0:13:10.840 --> 0:13:14.600
<v Speaker 1>now from the White House and from Secretary Treasury Secretary

0:13:14.640 --> 0:13:16.720
<v Speaker 1>Yellen saying that there is confidence in the banking system.

0:13:16.760 --> 0:13:19.360
<v Speaker 1>If the FED doesn't move on that basis, it's contradicting

0:13:19.400 --> 0:13:22.160
<v Speaker 1>central government. All right, And but let's have a look

0:13:22.200 --> 0:13:24.319
<v Speaker 1>at all this, you know, because at the same time,

0:13:24.559 --> 0:13:27.240
<v Speaker 1>we you know, as we be then we went into

0:13:27.280 --> 0:13:30.360
<v Speaker 1>this like a bit of a lull. But you know,

0:13:30.440 --> 0:13:33.120
<v Speaker 1>you always felt as the investors were waiting for the

0:13:33.120 --> 0:13:36.040
<v Speaker 1>next shoe to drop, and then we've got credit Suiee.

0:13:36.720 --> 0:13:40.160
<v Speaker 1>Was that the shoe which dropped, because really, ultimately that's

0:13:40.600 --> 0:13:43.480
<v Speaker 1>been in the making for a while. That problem, Yeah,

0:13:43.520 --> 0:13:45.000
<v Speaker 1>I agree with I think I agree with that. The

0:13:45.000 --> 0:13:47.439
<v Speaker 1>credit Swie issue has been making in the making for

0:13:47.480 --> 0:13:48.800
<v Speaker 1>a long time, and you can see it in its

0:13:48.840 --> 0:13:52.200
<v Speaker 1>share price, which has been consistently declining since posts the

0:13:52.240 --> 0:13:55.640
<v Speaker 1>Great Financial Crisis. SPB is a different thing, and here's

0:13:55.640 --> 0:13:58.360
<v Speaker 1>where I think the shoe's about to drop next. And

0:13:58.440 --> 0:14:01.680
<v Speaker 1>it's not about systemic bank issues. It's about the fact

0:14:01.800 --> 0:14:06.400
<v Speaker 1>that endowments and pension funds haven't yet seen the full

0:14:06.520 --> 0:14:10.240
<v Speaker 1>hit to their positions in venture capital and in private

0:14:10.280 --> 0:14:14.400
<v Speaker 1>capital markets because those funds haven't yet sufficiently marked their

0:14:14.440 --> 0:14:16.959
<v Speaker 1>portfolios down. But now with SDB, they're going to have to.

0:14:17.600 --> 0:14:20.040
<v Speaker 1>What are we talking about in terms of exposure here,

0:14:20.080 --> 0:14:22.680
<v Speaker 1>because these are meant to be retirement funds and meant

0:14:22.680 --> 0:14:25.720
<v Speaker 1>to be quite conservative. Yeah, I mean it's been significant.

0:14:25.720 --> 0:14:26.840
<v Speaker 1>If you take a look at a lot of the

0:14:26.920 --> 0:14:30.200
<v Speaker 1>endowments and pension funds, they have been increasing their exposure

0:14:30.680 --> 0:14:33.440
<v Speaker 1>personally to later stage private equity, but also to venture

0:14:33.440 --> 0:14:37.400
<v Speaker 1>capital over time. And if you see what happened Richard,

0:14:37.440 --> 0:14:40.080
<v Speaker 1>you saw that a lot of these funds. Tiger marked

0:14:40.080 --> 0:14:44.520
<v Speaker 1>its venture portfolio down thirty three twenty twenty two. Soft

0:14:44.600 --> 0:14:47.480
<v Speaker 1>Bank has marked their portfolios down for twenty percent for

0:14:47.560 --> 0:14:50.080
<v Speaker 1>twenty twenty two. But now we're in twenty twenty three,

0:14:50.160 --> 0:14:52.200
<v Speaker 1>and what happens if someone tries to turn up to

0:14:52.280 --> 0:14:56.040
<v Speaker 1>buy Silicon Valley Banks ten billion dollars portfolio for even

0:14:56.080 --> 0:14:59.040
<v Speaker 1>bigger discounts, then what are the endowments and pension funds

0:14:59.080 --> 0:15:00.480
<v Speaker 1>going to have to They're can have to the marks

0:15:00.480 --> 0:15:03.160
<v Speaker 1>down further. So I'm kind of surprised because, you know,

0:15:03.200 --> 0:15:05.560
<v Speaker 1>it seem like from your words to the fed's ears,

0:15:05.960 --> 0:15:08.520
<v Speaker 1>I mean, are they not listening? Are they not seeing that?

0:15:09.120 --> 0:15:11.080
<v Speaker 1>But you're saying that you still think that they have

0:15:11.200 --> 0:15:13.640
<v Speaker 1>to raise twenty five basis points in the end, Does

0:15:13.680 --> 0:15:16.040
<v Speaker 1>it really matter at all whether it's twenty five or pause.

0:15:16.320 --> 0:15:20.120
<v Speaker 1>The commentary is going to have to be something about we're,

0:15:20.160 --> 0:15:23.360
<v Speaker 1>you know, we're assessing where we're at, and we're paying

0:15:23.400 --> 0:15:27.000
<v Speaker 1>some respect to the long and variable lag angle. I

0:15:27.000 --> 0:15:30.400
<v Speaker 1>think certainly the voiceover so when we see Jay Powell

0:15:30.400 --> 0:15:32.720
<v Speaker 1>come out and do his press conference and we read

0:15:32.760 --> 0:15:34.880
<v Speaker 1>through the minutes, I think we definitely need to see

0:15:34.920 --> 0:15:38.640
<v Speaker 1>that language. Brian when it comes to the actual execution

0:15:39.120 --> 0:15:41.640
<v Speaker 1>of a hike, will they pause or not. I'm at

0:15:41.720 --> 0:15:43.440
<v Speaker 1>least hopeful that they go up and they pursue that

0:15:43.480 --> 0:15:46.280
<v Speaker 1>twenty five basis points because inflation is not under control

0:15:46.360 --> 0:15:49.040
<v Speaker 1>yet and there's no sign really that there's going to

0:15:49.120 --> 0:15:51.520
<v Speaker 1>be that control that two percent target going to be

0:15:51.600 --> 0:15:54.400
<v Speaker 1>hit anytime in the next twelve months right now, Well chapping,

0:15:55.080 --> 0:15:57.280
<v Speaker 1>you know, so we're talking about financials, but about the

0:15:57.480 --> 0:15:59.160
<v Speaker 1>you know, this is one thing which is not as

0:15:59.240 --> 0:16:03.720
<v Speaker 1>regulated and a bit definitely more opaque. How does it

0:16:03.800 --> 0:16:06.280
<v Speaker 1>all creep into the non banking side of the economy

0:16:06.280 --> 0:16:10.400
<v Speaker 1>and then the non formalized banking sector. Well, parts of

0:16:10.440 --> 0:16:13.440
<v Speaker 1>the non formalized banking sector that has been growing over

0:16:13.520 --> 0:16:16.960
<v Speaker 1>time is the private credit area. So if you take

0:16:17.000 --> 0:16:19.880
<v Speaker 1>a look, for example, at these big asset managers which

0:16:19.880 --> 0:16:21.880
<v Speaker 1>have traditionally been in private equity, or they've had some

0:16:21.920 --> 0:16:25.520
<v Speaker 1>public market arms such as Blackstone, or if you take

0:16:25.560 --> 0:16:27.320
<v Speaker 1>a look at Apollo, which is a name that's been

0:16:27.640 --> 0:16:30.200
<v Speaker 1>going around a lot, it's potential bid of for SVB lately.

0:16:30.400 --> 0:16:33.160
<v Speaker 1>Traditionally they've made their name in private equity, but private

0:16:33.200 --> 0:16:36.000
<v Speaker 1>credit is really where a lot of the action has

0:16:36.040 --> 0:16:37.920
<v Speaker 1>tended to happen, and what we're seeing now with the

0:16:37.960 --> 0:16:40.200
<v Speaker 1>banks where confidence is low, I think we're going to

0:16:40.200 --> 0:16:44.560
<v Speaker 1>see the pullback in commercial lending by these big banks

0:16:44.600 --> 0:16:47.120
<v Speaker 1>as they try and tighten their underwriting standards, and that's

0:16:47.120 --> 0:16:50.960
<v Speaker 1>where we could see these non traditional capital providers step in. Yeah,

0:16:51.040 --> 0:16:53.640
<v Speaker 1>let's take a closer look at First Republic. It's only

0:16:53.680 --> 0:16:55.960
<v Speaker 1>one bank, but you've written about it in your notes,

0:16:56.040 --> 0:16:59.400
<v Speaker 1>so fair game. We see the star that starts down

0:16:59.440 --> 0:17:02.040
<v Speaker 1>pretty sharp and after hours. Now I know that liquidity

0:17:02.120 --> 0:17:05.320
<v Speaker 1>is a bit thin in late trading there, but still,

0:17:05.359 --> 0:17:07.399
<v Speaker 1>I mean, you have to pay respect that twenty percent

0:17:07.480 --> 0:17:12.240
<v Speaker 1>down after this thirty billion injection. It's only a deposit injection.

0:17:12.800 --> 0:17:15.280
<v Speaker 1>And the analogy that I made earlier, I think is

0:17:15.320 --> 0:17:18.680
<v Speaker 1>real that Silicon Value bank, nobody's buying it, even though

0:17:18.760 --> 0:17:22.200
<v Speaker 1>all the deposits were guaranteed. And here you have First

0:17:22.200 --> 0:17:25.360
<v Speaker 1>Reprobably you get thirty billion, but you know, there's who

0:17:25.359 --> 0:17:28.640
<v Speaker 1>knows whether they get anymore, and people sell down the start. Well,

0:17:28.680 --> 0:17:30.359
<v Speaker 1>I think the question is whether there's going to be

0:17:30.400 --> 0:17:32.720
<v Speaker 1>a guarantee extended beyond the two hundred and fifty thousand

0:17:32.760 --> 0:17:34.560
<v Speaker 1>limits for First Republic in the way that there has

0:17:34.600 --> 0:17:38.000
<v Speaker 1>been for signature and for SPB. I mean, I think, Brian,

0:17:38.040 --> 0:17:40.320
<v Speaker 1>what's interesting the eleven banks coming in with a thirty

0:17:40.320 --> 0:17:43.360
<v Speaker 1>billion dollars of deposits. In my mind, is the banking

0:17:43.400 --> 0:17:46.159
<v Speaker 1>system self medicating in the hope that this means that

0:17:46.240 --> 0:17:48.400
<v Speaker 1>regulators won't have to come and cure it for them.

0:17:48.760 --> 0:17:50.760
<v Speaker 1>But you raised the point earlier. It's only one hundred

0:17:50.800 --> 0:17:53.720
<v Speaker 1>and twenty day solution, and so I think there's twenty

0:17:53.720 --> 0:17:56.960
<v Speaker 1>percent down in the after hours trading is a reflection

0:17:56.960 --> 0:17:58.960
<v Speaker 1>of the fact the market saying, look, we really like

0:17:59.080 --> 0:18:01.520
<v Speaker 1>the sign of infidence. We like the fact the banking

0:18:01.520 --> 0:18:04.000
<v Speaker 1>system is rallying together and trying to be collegial about this,

0:18:04.280 --> 0:18:06.280
<v Speaker 1>but it doesn't solve the longer term issue. We need

0:18:06.359 --> 0:18:10.440
<v Speaker 1>evidence from First Republic that there's no bigger fundamental issue

0:18:10.640 --> 0:18:14.320
<v Speaker 1>and that confidence can be restored. Okay, twenty seconds or so.

0:18:14.440 --> 0:18:16.359
<v Speaker 1>Where would you put new money at the moment or

0:18:16.359 --> 0:18:19.240
<v Speaker 1>would you hold it in cash? I'm holding it in cash.

0:18:19.280 --> 0:18:22.040
<v Speaker 1>I have you for a while, Brian. It's particularly creative.

0:18:22.040 --> 0:18:24.680
<v Speaker 1>We're imaginative, but until this shakes out, I really fail

0:18:24.720 --> 0:18:26.959
<v Speaker 1>to see something that's yielding a better return than holding

0:18:27.280 --> 0:18:30.520
<v Speaker 1>short duration treasuries to maturity and thank you very much

0:18:30.560 --> 0:18:32.919
<v Speaker 1>for joining us. We appreciate it. And Barry, founder and

0:18:33.000 --> 0:18:39.040
<v Speaker 1>managing partner at Threadneedle. This is Bloomberg. This is Bloomberg

0:18:39.080 --> 0:18:41.560
<v Speaker 1>Daybreak Asia. Your morning brief on this story is making

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