1 00:00:00,880 --> 00:00:04,320 Speaker 1: You're listening to the Bloomberg Sound on podcast. Catch us 2 00:00:04,400 --> 00:00:06,479 Speaker 1: live weekdays at one Eastern. 3 00:00:06,160 --> 00:00:09,360 Speaker 2: On Bloomberg dot com, the iHeartRadio app and the Bloomberg 4 00:00:09,400 --> 00:00:10,280 Speaker 2: Business apps. 5 00:00:10,240 --> 00:00:12,960 Speaker 3: Or listening on demand wherever you get your podcasts. 6 00:00:13,880 --> 00:00:15,400 Speaker 4: Thanks for joining us from Washington. 7 00:00:15,440 --> 00:00:18,119 Speaker 5: This is Bloomberg Sound on President Biden wiyhs In on 8 00:00:18,160 --> 00:00:21,800 Speaker 5: First Republic. He just made the comments in the Rose Garden. 9 00:00:21,960 --> 00:00:24,800 Speaker 5: An unrelated event here, of course, First Republic, as you've 10 00:00:24,800 --> 00:00:27,080 Speaker 5: been hearing, acquired by JP Morgan and a deal put 11 00:00:27,080 --> 00:00:30,040 Speaker 5: together over the weekend with the help of the FDIC, 12 00:00:30,240 --> 00:00:31,360 Speaker 5: with the help of regulators. 13 00:00:31,400 --> 00:00:32,000 Speaker 4: Here's the President. 14 00:00:32,080 --> 00:00:33,920 Speaker 6: These actions are going to make sure that the banking 15 00:00:34,000 --> 00:00:37,640 Speaker 6: system is safe and sound, and that includes protecting small 16 00:00:37,640 --> 00:00:40,960 Speaker 6: businesses across the country who need to make payroll for 17 00:00:41,080 --> 00:00:44,839 Speaker 6: workers and their small businesses. And so let me be 18 00:00:44,960 --> 00:00:50,000 Speaker 6: very clear, well, depositors are being protected, shareholders are losing 19 00:00:50,040 --> 00:00:53,840 Speaker 6: their investments, and critically, taxpayers are not the ones that 20 00:00:53,880 --> 00:00:54,319 Speaker 6: are on the. 21 00:00:54,240 --> 00:00:55,960 Speaker 5: Hook, all right, and that will be the message from 22 00:00:56,000 --> 00:00:59,000 Speaker 5: the White House here. Yet, JP Morgan becomes even bigger 23 00:00:59,040 --> 00:01:01,720 Speaker 5: after receiving an exception to rules that prevent banks of 24 00:01:01,720 --> 00:01:06,160 Speaker 5: that size from getting larger through consolidation. It did save 25 00:01:06,200 --> 00:01:08,440 Speaker 5: the FDA DIC a few billion dollars, though in its 26 00:01:08,480 --> 00:01:12,280 Speaker 5: deposit insurance fund, JP's got a lot of cash. Bloomberg's 27 00:01:12,319 --> 00:01:15,000 Speaker 5: Kaylee lines has been on the story, of course, since 28 00:01:15,040 --> 00:01:17,360 Speaker 5: the beginning. Here, Kaylee, you've had quite a morning. 29 00:01:17,840 --> 00:01:20,520 Speaker 7: Yeah, technically a morning that kind of started overnight. 30 00:01:20,640 --> 00:01:21,640 Speaker 4: Well, I guess that's true. 31 00:01:21,680 --> 00:01:23,320 Speaker 5: So and a lot of people are kind of waking 32 00:01:23,400 --> 00:01:25,520 Speaker 5: up to this, coming to terms with exactly what happened 33 00:01:25,520 --> 00:01:29,360 Speaker 5: here and again it's this debate over bailout or no bailout. 34 00:01:29,360 --> 00:01:30,280 Speaker 5: What do we call this? 35 00:01:30,880 --> 00:01:33,959 Speaker 7: Well, it's definitely a failure of a bank. We know 36 00:01:34,080 --> 00:01:39,800 Speaker 7: that our first Republic was seized by regulators the FDIC overnight, 37 00:01:40,000 --> 00:01:44,039 Speaker 7: and then very quickly thereafter a transaction took place in 38 00:01:44,040 --> 00:01:46,760 Speaker 7: which JP Morgan agreed to buy the bank take over 39 00:01:46,840 --> 00:01:49,040 Speaker 7: all of its assets. This includes one hundred and seventy 40 00:01:49,040 --> 00:01:52,160 Speaker 7: three billion dollars of loans, thirty billion dollars of securities, 41 00:01:52,520 --> 00:01:56,840 Speaker 7: and ninety two billion dollars in deposits. So this raises 42 00:01:56,840 --> 00:01:59,680 Speaker 7: a question, Joe, because to your point about a bailout, 43 00:01:59,720 --> 00:02:02,160 Speaker 7: the law largest bank in the US has just become 44 00:02:02,560 --> 00:02:06,520 Speaker 7: even larger, been allowed to become even larger in order 45 00:02:06,840 --> 00:02:10,359 Speaker 7: to take over this bank and have the smallest possible 46 00:02:10,400 --> 00:02:14,639 Speaker 7: impact on the Deposit Insurance Fund because from our understanding 47 00:02:14,639 --> 00:02:17,520 Speaker 7: here at Bloomberg is that JP Morgan was the only 48 00:02:17,560 --> 00:02:20,040 Speaker 7: bidder that went to the FDIC and offered to take 49 00:02:20,080 --> 00:02:23,640 Speaker 7: over the entire First Republic Bank, including its problematic assets. 50 00:02:23,720 --> 00:02:26,280 Speaker 5: Some money there, right, yes, but there was FDIC money 51 00:02:26,280 --> 00:02:26,920 Speaker 5: still involved. 52 00:02:26,960 --> 00:02:29,120 Speaker 7: Yeah, there's going to be a thirteen billion dollar hit 53 00:02:29,480 --> 00:02:32,520 Speaker 7: to the insurance fund as a result of this transaction. 54 00:02:32,600 --> 00:02:35,360 Speaker 7: And there's a laws sharing agreement between JP Morgan and 55 00:02:35,400 --> 00:02:37,840 Speaker 7: the FDIC at play here as well. So it raises 56 00:02:37,840 --> 00:02:40,000 Speaker 7: the question to your point about is it a bailout 57 00:02:40,080 --> 00:02:43,280 Speaker 7: or not? In theory, no, it's not a bailout, but 58 00:02:43,360 --> 00:02:45,560 Speaker 7: could there be some trickle down to the tax bayer 59 00:02:46,160 --> 00:02:47,840 Speaker 7: at the end of the day Because of this is 60 00:02:47,880 --> 00:02:51,079 Speaker 7: the tricky political question and one that the Biden administration 61 00:02:51,200 --> 00:02:52,079 Speaker 7: is going to have to grapple with. 62 00:02:52,120 --> 00:02:54,600 Speaker 4: And redefining all the while. Too big to fail. 63 00:02:54,480 --> 00:02:56,680 Speaker 7: Right in terms of JP Morgan here, I mean, this 64 00:02:56,840 --> 00:03:00,600 Speaker 7: is a behemoth. This is literally the largest banking in 65 00:03:00,639 --> 00:03:03,000 Speaker 7: the US. It was already too big to fail and 66 00:03:03,040 --> 00:03:06,160 Speaker 7: now it has grown in size as a result of 67 00:03:06,160 --> 00:03:09,960 Speaker 7: this transaction. But it really speaks to this whole narrative, Joe, 68 00:03:09,960 --> 00:03:13,120 Speaker 7: that those are the safe banks. All throughout the banking crisis, 69 00:03:13,120 --> 00:03:16,040 Speaker 7: we've been having a conversation about how money was leaving 70 00:03:16,080 --> 00:03:18,320 Speaker 7: some of the smaller lenders rushing to the likes of 71 00:03:18,360 --> 00:03:20,400 Speaker 7: JP Morgan and others because they are too big to 72 00:03:20,400 --> 00:03:23,480 Speaker 7: fail because the government will always backstop them and never 73 00:03:23,600 --> 00:03:26,400 Speaker 7: let any of their depositors not be made whole. So 74 00:03:26,760 --> 00:03:30,240 Speaker 7: it kind of reinforces this whole question right when we're 75 00:03:30,280 --> 00:03:32,840 Speaker 7: talking about midsides banks failing because there's a crisis of 76 00:03:32,880 --> 00:03:37,280 Speaker 7: confidence in their ability to have you know, full resolution 77 00:03:37,400 --> 00:03:40,400 Speaker 7: should a failure happen. It kind of makes the point 78 00:03:40,440 --> 00:03:41,000 Speaker 7: in some ways. 79 00:03:41,200 --> 00:03:43,880 Speaker 5: Bloomberg's Kylee Lines will be back in exactly one hour, 80 00:03:44,080 --> 00:03:47,120 Speaker 5: hour two of Bloomberg's Sound on. Thank you, Kaylee, as 81 00:03:47,120 --> 00:03:49,400 Speaker 5: we add the voice of Nathan Dean, of course, senior 82 00:03:49,440 --> 00:03:52,240 Speaker 5: analyst at Bloomberg Intelligence. If you listen to this program, 83 00:03:52,640 --> 00:03:55,160 Speaker 5: you know you can rely on Nathan for some important 84 00:03:55,200 --> 00:03:58,560 Speaker 5: insights here as we wait for our conversation with City 85 00:03:58,600 --> 00:04:01,240 Speaker 5: Group CEO Jane Fraser that's just a couple of minutes away. 86 00:04:01,280 --> 00:04:03,160 Speaker 5: Nathan it's good to see you here. You've also had 87 00:04:03,200 --> 00:04:05,520 Speaker 5: a heck of a busy day. I suspect maybe all 88 00:04:05,560 --> 00:04:08,880 Speaker 5: weekend without Jamie Diamond, this would have taken on a 89 00:04:09,000 --> 00:04:09,720 Speaker 5: very different forma. 90 00:04:09,760 --> 00:04:12,119 Speaker 8: It sounds like, yeah, you know, obviously, if you listen 91 00:04:12,200 --> 00:04:14,560 Speaker 8: to the news reports, you know P and c US Bank, 92 00:04:14,600 --> 00:04:16,520 Speaker 8: there were a couple of other potential bidders for this, 93 00:04:16,680 --> 00:04:20,680 Speaker 8: and you know, obviously JP Morgan emerges as the winner. 94 00:04:20,720 --> 00:04:24,520 Speaker 8: But if JP Morgan wasn't there, and you had somebody 95 00:04:24,520 --> 00:04:26,640 Speaker 8: that was wanting to buy bits and pieces of the 96 00:04:26,640 --> 00:04:28,320 Speaker 8: bank and so forth, two things would happen. 97 00:04:28,360 --> 00:04:29,520 Speaker 4: One, obviously the. 98 00:04:29,480 --> 00:04:31,960 Speaker 8: Government wouldn't as good, wouldn't get as good of a 99 00:04:32,000 --> 00:04:35,159 Speaker 8: deal as it got, you know, the government backstop would 100 00:04:35,160 --> 00:04:37,080 Speaker 8: have to be even more. And Two, this would have 101 00:04:37,120 --> 00:04:39,800 Speaker 8: played out even longer. I mean, you know, if you 102 00:04:39,800 --> 00:04:43,040 Speaker 8: think about how Silicon Valley Bank that played out over 103 00:04:43,120 --> 00:04:44,760 Speaker 8: a series of a couple of weeks, you know, this 104 00:04:44,839 --> 00:04:47,280 Speaker 8: played out over a weekend, and so there would have 105 00:04:47,320 --> 00:04:50,320 Speaker 8: been more discussion, more market angst. I think about what 106 00:04:50,440 --> 00:04:53,440 Speaker 8: is the future of the regional banking system, Potentially even 107 00:04:53,480 --> 00:04:56,000 Speaker 8: more people just taking deposits and running for the JP 108 00:04:56,080 --> 00:04:58,479 Speaker 8: Morgans and the bank Americans of the world. So this 109 00:04:58,640 --> 00:05:00,599 Speaker 8: wasn't a situation where I think the govern can say 110 00:05:00,680 --> 00:05:02,120 Speaker 8: this is a great job or not. 111 00:05:02,279 --> 00:05:04,000 Speaker 4: It just it is what it is. It's just it 112 00:05:04,160 --> 00:05:05,320 Speaker 4: saved the day for now. 113 00:05:06,040 --> 00:05:07,880 Speaker 5: There are a lot of questions, and I suspect that 114 00:05:07,880 --> 00:05:10,320 Speaker 5: Shanali's going to ask Jane Fraser about this in just 115 00:05:10,360 --> 00:05:13,039 Speaker 5: a minute when we hear this interview from the Milican Institute, 116 00:05:13,320 --> 00:05:17,800 Speaker 5: can Washington breathe now is can we say that we're 117 00:05:17,839 --> 00:05:20,560 Speaker 5: past the worst here, that we're not worried about further contagion. 118 00:05:20,600 --> 00:05:22,000 Speaker 4: Well, so Washington has a problem. 119 00:05:22,040 --> 00:05:23,960 Speaker 8: The problem is what is the future of the US 120 00:05:24,040 --> 00:05:27,560 Speaker 8: Regional Bank, Because you know, back in January, the acting 121 00:05:27,640 --> 00:05:30,080 Speaker 8: ConTroll of the currency gave a speech in which he 122 00:05:30,200 --> 00:05:33,480 Speaker 8: said that there are too big to manage banks out there, 123 00:05:33,520 --> 00:05:35,480 Speaker 8: not too big to fail, but too big to manage. 124 00:05:35,920 --> 00:05:38,200 Speaker 8: And his idea was that the concern was a bank 125 00:05:38,240 --> 00:05:40,880 Speaker 8: like P and C or US Bank. The only option 126 00:05:40,960 --> 00:05:42,960 Speaker 8: it would have for a midsize bank failing is to 127 00:05:42,960 --> 00:05:44,640 Speaker 8: merge with another one, and then you have an even 128 00:05:44,680 --> 00:05:47,839 Speaker 8: bigger bank. And JP Morgan getting even bigger is not 129 00:05:48,000 --> 00:05:51,040 Speaker 8: something that the regulators or the policymakers want. You've certainly 130 00:05:51,160 --> 00:05:53,880 Speaker 8: seen statements from Elizabeth Warren and Shared Brown that they 131 00:05:53,880 --> 00:05:57,360 Speaker 8: are not happy with this. So the question that Washington 132 00:05:57,440 --> 00:05:59,640 Speaker 8: has is they may have thrown money at the wall 133 00:05:59,680 --> 00:06:02,800 Speaker 8: and survive, you know, solve the issue for today. But 134 00:06:02,880 --> 00:06:05,599 Speaker 8: the question is where do we go from here. Congress 135 00:06:05,640 --> 00:06:08,280 Speaker 8: isn't really going to help the regulators. It takes forever. 136 00:06:08,839 --> 00:06:10,680 Speaker 8: I'm just not sure there's going to be any answers 137 00:06:10,960 --> 00:06:12,360 Speaker 8: at least for the next two years. 138 00:06:12,640 --> 00:06:14,599 Speaker 4: The straight scoop from Nathan Deane. Great to see you. 139 00:06:14,680 --> 00:06:16,360 Speaker 5: Let's do something with when we have a little more 140 00:06:16,360 --> 00:06:18,040 Speaker 5: time this week. We always like to compare notes with 141 00:06:18,160 --> 00:06:21,919 Speaker 5: Nathan Dean, Bloomberg Intelligence senior government analyst with us on 142 00:06:22,000 --> 00:06:23,040 Speaker 5: Bloomberg sound On. 143 00:06:24,360 --> 00:06:27,719 Speaker 1: You're listening to the Bloomberg sound On podcast. Catch the 144 00:06:27,760 --> 00:06:30,440 Speaker 1: program live weekdays at one Eastern. 145 00:06:30,320 --> 00:06:33,720 Speaker 9: On Bloomberg Radio, the tune in app, Bloomberg dot Com, and. 146 00:06:33,680 --> 00:06:35,040 Speaker 3: The Bloomberg Business App. 147 00:06:35,200 --> 00:06:38,040 Speaker 1: You can also listen live on Amazon Alexa from our 148 00:06:38,040 --> 00:06:42,880 Speaker 1: flagship New York station, Just say Alexa play Bloomberg eleven thirty. 149 00:06:43,680 --> 00:06:45,720 Speaker 5: And as we prepare to assemble our panel here, we're 150 00:06:45,720 --> 00:06:47,640 Speaker 5: going to be talking with Genie Shanzy and with Lester 151 00:06:47,760 --> 00:06:50,440 Speaker 5: Munson for the next bit and their take on this 152 00:06:50,560 --> 00:06:52,479 Speaker 5: deal and what we heard from Jane Fraser, what we 153 00:06:52,560 --> 00:06:55,479 Speaker 5: heard as well from the President, because he's taking this 154 00:06:55,600 --> 00:06:59,960 Speaker 5: opportunity to ask again for Titan regulations in Congress. 155 00:07:00,040 --> 00:07:03,440 Speaker 6: I've called on Congress to give regulators the tools the 156 00:07:03,480 --> 00:07:07,440 Speaker 6: whole bank executives accountable, and I've called on regulators to 157 00:07:07,480 --> 00:07:13,800 Speaker 6: strengthen regulations and supervision of large and regional banks and folks. 158 00:07:14,760 --> 00:07:17,160 Speaker 6: We have to make sure that we're not back in 159 00:07:17,200 --> 00:07:18,160 Speaker 6: this position again. 160 00:07:18,680 --> 00:07:22,040 Speaker 5: We assemble our panel with Bloomberg Politics contributor Democratic candalyst 161 00:07:22,040 --> 00:07:26,000 Speaker 5: Genie Shanseo, joined today by Lester Munson, Republican Strategists Principle 162 00:07:26,040 --> 00:07:28,920 Speaker 5: like Government Relations firm BGR Group. Great to have you 163 00:07:28,960 --> 00:07:32,320 Speaker 5: both here, Genie those I'm assuming those calls are not 164 00:07:32,360 --> 00:07:34,760 Speaker 5: going to lead to much here. There was a thought 165 00:07:34,800 --> 00:07:37,720 Speaker 5: that we wouldn't see another bank fail. We did, But 166 00:07:37,760 --> 00:07:39,800 Speaker 5: there does not still seem to be a path for 167 00:07:39,840 --> 00:07:41,440 Speaker 5: action on Capitol Hill, does there? 168 00:07:41,880 --> 00:07:44,720 Speaker 10: No, there doesn't seem to be a path in Congress 169 00:07:45,080 --> 00:07:48,200 Speaker 10: to increase regulation. I think he is right. I think 170 00:07:48,280 --> 00:07:51,080 Speaker 10: we have seen since March that the regulators that we 171 00:07:51,200 --> 00:07:54,960 Speaker 10: all rely on to oversee. These banks don't seem to 172 00:07:55,000 --> 00:07:58,280 Speaker 10: be capturing as much as they should, and that's an understatement. 173 00:07:58,360 --> 00:08:00,800 Speaker 10: So he's right, they need to do a better job. 174 00:08:00,800 --> 00:08:03,320 Speaker 10: But if he's hoping that some of this is going 175 00:08:03,360 --> 00:08:06,280 Speaker 10: to come from Congress, you know, it's your hard pressed 176 00:08:06,320 --> 00:08:08,280 Speaker 10: to see at this point where we get anything of 177 00:08:08,280 --> 00:08:10,280 Speaker 10: that sort out of Congress in the next two years. 178 00:08:10,480 --> 00:08:12,800 Speaker 10: So of course that means we're going to be relying 179 00:08:12,840 --> 00:08:16,800 Speaker 10: on the very people who failed these last three times 180 00:08:16,840 --> 00:08:19,560 Speaker 10: around with these banks to do a better job. And 181 00:08:19,600 --> 00:08:22,600 Speaker 10: I think that's, you know, really asking the American public 182 00:08:22,600 --> 00:08:26,680 Speaker 10: to have faith in people whom they may increasingly be 183 00:08:26,720 --> 00:08:29,080 Speaker 10: losing faith in. So I think that is a big ask. 184 00:08:29,240 --> 00:08:31,520 Speaker 10: But he is right, we do need the regulations and 185 00:08:31,520 --> 00:08:32,640 Speaker 10: the regulators in place. 186 00:08:32,880 --> 00:08:35,120 Speaker 4: What's your take on this, Lester, And was this the 187 00:08:35,160 --> 00:08:38,720 Speaker 4: best possible outcome to have JP Morgan get the exception 188 00:08:38,880 --> 00:08:39,760 Speaker 4: to make the purchase. 189 00:08:41,600 --> 00:08:44,320 Speaker 11: Well, it is a solution that seems to be working, 190 00:08:44,400 --> 00:08:47,760 Speaker 11: so is it the best one? I'm not sure. There's 191 00:08:47,800 --> 00:08:51,680 Speaker 11: definitely going to be political repercussions for this. The far 192 00:08:51,760 --> 00:08:55,600 Speaker 11: left of the Democratic Party is already attacking the solution 193 00:08:56,000 --> 00:08:58,800 Speaker 11: as somehow being bad for the economy. So I think 194 00:08:59,200 --> 00:09:02,319 Speaker 11: I think we're going to be in the wash and 195 00:09:02,440 --> 00:09:05,880 Speaker 11: spin cycle here on banking regulation for quite some time. 196 00:09:06,080 --> 00:09:09,160 Speaker 11: And let me just say, on Congress acting, I'm not 197 00:09:09,200 --> 00:09:13,120 Speaker 11: sure that it's that Congress needs to have tighter regulations 198 00:09:13,160 --> 00:09:15,559 Speaker 11: and more tools for regulators. I think the regulators ought 199 00:09:15,559 --> 00:09:18,600 Speaker 11: to be using the tools they have. What Congress can do, 200 00:09:19,040 --> 00:09:23,400 Speaker 11: and what it ought to be doing, is reducing government spending. 201 00:09:23,600 --> 00:09:27,360 Speaker 11: Right Like, the issue here is inflation, which is driving 202 00:09:27,400 --> 00:09:30,520 Speaker 11: some of these problems. Congress can actually address the inflation 203 00:09:30,600 --> 00:09:34,720 Speaker 11: issue by lowering the budget deficit, lowering government spending. And 204 00:09:34,760 --> 00:09:38,520 Speaker 11: at some point the banking crisis such as it is, 205 00:09:38,520 --> 00:09:41,480 Speaker 11: is going to be linked to the debt ceiling crisis. 206 00:09:41,800 --> 00:09:44,640 Speaker 11: It's a great opportunity for Republicans to say, we actually 207 00:09:44,679 --> 00:09:46,760 Speaker 11: have a solution we can do here, and the House 208 00:09:46,800 --> 00:09:47,800 Speaker 11: started at last week. 209 00:09:47,880 --> 00:09:49,720 Speaker 5: I'm going to get there too with the debt ceiling. 210 00:09:49,720 --> 00:09:52,880 Speaker 5: In a moment, Elizabeth Warren tweets Genie the failure of 211 00:09:52,920 --> 00:09:56,320 Speaker 5: First Republic Bank shows how deregulation has made the too 212 00:09:56,400 --> 00:09:59,400 Speaker 5: big to fail problem even worse. So poorly supervised bank 213 00:09:59,480 --> 00:10:02,720 Speaker 5: snapped up an even bigger bank, ultimately taxpayers will be 214 00:10:02,760 --> 00:10:05,960 Speaker 5: on the hook. And she does call on Congress needs 215 00:10:06,000 --> 00:10:08,360 Speaker 5: to make major reforms, she writes, to fix a broken 216 00:10:08,400 --> 00:10:12,240 Speaker 5: banking system. Is she write about this supportly supervised bank 217 00:10:12,280 --> 00:10:15,200 Speaker 5: snapped up by an even bigger one leaves taxpayers on 218 00:10:15,240 --> 00:10:17,319 Speaker 5: the hook? And I ask you that because the FDIC 219 00:10:18,040 --> 00:10:21,360 Speaker 5: kicked in thirteen billion dollars here it's deposit insurance fun 220 00:10:21,400 --> 00:10:23,400 Speaker 5: and would have had to pay more if it was 221 00:10:23,440 --> 00:10:25,280 Speaker 5: a smaller bank, it would have. 222 00:10:25,280 --> 00:10:27,520 Speaker 10: And you know what's striking about her statement, it's almost 223 00:10:27,559 --> 00:10:30,840 Speaker 10: exactly opposite of the statement from the President. I believe 224 00:10:30,880 --> 00:10:33,320 Speaker 10: he said, quote unquote, taxpayers are not on the shapeth 225 00:10:33,440 --> 00:10:35,440 Speaker 10: that right. And this is where we get to this 226 00:10:35,559 --> 00:10:38,360 Speaker 10: sort of semantic game that we've talked about. You know, 227 00:10:38,679 --> 00:10:41,040 Speaker 10: do you describe it as a bailout or not? And 228 00:10:41,200 --> 00:10:43,960 Speaker 10: I am not an economist, I am a political scientist, 229 00:10:44,000 --> 00:10:46,439 Speaker 10: and I will tell you that for the American public, 230 00:10:46,840 --> 00:10:51,000 Speaker 10: these semantic games are you know, just that what they 231 00:10:51,160 --> 00:10:54,320 Speaker 10: hear is that big banks are coming in to save 232 00:10:54,440 --> 00:10:57,280 Speaker 10: little banks. Does that mean we now find ourselves at 233 00:10:57,320 --> 00:10:59,600 Speaker 10: a point in which in the United States we are 234 00:10:59,640 --> 00:11:02,280 Speaker 10: relying on these big banks to do this every time? 235 00:11:02,360 --> 00:11:05,959 Speaker 10: This happens. Does that mean, for instance, that they are 236 00:11:05,960 --> 00:11:09,640 Speaker 10: not going to transfer the costs of that to customers. 237 00:11:09,960 --> 00:11:12,440 Speaker 10: Most people know that that is the case, and so 238 00:11:12,520 --> 00:11:14,760 Speaker 10: when we hear over and over again taxpayers are not 239 00:11:14,800 --> 00:11:18,360 Speaker 10: in the hook, well, bank customers are. And what that 240 00:11:18,720 --> 00:11:22,760 Speaker 10: results in is people feeling less confident in banks, and 241 00:11:23,160 --> 00:11:25,120 Speaker 10: that is a real problem for all of us. So 242 00:11:25,520 --> 00:11:28,199 Speaker 10: I do think Congress needs to act, and I do 243 00:11:28,240 --> 00:11:30,960 Speaker 10: think they need to act in more ways than just 244 00:11:31,080 --> 00:11:34,120 Speaker 10: addressing which is a big issue, just addressing the debt 245 00:11:34,120 --> 00:11:37,200 Speaker 10: and deficit and governmental spending. I do think that they 246 00:11:37,320 --> 00:11:40,319 Speaker 10: need to make sure regulations are tightened up. Let's look 247 00:11:40,320 --> 00:11:43,880 Speaker 10: at the fact that you had people from SVB on 248 00:11:44,080 --> 00:11:47,079 Speaker 10: the San Francisco FED. I mean, that is a big problem. 249 00:11:47,120 --> 00:11:50,079 Speaker 10: You can't regulate yourself. So there are steps that need 250 00:11:50,120 --> 00:11:53,080 Speaker 10: to be taken, and there are things that Congress should 251 00:11:53,120 --> 00:11:54,079 Speaker 10: do for all of us. 252 00:11:54,120 --> 00:11:55,960 Speaker 5: All right, let's hear what the President said about this, 253 00:11:56,040 --> 00:11:58,480 Speaker 5: and Lester, I love your input on this bailout. 254 00:11:58,480 --> 00:12:00,319 Speaker 4: Don't call it a bailout. Here's the press in the 255 00:12:00,400 --> 00:12:00,800 Speaker 4: Rose Guard. 256 00:12:00,880 --> 00:12:02,720 Speaker 6: These actions are going to make sure that the banking 257 00:12:02,800 --> 00:12:06,400 Speaker 6: system is safe and sound, and that includes protecting small 258 00:12:06,440 --> 00:12:10,360 Speaker 6: businesses across the country who need to make payroll for workers, 259 00:12:10,440 --> 00:12:14,959 Speaker 6: and they're small businesses. And so let me be very clear, Well, 260 00:12:15,040 --> 00:12:20,880 Speaker 6: depositors are being protected, shareholders are losing their investments, and critically, 261 00:12:21,000 --> 00:12:23,360 Speaker 6: taxpayers are not the ones that are on the hook. 262 00:12:23,640 --> 00:12:26,520 Speaker 4: But Elizabeth Warren said they would be lester. So which 263 00:12:26,520 --> 00:12:27,000 Speaker 4: one is it? 264 00:12:27,760 --> 00:12:31,079 Speaker 11: Well, I actually think President Biden has a pretty sensible 265 00:12:31,120 --> 00:12:33,959 Speaker 11: policy here. The question is is it sustainable in his 266 00:12:34,080 --> 00:12:39,199 Speaker 11: party when it gets such an immediate brushback pitch from 267 00:12:39,280 --> 00:12:42,160 Speaker 11: his colleagues in the Senate. If if I were Robert F. 268 00:12:42,240 --> 00:12:45,280 Speaker 11: Kennedy Junior, I'd be out there talking about this issue 269 00:12:45,320 --> 00:12:49,480 Speaker 11: every single day. I'd be calling Senator Warren to talk 270 00:12:49,520 --> 00:12:52,719 Speaker 11: about maybe changing her endorsements for next year's election, and 271 00:12:52,960 --> 00:12:55,480 Speaker 11: maybe I'd bring it up in the presidential debates. Oh wait, 272 00:12:56,000 --> 00:12:58,000 Speaker 11: there aren't going to be any on that side of 273 00:12:58,000 --> 00:12:58,400 Speaker 11: the aisle. 274 00:12:59,160 --> 00:13:01,640 Speaker 5: Well, Donald Trump's he's not showing up for his either, 275 00:13:01,679 --> 00:13:03,800 Speaker 5: so we might have a problem with that. But you 276 00:13:03,840 --> 00:13:05,800 Speaker 5: mentioned the debt ceiling, and this is all, of course 277 00:13:05,840 --> 00:13:09,880 Speaker 5: taking place against that debate that's still gone nowhere. I 278 00:13:10,000 --> 00:13:12,840 Speaker 5: don't think anything happened over the weekend or this morning, 279 00:13:13,559 --> 00:13:16,760 Speaker 5: and Kevin McCarthy was asked about it overseas today. Of course, 280 00:13:16,760 --> 00:13:18,959 Speaker 5: he delivered the big speech in Israel and he's making 281 00:13:19,040 --> 00:13:21,120 Speaker 5: news over there. One of the questions he was asked, 282 00:13:21,120 --> 00:13:21,719 Speaker 5: you can't avoid it. 283 00:13:21,840 --> 00:13:22,760 Speaker 12: What was your second question? 284 00:13:23,559 --> 00:13:24,000 Speaker 13: Debt limit? 285 00:13:24,080 --> 00:13:25,280 Speaker 14: The President still hasn't. 286 00:13:25,040 --> 00:13:27,720 Speaker 5: Talked to me, still hasn't talked to me. And the 287 00:13:27,720 --> 00:13:30,200 Speaker 5: President got to this as well again today with the 288 00:13:30,200 --> 00:13:30,880 Speaker 5: hostage line. 289 00:13:30,920 --> 00:13:34,400 Speaker 6: America is not a dead beat nation. We have never 290 00:13:34,559 --> 00:13:38,840 Speaker 6: ever failed to meet the debt. As a result, one 291 00:13:38,880 --> 00:13:41,959 Speaker 6: of the most respected nations of the world. We pay 292 00:13:42,000 --> 00:13:45,320 Speaker 6: our bills and we should do so without reckless hostage 293 00:13:45,360 --> 00:13:48,360 Speaker 6: taking from some of the mega Republicans in Congress. 294 00:13:48,400 --> 00:13:50,040 Speaker 5: At what point is he going to be accused of 295 00:13:50,080 --> 00:13:54,359 Speaker 5: reckless hostage taking? Lester, and I ask you that acknowledging. 296 00:13:54,400 --> 00:13:56,560 Speaker 5: The White House has been very consistent on this, and 297 00:13:56,600 --> 00:13:58,400 Speaker 5: he says that they will sit down and hash out 298 00:13:58,400 --> 00:14:00,480 Speaker 5: the budget, but he won't negotiate over the day that limit. 299 00:14:00,920 --> 00:14:03,760 Speaker 5: We could get an next date here today tomorrow, and 300 00:14:04,400 --> 00:14:06,880 Speaker 5: it's going to be a lot closer apparently than some thought, 301 00:14:07,440 --> 00:14:09,240 Speaker 5: meaning very little time to figure this out. 302 00:14:09,240 --> 00:14:10,920 Speaker 4: When do they get in the room. 303 00:14:11,040 --> 00:14:13,000 Speaker 11: Yeah, I think it's I think we're looking at the 304 00:14:13,000 --> 00:14:15,120 Speaker 11: middle of June would be a pretty would be a 305 00:14:15,120 --> 00:14:17,960 Speaker 11: pretty healthy guess. And with the kind of the plan 306 00:14:18,080 --> 00:14:21,360 Speaker 11: B being, maybe you suspend the debt limit issue, Commress 307 00:14:21,360 --> 00:14:24,240 Speaker 11: suspends it for three months and gets you into into 308 00:14:24,320 --> 00:14:27,840 Speaker 11: September October. But I think, you know, the calls are 309 00:14:27,840 --> 00:14:30,440 Speaker 11: coming in from Democrats now to the White House saying, Okay, 310 00:14:30,440 --> 00:14:33,800 Speaker 11: it's time like we got we got your position. But 311 00:14:33,880 --> 00:14:37,160 Speaker 11: now the House has passed their version of the deal, 312 00:14:37,640 --> 00:14:39,960 Speaker 11: it's time to start talking and let's let's figure out 313 00:14:39,960 --> 00:14:43,520 Speaker 11: a way where everyone can come to the table consistent 314 00:14:43,560 --> 00:14:45,960 Speaker 11: with their previous statements and find a way forward here. 315 00:14:46,840 --> 00:14:50,840 Speaker 5: Jeanie Methan's changed. What would make Joe Biden sit down 316 00:14:50,920 --> 00:14:53,640 Speaker 5: this week that wouldn't last week? Is it the actual date? 317 00:14:54,440 --> 00:14:57,360 Speaker 10: It's the date. It's also the pressure that Lester mentioned, 318 00:14:57,360 --> 00:14:59,320 Speaker 10: which he's going to get and he is getting from 319 00:14:59,360 --> 00:15:02,440 Speaker 10: Democrats to at least have a conversation. But you know, 320 00:15:02,520 --> 00:15:05,560 Speaker 10: the reality is is the politics of this the Biden 321 00:15:05,600 --> 00:15:09,800 Speaker 10: administration feels are working to their advantage. So I think 322 00:15:09,800 --> 00:15:11,720 Speaker 10: they're going to hold off. But I do think the 323 00:15:11,760 --> 00:15:15,200 Speaker 10: President has an obligation to meet with Kevin McCarthy and 324 00:15:15,280 --> 00:15:17,400 Speaker 10: start the ball rolling on how we are going to 325 00:15:17,480 --> 00:15:20,800 Speaker 10: move forward on this. Especially and you know, even if 326 00:15:20,840 --> 00:15:23,880 Speaker 10: this didn't happen over the weekend, with this bank failure, 327 00:15:24,320 --> 00:15:28,320 Speaker 10: especially in light of this, we are seeing enormous questions 328 00:15:28,360 --> 00:15:32,640 Speaker 10: about American's confidence in the economy and President Biden's ability 329 00:15:32,680 --> 00:15:35,600 Speaker 10: to manage it. And so those are things he's going 330 00:15:35,640 --> 00:15:38,440 Speaker 10: to have to address. And so I do think he 331 00:15:38,560 --> 00:15:41,760 Speaker 10: needs to talk to Kevin McCarthy, and he can make 332 00:15:41,920 --> 00:15:44,800 Speaker 10: very clear before they meet that he won't discuss, you know, 333 00:15:44,960 --> 00:15:47,160 Speaker 10: the debt ceiling that's going to be separate, but that 334 00:15:47,200 --> 00:15:49,600 Speaker 10: they're going to talk about the budget and push Kevin 335 00:15:49,680 --> 00:15:53,200 Speaker 10: McCarthy to push his caucus to raise the debt ceiling, 336 00:15:53,440 --> 00:15:56,560 Speaker 10: either temporarily or for a longer term so they can 337 00:15:56,560 --> 00:15:58,000 Speaker 10: get onto the business of governing. 338 00:15:58,240 --> 00:15:59,680 Speaker 4: It does sound like we're going to have to buy 339 00:15:59,720 --> 00:16:00,400 Speaker 4: some I'm here. 340 00:16:00,440 --> 00:16:02,080 Speaker 5: I mean, by the time there's an X date they 341 00:16:02,080 --> 00:16:05,080 Speaker 5: realize is what a month maybe less when you factor 342 00:16:05,120 --> 00:16:08,040 Speaker 5: in time spent out of Washington. I just don't see 343 00:16:08,400 --> 00:16:10,760 Speaker 5: how they get anything done in time here. We spoke 344 00:16:10,760 --> 00:16:14,920 Speaker 5: earlier with Dick Durbin. Bloomberg's David Weston did Lester about 345 00:16:14,920 --> 00:16:17,440 Speaker 5: this very issue, and he made the point that he 346 00:16:17,480 --> 00:16:21,440 Speaker 5: thinks Kevin McCarthy's basically handcuffed because he wants to preserve 347 00:16:21,560 --> 00:16:22,680 Speaker 5: the Trump tax cuts. 348 00:16:22,720 --> 00:16:24,800 Speaker 12: Here's what he said, one fourth of our current debt 349 00:16:24,960 --> 00:16:28,000 Speaker 12: was accumulated in the last four years of the Trump presidency. 350 00:16:28,960 --> 00:16:30,920 Speaker 12: Just to give you an idea, and how did that happen. 351 00:16:31,160 --> 00:16:33,680 Speaker 12: It was the Trump tax cuts for the wealthiest individual 352 00:16:34,000 --> 00:16:37,800 Speaker 12: in America, and now speaking, McCarthy is trying to protect those. 353 00:16:38,120 --> 00:16:41,560 Speaker 12: That's why he keeps suggesting cuts and spending. Some of 354 00:16:41,600 --> 00:16:44,720 Speaker 12: the cuts are patently unreasonable. To think that we would 355 00:16:44,760 --> 00:16:48,840 Speaker 12: remove thirty thousand law enforcement and border patrol officials at 356 00:16:48,840 --> 00:16:51,560 Speaker 12: this moment in our history. Hard to imagine the same 357 00:16:51,600 --> 00:16:55,160 Speaker 12: party that just campaigned on don't defund the police is 358 00:16:55,200 --> 00:16:58,200 Speaker 12: defunding the police with the McCarthy proposal. And you go 359 00:16:58,280 --> 00:17:01,240 Speaker 12: through the long list and you say, these are serious cuts. 360 00:17:01,560 --> 00:17:04,600 Speaker 12: Can't we consider the revenue breaks that we are, the 361 00:17:04,640 --> 00:17:06,920 Speaker 12: tax breaks that we gave to the wealthiest people during 362 00:17:06,960 --> 00:17:09,399 Speaker 12: the Trump years as part of the package whatever it 363 00:17:09,440 --> 00:17:09,760 Speaker 12: may be. 364 00:17:09,800 --> 00:17:12,600 Speaker 5: Moving But nobody's having that conversation right Leicester, the Trump 365 00:17:12,680 --> 00:17:15,080 Speaker 5: tax cuts. It seems like that kind of talk from 366 00:17:15,200 --> 00:17:18,440 Speaker 5: Joe Biden might be more effective than the stonewalling. 367 00:17:18,520 --> 00:17:19,240 Speaker 4: What's your take? 368 00:17:20,000 --> 00:17:22,560 Speaker 11: Yeah, I think what we have a ton of respect 369 00:17:22,600 --> 00:17:26,119 Speaker 11: for sender durban He's a very effective messenger, and I 370 00:17:26,119 --> 00:17:28,800 Speaker 11: hope the White House is taking some cues from what 371 00:17:28,840 --> 00:17:31,840 Speaker 11: he's saying, because there's your beginning of the negotiation right there. 372 00:17:32,400 --> 00:17:34,920 Speaker 11: Some of these cuts are unacceptable. Let's throw this thing 373 00:17:34,960 --> 00:17:38,440 Speaker 11: on the table. We see where the Democratic priorities are. Now, 374 00:17:38,520 --> 00:17:40,560 Speaker 11: let's go match him up with the Republican ones and 375 00:17:40,600 --> 00:17:41,560 Speaker 11: try to find middle ground. 376 00:17:42,520 --> 00:17:44,760 Speaker 5: Jennie, what do you think on this? On this line, 377 00:17:44,760 --> 00:17:47,160 Speaker 5: I was compelled by that moment from Dick Durbin because 378 00:17:47,160 --> 00:17:49,000 Speaker 5: he seemed to articulate this in a way the White 379 00:17:49,000 --> 00:17:49,480 Speaker 5: House is not. 380 00:17:50,560 --> 00:17:54,240 Speaker 10: He does, and he raises the prospect that here's what 381 00:17:54,280 --> 00:17:56,640 Speaker 10: we are thinking. Here is a place where we can 382 00:17:56,680 --> 00:17:59,800 Speaker 10: have a conversation, where we can debate and potentially come 383 00:17:59,880 --> 00:18:03,520 Speaker 10: up with a way to move forward. What we're hearing 384 00:18:03,600 --> 00:18:05,760 Speaker 10: from the White House, of course, is they want to 385 00:18:05,840 --> 00:18:10,280 Speaker 10: take what the Republicans passed in Congress's Republican wish List, 386 00:18:10,680 --> 00:18:13,719 Speaker 10: and they are trying to make the case to people 387 00:18:13,760 --> 00:18:16,800 Speaker 10: across the country, in states across the country what these 388 00:18:16,880 --> 00:18:19,440 Speaker 10: cuts would mean for them, and they are quite draconian 389 00:18:19,480 --> 00:18:21,439 Speaker 10: when you look at them. So that's what they're going 390 00:18:21,520 --> 00:18:24,080 Speaker 10: to spend this week, I believe, doing while the House 391 00:18:24,200 --> 00:18:27,280 Speaker 10: is out and Kevin McCarthy's overseas, and then I think 392 00:18:27,320 --> 00:18:29,160 Speaker 10: you see them come back and they'll try to get 393 00:18:29,200 --> 00:18:32,080 Speaker 10: down to these conversations. But they do want to make 394 00:18:32,160 --> 00:18:35,000 Speaker 10: this case that what these, as the President says, mag 395 00:18:35,119 --> 00:18:38,439 Speaker 10: Republicans have done, is going to be detrimental to people 396 00:18:38,480 --> 00:18:40,960 Speaker 10: across the country. And so that's where I think the 397 00:18:41,000 --> 00:18:43,200 Speaker 10: focus is at this point out of the White House. 398 00:18:43,920 --> 00:18:44,160 Speaker 4: Yeah. 399 00:18:44,200 --> 00:18:48,640 Speaker 5: Interesting, as we follow the speaker on his tour abroad, 400 00:18:48,720 --> 00:18:50,960 Speaker 5: he's in Israel. As we mentioned, the House is out, 401 00:18:51,359 --> 00:18:54,320 Speaker 5: and it was suggested Lester that it might have been 402 00:18:54,359 --> 00:18:57,480 Speaker 5: a good point for him to make an actual example 403 00:18:57,520 --> 00:19:00,320 Speaker 5: to say, you know what, I'm canceling the trip, past 404 00:19:00,359 --> 00:19:03,600 Speaker 5: the budget, past the debt ceiling. I'm canceling my trip, 405 00:19:03,680 --> 00:19:06,159 Speaker 5: mister President. I'm available when you are. Would it have 406 00:19:06,200 --> 00:19:07,359 Speaker 5: been smart to stay in town. 407 00:19:09,400 --> 00:19:11,399 Speaker 11: I see the temptation to do that. I think the 408 00:19:11,440 --> 00:19:13,240 Speaker 11: White House had already kind of given him the stiff 409 00:19:13,320 --> 00:19:15,080 Speaker 11: arm and said we're not going to talk to you 410 00:19:15,119 --> 00:19:17,119 Speaker 11: while the house is out, and he said, look, I'm 411 00:19:17,119 --> 00:19:20,920 Speaker 11: willing to come back. At least they're you know, I'm 412 00:19:20,960 --> 00:19:23,160 Speaker 11: trying to find the silver lining here. At least they're 413 00:19:23,200 --> 00:19:25,720 Speaker 11: starting to think about dancing. They may not be out 414 00:19:25,760 --> 00:19:27,680 Speaker 11: on the dance floor yet, they may not be showing 415 00:19:27,760 --> 00:19:29,840 Speaker 11: us their best moves, but they're at least talking to 416 00:19:29,880 --> 00:19:30,280 Speaker 11: each other. 417 00:19:30,400 --> 00:19:33,960 Speaker 4: They can hear the music. It kiss. That's right, Jeannie 418 00:19:34,000 --> 00:19:34,959 Speaker 4: and Leicester. Stay with us. 419 00:19:35,000 --> 00:19:37,320 Speaker 5: You're not going to believe what else Kevin McCarthy said 420 00:19:37,320 --> 00:19:40,320 Speaker 5: today in Israel had nothing to do with the debt ceiling. 421 00:19:40,960 --> 00:19:42,680 Speaker 5: It actually had to do with Ukraine. 422 00:19:43,640 --> 00:19:47,119 Speaker 1: You're listening to the Bloomberg Sound on podcast. Catch us 423 00:19:47,200 --> 00:19:49,240 Speaker 1: live weekdays at one Eastern. 424 00:19:48,920 --> 00:19:52,120 Speaker 2: On Bloomberg dot Com, the iHeartRadio app, and the Bloomberg 425 00:19:52,160 --> 00:19:52,960 Speaker 2: Business App. 426 00:19:53,000 --> 00:19:55,560 Speaker 3: Or listen on demand wherever you get your podcasts. 427 00:19:56,640 --> 00:19:57,880 Speaker 4: And Joe Matthew in Washington. 428 00:19:57,920 --> 00:20:01,879 Speaker 5: This is Bloomberg Sound on the Fastest Show in Politics 429 00:20:02,320 --> 00:20:05,320 Speaker 5: with our panel Lester Munson and Jeanie Schanzano with us today. 430 00:20:05,800 --> 00:20:09,080 Speaker 5: Having heard from Kevin McCarthy on his trip to Israel. 431 00:20:09,160 --> 00:20:13,400 Speaker 5: He spoke there to the the legislature a bit earlier 432 00:20:13,440 --> 00:20:15,479 Speaker 5: on and then held a news conference, which would be 433 00:20:15,600 --> 00:20:17,159 Speaker 5: kind of par for the course, and you heard he 434 00:20:17,240 --> 00:20:19,120 Speaker 5: took a question on the debt ceiling. He also took 435 00:20:19,119 --> 00:20:22,680 Speaker 5: a question on funding for Ukraine. Remember no blank check. 436 00:20:23,119 --> 00:20:25,560 Speaker 5: We talked about it a lot on this program. And 437 00:20:25,600 --> 00:20:28,720 Speaker 5: he gets a question from a Russian reporter and I 438 00:20:28,760 --> 00:20:30,439 Speaker 5: want you to hear the whole thing. I did not 439 00:20:30,600 --> 00:20:33,480 Speaker 5: edit any of this, the question and the answer. 440 00:20:33,520 --> 00:20:37,119 Speaker 15: Today in Israel, we know that you don't support the 441 00:20:37,160 --> 00:20:43,960 Speaker 15: current untlimited and uncontrol supply so weaponry and aid to Ukraine. 442 00:20:44,440 --> 00:20:47,119 Speaker 15: So can you comment, Is it possible if in the 443 00:20:47,160 --> 00:20:51,840 Speaker 15: near future the US policy regarding sending weaponry to Ukraine 444 00:20:52,040 --> 00:20:52,720 Speaker 15: will change? 445 00:20:53,560 --> 00:20:56,320 Speaker 14: Yeah, I'm not sure the sound heres are good. Did 446 00:20:56,359 --> 00:20:59,119 Speaker 14: he say I don't support A to Ukraine. No, I 447 00:20:59,280 --> 00:21:02,960 Speaker 14: vote for A for Ukraine. I support aid for Ukraine. 448 00:21:03,080 --> 00:21:05,119 Speaker 14: I do not support what your country has done you 449 00:21:05,480 --> 00:21:08,119 Speaker 14: to Ukraine. I do not support your killing of the 450 00:21:08,200 --> 00:21:11,879 Speaker 14: children either, and I think for one standpoint you should 451 00:21:11,880 --> 00:21:14,280 Speaker 14: pull out and I don't think it's right. And we 452 00:21:14,320 --> 00:21:18,480 Speaker 14: will continue to support because the rest of the world sees. 453 00:21:18,240 --> 00:21:19,160 Speaker 4: It just as it is. 454 00:21:19,280 --> 00:21:22,639 Speaker 5: Genie Shanzano, Wow, we haven't heard comments like that. He 455 00:21:22,720 --> 00:21:25,160 Speaker 5: has qualified the no blank check to say there should 456 00:21:25,160 --> 00:21:28,720 Speaker 5: be accountability, but not about the war effort, not specifically 457 00:21:28,760 --> 00:21:31,919 Speaker 5: about what we have seen from Russia, certainly not to 458 00:21:31,960 --> 00:21:33,120 Speaker 5: a Russian while abroad. 459 00:21:33,520 --> 00:21:34,360 Speaker 4: What do you make of it? 460 00:21:34,760 --> 00:21:37,440 Speaker 10: I give kudos to Kevin McCarthy, you know, on this 461 00:21:37,520 --> 00:21:40,679 Speaker 10: and also his meeting with the president of Taiwan. I 462 00:21:40,720 --> 00:21:43,879 Speaker 10: think these two have been, you know, bright spots for 463 00:21:43,960 --> 00:21:47,199 Speaker 10: in my view of Kevin McCarthy's speakership, which reminds me, 464 00:21:47,280 --> 00:21:50,640 Speaker 10: you know, presidents tend to go overseas as their administration 465 00:21:50,720 --> 00:21:53,320 Speaker 10: waxes on and they have more success. Now I think 466 00:21:53,359 --> 00:21:55,840 Speaker 10: we're starting to see a point where speakers may have 467 00:21:55,880 --> 00:21:58,600 Speaker 10: more success on foreign policy than they do in their 468 00:21:58,600 --> 00:22:01,280 Speaker 10: own domestic policy with their own caucus. And you know, 469 00:22:01,400 --> 00:22:04,280 Speaker 10: I give him credit. He made a very strong statement there. 470 00:22:04,320 --> 00:22:08,199 Speaker 10: He pushed back. I think most thinking people agree accountability 471 00:22:08,240 --> 00:22:12,199 Speaker 10: is critically important. But he said very clearly he supports 472 00:22:12,440 --> 00:22:15,600 Speaker 10: the Ukrainian government, and he supports aid to Ukraine, and 473 00:22:15,680 --> 00:22:18,639 Speaker 10: he is, you know, pushes back against what Russia has 474 00:22:18,680 --> 00:22:21,200 Speaker 10: done here, and he is right on all of those things. 475 00:22:21,440 --> 00:22:24,200 Speaker 4: Lester Marjorie Taylor Green's not gonna like that one. 476 00:22:25,040 --> 00:22:28,880 Speaker 11: No, she's not. And will will will it endanger her 477 00:22:28,920 --> 00:22:32,000 Speaker 11: support of the speaker? I suspect it won't. This it 478 00:22:32,040 --> 00:22:35,080 Speaker 11: was a terrific statement. I agree with Genie totally, but 479 00:22:35,160 --> 00:22:39,160 Speaker 11: it's not a total shocker either. Kevin. Kevin McCarthy has 480 00:22:39,240 --> 00:22:42,200 Speaker 11: been a supporter. He did talk about the no blank check. 481 00:22:42,520 --> 00:22:45,040 Speaker 11: It's not a totally unreasonable thing to say in the 482 00:22:45,400 --> 00:22:49,040 Speaker 11: long run, but it's it's great to see him reaffirm 483 00:22:49,280 --> 00:22:53,400 Speaker 11: explicitly on the record support for aid for the Ukrainians. 484 00:22:53,520 --> 00:22:55,760 Speaker 11: Kudos to him. He's having he's having a good run. 485 00:22:56,320 --> 00:23:00,400 Speaker 11: Speaker's doing really well. He passed the package a few 486 00:23:00,440 --> 00:23:02,080 Speaker 11: days ago that no one thought he could pass on 487 00:23:02,119 --> 00:23:06,119 Speaker 11: the budget and the debt limit. Speak Speakers is really 488 00:23:06,119 --> 00:23:07,080 Speaker 11: on a roll right now. 489 00:23:08,080 --> 00:23:11,520 Speaker 5: It's not just Margie Taylor Green, Genie, Lauren Bobert, Matt Gates. 490 00:23:11,560 --> 00:23:12,159 Speaker 4: I could go on. 491 00:23:12,320 --> 00:23:16,320 Speaker 5: There are other quote unquote troublemakers you know who challenged 492 00:23:16,680 --> 00:23:18,639 Speaker 5: not the case of Marjorie Taylor Green, but others who 493 00:23:18,720 --> 00:23:21,680 Speaker 5: challenged his speakership in the outset. And it does make 494 00:23:21,720 --> 00:23:24,640 Speaker 5: you wonder, as this debt ceiling is being negotiated, if 495 00:23:24,680 --> 00:23:28,679 Speaker 5: he's walking on eggshells here when it comes to foreign policy, he. 496 00:23:28,600 --> 00:23:31,000 Speaker 10: Could be to a certain extent. I think it's more 497 00:23:31,119 --> 00:23:33,320 Speaker 10: likely he's walking on eggshells as it pertains to the 498 00:23:33,359 --> 00:23:35,520 Speaker 10: debt ceiling, because the reality is he's going to have 499 00:23:35,560 --> 00:23:37,760 Speaker 10: to go to the White House, he's going to have 500 00:23:37,800 --> 00:23:41,119 Speaker 10: to negotiate, and he is going to have to get 501 00:23:41,200 --> 00:23:44,280 Speaker 10: a certain number of his members to agree with what 502 00:23:44,400 --> 00:23:46,439 Speaker 10: he comes up with, and it's going to be a 503 00:23:46,520 --> 00:23:50,000 Speaker 10: compromise with the Democrats that's you know, probably more than 504 00:23:50,040 --> 00:23:52,879 Speaker 10: four or five won't like. And if that happens, then 505 00:23:52,920 --> 00:23:55,240 Speaker 10: he's going to have to have some moderate Democrats come 506 00:23:55,280 --> 00:23:57,520 Speaker 10: help him out and that they're not going to like. So, 507 00:23:57,880 --> 00:24:00,000 Speaker 10: you know, he may be in a very difficult position 508 00:24:00,280 --> 00:24:02,760 Speaker 10: as it pertains to this debt ceiling, because of course, 509 00:24:03,080 --> 00:24:05,639 Speaker 10: while you know, he did get it over the finish 510 00:24:05,760 --> 00:24:09,360 Speaker 10: line just narrowly in last week before he went to Israel, 511 00:24:09,640 --> 00:24:12,000 Speaker 10: that was the easiest thing he is going to have 512 00:24:12,040 --> 00:24:14,680 Speaker 10: to do in this process. It only gets harder from here, 513 00:24:15,040 --> 00:24:17,000 Speaker 10: and that's the challenge for Kevin McCarthy. 514 00:24:17,160 --> 00:24:19,360 Speaker 5: I said eggshells, lester, maybe I should have said thin 515 00:24:19,440 --> 00:24:21,800 Speaker 5: ice because there was a lot of talk about emotion 516 00:24:21,920 --> 00:24:23,879 Speaker 5: to vacate that Hey, if he doesn't do this the 517 00:24:23,880 --> 00:24:27,600 Speaker 5: way certain factions, namely the Freedom Caucus, does not like 518 00:24:28,080 --> 00:24:30,720 Speaker 5: when it comes to the debt limit and budget negotiations, 519 00:24:30,720 --> 00:24:32,280 Speaker 5: he could be out of a job. Are you still 520 00:24:32,280 --> 00:24:35,200 Speaker 5: of that mind? Or has he consolidated power more effectively 521 00:24:35,200 --> 00:24:35,439 Speaker 5: than that. 522 00:24:36,760 --> 00:24:41,440 Speaker 11: I'm starting to think he's consolidated power pretty effectively. He's 523 00:24:41,800 --> 00:24:43,439 Speaker 11: Genie's right, He's going to have it. He's going to 524 00:24:43,440 --> 00:24:45,159 Speaker 11: have The next vote is much tougher. It's going to 525 00:24:45,160 --> 00:24:46,639 Speaker 11: be a compromise. There's going to be things and there 526 00:24:46,680 --> 00:24:49,120 Speaker 11: Republicans don't like, and he's going to have to get 527 00:24:49,119 --> 00:24:50,960 Speaker 11: a majority of the majority to vote for it. What 528 00:24:51,119 --> 00:24:55,760 Speaker 11: happens to him later when he's relying on Democratic votes 529 00:24:55,760 --> 00:24:57,960 Speaker 11: to get this package passed, that remains to be seen. 530 00:24:58,080 --> 00:25:02,360 Speaker 11: I suspect the original vote for Speaker back in January 531 00:25:02,560 --> 00:25:06,240 Speaker 11: was much more cathartic than people realized and had great 532 00:25:06,359 --> 00:25:10,199 Speaker 11: utility for Kevin McCarthy in particular, because he had to 533 00:25:10,200 --> 00:25:12,199 Speaker 11: talk to everyone, he had to cut all the deals, 534 00:25:12,520 --> 00:25:14,960 Speaker 11: and he had to win the ultimate vote, and he 535 00:25:15,000 --> 00:25:18,600 Speaker 11: did that and that has clearly strengthened him on these 536 00:25:18,600 --> 00:25:19,280 Speaker 11: other issues. 537 00:25:19,680 --> 00:25:22,800 Speaker 5: As he said at the time, Genie, we learned how 538 00:25:22,800 --> 00:25:25,440 Speaker 5: to govern. We'll find out of course if that's true. 539 00:25:25,880 --> 00:25:29,280 Speaker 5: Many thanks to Genie Shanzano and Lester Monson. Great panel, boy. 540 00:25:29,280 --> 00:25:31,560 Speaker 5: We covered a lot of ground here, from First Republic 541 00:25:31,600 --> 00:25:35,920 Speaker 5: Bank all the way through funding the war effort in Ukraine, 542 00:25:35,920 --> 00:25:38,159 Speaker 5: and a lot of stuff in between. Great conversation and 543 00:25:38,160 --> 00:25:40,520 Speaker 5: great analysis from our panel, as you would expect. 544 00:25:40,560 --> 00:25:46,000 Speaker 16: On sound On, I'm Joe Matthew. This is Bloomberg. You're 545 00:25:46,040 --> 00:25:49,640 Speaker 16: listening to the Bloomberg Sound On podcast. Catch the program 546 00:25:49,760 --> 00:25:51,880 Speaker 16: live weekdays at one Eastern. 547 00:25:51,760 --> 00:25:54,959 Speaker 9: On Bloomberg Radio, the tune in alf, Bloomberg dot Com, 548 00:25:55,000 --> 00:25:55,280 Speaker 9: and the. 549 00:25:55,240 --> 00:25:56,480 Speaker 3: Bloomberg Business app. 550 00:25:56,600 --> 00:25:59,439 Speaker 1: You can also listen live on Amazon Alexa from our 551 00:25:59,480 --> 00:26:03,200 Speaker 1: flagship in New York station Just say Alexa play Bloomberg 552 00:26:03,240 --> 00:26:03,960 Speaker 1: eleven thirty. 553 00:26:05,119 --> 00:26:08,080 Speaker 5: In the Age of TikTok, here in twelve TikTok bands 554 00:26:08,119 --> 00:26:11,560 Speaker 5: being proposed and protecting our kids from the dangers of 555 00:26:11,640 --> 00:26:15,920 Speaker 5: social media. We think back a few years for some wisdom, 556 00:26:15,960 --> 00:26:18,440 Speaker 5: because it was on this day in Washington in nineteen 557 00:26:18,680 --> 00:26:23,560 Speaker 5: sixty nine that mister Rogers testified before the Senate Subcommittee 558 00:26:23,560 --> 00:26:27,399 Speaker 5: on Communications, some very famous moment you may have seen it. 559 00:26:27,440 --> 00:26:30,120 Speaker 5: He was there to justify government funding that was proposed 560 00:26:30,119 --> 00:26:34,840 Speaker 5: for this new nonprofit corporation for public broadcasting funding that 561 00:26:34,920 --> 00:26:36,679 Speaker 5: was being fretned at the time, and it's funny of 562 00:26:37,800 --> 00:26:41,800 Speaker 5: some things carry on. Fred Rogers, who had just launched 563 00:26:41,880 --> 00:26:45,760 Speaker 5: a new show for kids called Mister Rogers Neighborhood, testified 564 00:26:46,720 --> 00:26:48,200 Speaker 5: well in a way that only he could. He put 565 00:26:48,280 --> 00:26:52,200 Speaker 5: down his script so he could just talk and describe 566 00:26:52,240 --> 00:26:57,120 Speaker 5: that good feeling of control, as he called it, answering 567 00:26:57,119 --> 00:26:59,919 Speaker 5: the question a child had asked him about controlling their anger. 568 00:27:00,080 --> 00:27:02,720 Speaker 13: Listen, what do you do with the mad that you feel? 569 00:27:02,760 --> 00:27:05,919 Speaker 13: When you feel so mad you could bite, when the 570 00:27:05,960 --> 00:27:10,040 Speaker 13: whole wide world seems oh so wrong and nothing you 571 00:27:10,160 --> 00:27:14,480 Speaker 13: do seems very right? What do you do? Do you 572 00:27:14,760 --> 00:27:18,600 Speaker 13: punch a bag? Do you pound some clay or some dough? 573 00:27:19,400 --> 00:27:22,199 Speaker 13: Do you round up friends for a game of tag? 574 00:27:22,400 --> 00:27:25,960 Speaker 13: Or see how fast you go? It's great to be 575 00:27:26,040 --> 00:27:29,800 Speaker 13: able to stop when you've planned a thing that's wrong, 576 00:27:30,600 --> 00:27:34,720 Speaker 13: and be able to do something else instead, and think 577 00:27:34,840 --> 00:27:38,560 Speaker 13: this song, I can stop when I want to, can 578 00:27:38,680 --> 00:27:43,719 Speaker 13: stop when I wish, can stop, stop, stop anytime. And 579 00:27:43,800 --> 00:27:46,840 Speaker 13: what a good feeling to feel like this and know 580 00:27:46,960 --> 00:27:50,880 Speaker 13: that the feeling is really mine, know that there's something 581 00:27:51,119 --> 00:27:56,080 Speaker 13: deep inside that helps us become what we can for. 582 00:27:56,240 --> 00:28:00,240 Speaker 13: A girl can be someday, a lady and a boy 583 00:28:00,440 --> 00:28:01,639 Speaker 13: can be someday. 584 00:28:01,880 --> 00:28:02,320 Speaker 8: A man. 585 00:28:02,520 --> 00:28:03,560 Speaker 4: I think it's wonderful. 586 00:28:04,600 --> 00:28:05,800 Speaker 1: I think it's wonderful. 587 00:28:07,680 --> 00:28:11,280 Speaker 4: Germans like you just downed the twenty million dollars and 588 00:28:11,359 --> 00:28:12,680 Speaker 4: he brought the house down. 589 00:28:13,000 --> 00:28:17,840 Speaker 5: Actual applause in the hearing room from. 590 00:28:17,720 --> 00:28:18,879 Speaker 4: Mister Roger Charlie. 591 00:28:19,400 --> 00:28:21,760 Speaker 17: Neighborhood of make late This, many years. 592 00:28:21,600 --> 00:28:24,040 Speaker 4: Later, still hits home to us. 593 00:28:25,240 --> 00:28:27,280 Speaker 5: I'm Jill Matthew Kayley Lines is on the way in 594 00:28:27,400 --> 00:28:29,399 Speaker 5: because you know what hour two of sound on. 595 00:28:29,680 --> 00:28:30,560 Speaker 4: Start us right down. 596 00:28:36,160 --> 00:28:39,560 Speaker 1: You're listening to the Bloomberg Sound On podcast. Catch the 597 00:28:39,600 --> 00:28:42,320 Speaker 1: program live weekdays at one Eastern. 598 00:28:42,120 --> 00:28:45,320 Speaker 9: On Bloomberg Radio, the tune in app, Bloomberg dot Com, 599 00:28:45,360 --> 00:28:46,840 Speaker 9: and the Bloomberg Business App. 600 00:28:47,000 --> 00:28:49,840 Speaker 1: You can also listen live on Amazon Alexa from our 601 00:28:49,880 --> 00:28:55,600 Speaker 1: flagship New York station Just Say Alexa played Bloomberg eleven thirty. 602 00:28:55,640 --> 00:28:58,240 Speaker 5: We've got breaking news from Washington, Kayley. We were talking 603 00:28:58,400 --> 00:29:01,800 Speaker 5: right at this time an hour ago about First Republic. 604 00:29:02,320 --> 00:29:04,760 Speaker 5: At least we're past that part of the saga here, 605 00:29:04,800 --> 00:29:07,440 Speaker 5: but there's still a lot of questions about whether regulations 606 00:29:07,440 --> 00:29:10,520 Speaker 5: should be tightened. We've been discussing some of the options here. 607 00:29:10,600 --> 00:29:13,040 Speaker 5: Certainly did with our panel, and outlooks like the FDIC 608 00:29:13,720 --> 00:29:15,160 Speaker 5: is prepared to make some changes too. 609 00:29:15,400 --> 00:29:18,000 Speaker 7: Yeah. Well, remember the First Republic failure, but also the 610 00:29:18,000 --> 00:29:21,320 Speaker 7: failures of Silicon Valley Bank and Signature Bank race questions 611 00:29:21,400 --> 00:29:24,600 Speaker 7: about the insurance cap, the deposit insurance cap of two 612 00:29:24,680 --> 00:29:26,920 Speaker 7: hundred and fifty thousand dollars because, of course, in the 613 00:29:26,960 --> 00:29:30,440 Speaker 7: cases of SBB and Signature even uninsured depositors were made 614 00:29:30,480 --> 00:29:33,719 Speaker 7: whole because there were so many that were uninsured. So 615 00:29:33,880 --> 00:29:36,680 Speaker 7: it caused a lot of conversation here in Washington about 616 00:29:36,680 --> 00:29:39,160 Speaker 7: what should become of that cap. But obviously the FDIC 617 00:29:39,320 --> 00:29:41,960 Speaker 7: is looking internally as well, and what we understand now 618 00:29:42,000 --> 00:29:44,760 Speaker 7: is that they are looking at three different options for 619 00:29:44,880 --> 00:29:47,880 Speaker 7: the deposit Insurance fund, one of which could be a 620 00:29:47,960 --> 00:29:52,520 Speaker 7: targeted coverage approach where business accounts get more coverage than 621 00:29:52,560 --> 00:29:54,760 Speaker 7: the current cap, and the FDIC says that would be 622 00:29:54,800 --> 00:29:58,440 Speaker 7: the best option for financial stability. Importantly, Joe, that would 623 00:29:58,440 --> 00:30:02,720 Speaker 7: require congressional approval four, which raises a whole other set 624 00:30:02,720 --> 00:30:05,160 Speaker 7: of questions. Even if the FDIC decided it did want 625 00:30:05,200 --> 00:30:07,400 Speaker 7: to do that, would Congress give it a thumbs up? 626 00:30:07,560 --> 00:30:09,480 Speaker 4: Much more of a challenge in that case. 627 00:30:09,640 --> 00:30:13,680 Speaker 5: We talked to Bill Isaac, former FDIC chair on Balance 628 00:30:13,720 --> 00:30:16,840 Speaker 5: of Power on Friday, and that's exactly what he recommended, right. 629 00:30:16,880 --> 00:30:20,600 Speaker 5: He said, business checking accounts that do not draw an 630 00:30:20,640 --> 00:30:24,280 Speaker 5: interest rate should be covered basically unlimited, if that's how 631 00:30:24,320 --> 00:30:26,160 Speaker 5: you want to fix this, as opposed to the the 632 00:30:26,200 --> 00:30:30,479 Speaker 5: two hundred and fifty thousand dollars cap that individuals deal with. 633 00:30:30,480 --> 00:30:32,400 Speaker 5: So clearly this has been something that's been aired out 634 00:30:32,440 --> 00:30:33,680 Speaker 5: throughout the agency here as. 635 00:30:33,600 --> 00:30:37,400 Speaker 7: An idea, Yeah, absolutely, and the agency is noting as 636 00:30:37,440 --> 00:30:41,040 Speaker 7: well how technology makes a difference in how they should 637 00:30:41,040 --> 00:30:44,040 Speaker 7: be viewing things now. The idea that technological changes aka 638 00:30:44,080 --> 00:30:46,600 Speaker 7: the ability to move money on an app at the 639 00:30:46,600 --> 00:30:48,360 Speaker 7: speed of light as soon as you see a tweet 640 00:30:48,840 --> 00:30:52,440 Speaker 7: on Twitter, that and high concentrations of uninsured depositors and 641 00:30:52,480 --> 00:30:55,840 Speaker 7: certain pockets of the baking system may make this overhaul 642 00:30:55,960 --> 00:30:58,760 Speaker 7: something that they do indeed want to pursue. Again, these 643 00:30:58,800 --> 00:31:03,760 Speaker 7: are just recommendations, possible considerations. The agency isn't committing to 644 00:31:03,800 --> 00:31:06,440 Speaker 7: taking any particular approach at this point, but clearly a 645 00:31:06,480 --> 00:31:07,320 Speaker 7: live conversation. 646 00:31:07,520 --> 00:31:09,480 Speaker 5: I do wonder what Mick Molvani thinks about all this. 647 00:31:09,560 --> 00:31:11,760 Speaker 5: He joins us each week at this time, and we've 648 00:31:11,760 --> 00:31:13,920 Speaker 5: been talking to Mick on a daily or weekly basis 649 00:31:13,960 --> 00:31:17,360 Speaker 5: rather since the failure of SVBS, we've kind of been 650 00:31:17,400 --> 00:31:19,960 Speaker 5: a group conversation here. Maybe we need a group hug 651 00:31:19,960 --> 00:31:23,200 Speaker 5: at some point, Mick, welcome back as always, former OMB director, 652 00:31:23,240 --> 00:31:26,440 Speaker 5: former acting White House Chief of Staff, founder of the 653 00:31:26,440 --> 00:31:29,040 Speaker 5: Freedom Caucus, as he is, a former congressman as well. 654 00:31:29,120 --> 00:31:31,960 Speaker 5: Is this a good idea, Mick for FDI see a 655 00:31:32,040 --> 00:31:33,000 Speaker 5: deposit insurance? 656 00:31:33,040 --> 00:31:33,800 Speaker 4: Is this what's needed? 657 00:31:34,800 --> 00:31:37,520 Speaker 17: I think it's certainly merint some looking. I mean, I 658 00:31:37,560 --> 00:31:40,400 Speaker 17: think kaylating some excellent points that you know, if the 659 00:31:40,440 --> 00:31:43,600 Speaker 17: world is, if the technology is changing the world where 660 00:31:43,600 --> 00:31:45,360 Speaker 17: you can move money so rapidly, do we need to 661 00:31:45,600 --> 00:31:48,040 Speaker 17: look at the way that we ensure different accounts or 662 00:31:48,080 --> 00:31:50,080 Speaker 17: different accounts need different sorts of coverage. I think it 663 00:31:50,120 --> 00:31:52,400 Speaker 17: makes a lot of sense. The one thing that comes 664 00:31:52,400 --> 00:31:54,680 Speaker 17: to my mind is a former member of Congress listening 665 00:31:54,680 --> 00:31:56,960 Speaker 17: to what you just said again this is breaking news. 666 00:31:57,280 --> 00:31:59,240 Speaker 17: Of course I'm sitting there thinking in the back of 667 00:31:59,280 --> 00:32:01,560 Speaker 17: my mind, that's fine, that makes sense. Who's going to 668 00:32:01,600 --> 00:32:04,200 Speaker 17: pay for it? And if businesses are willing to pay 669 00:32:04,280 --> 00:32:09,800 Speaker 17: more for different or better insurance. That's fine, but I 670 00:32:09,840 --> 00:32:12,280 Speaker 17: think it's important just to recognize this kind of stuff 671 00:32:12,360 --> 00:32:14,480 Speaker 17: isn't free unless the government is going to be the 672 00:32:14,480 --> 00:32:17,120 Speaker 17: insurer last resort, which case it's I guess sort of 673 00:32:17,160 --> 00:32:20,080 Speaker 17: free because it's a socialized sort of cost. But that 674 00:32:21,000 --> 00:32:22,959 Speaker 17: would be my point. And maybe it'll come up here 675 00:32:23,080 --> 00:32:25,800 Speaker 17: at the Milking conference with Los Angeles this week. Patrick 676 00:32:25,960 --> 00:32:28,600 Speaker 17: Henry speaking here later this afternoon, maybe he'll get a 677 00:32:28,640 --> 00:32:30,800 Speaker 17: couple of questions about this, and we get the ball 678 00:32:30,880 --> 00:32:33,200 Speaker 17: rolling on that discussion. But I think it's a fair 679 00:32:33,920 --> 00:32:35,400 Speaker 17: and proper discussion to have. 680 00:32:36,240 --> 00:32:38,800 Speaker 7: Do you think that this is a discussion that has 681 00:32:38,920 --> 00:32:44,040 Speaker 7: bipartisan support or at least there is something on Capitol 682 00:32:44,080 --> 00:32:46,760 Speaker 7: Hill that would be driving Congress to consider such action, 683 00:32:46,840 --> 00:32:49,360 Speaker 7: because it feels like there was so much talk in 684 00:32:49,400 --> 00:32:51,600 Speaker 7: the aftermath of SVB and signature, but not a lot 685 00:32:51,640 --> 00:32:53,880 Speaker 7: of people are blinking that much at First Republic. It 686 00:32:53,880 --> 00:32:56,920 Speaker 7: feels like the conversation largely has just kind of died 687 00:32:57,000 --> 00:32:59,120 Speaker 7: crisis over no need for Congressional action. 688 00:33:00,080 --> 00:33:01,760 Speaker 17: Well, I think the reason this one might be a 689 00:33:01,760 --> 00:33:04,360 Speaker 17: little bit different is that this was really expected. There's 690 00:33:04,440 --> 00:33:07,800 Speaker 17: anything unexpected about First Republicans. What took so long for 691 00:33:07,840 --> 00:33:09,880 Speaker 17: this to happen. I thought this was going to happen 692 00:33:09,920 --> 00:33:11,480 Speaker 17: three or four weeks ago. So what was going on 693 00:33:12,200 --> 00:33:14,520 Speaker 17: in the meantime was where the terms changing. I don't 694 00:33:14,560 --> 00:33:17,000 Speaker 17: understand that, so I think that bears some asking. But 695 00:33:17,040 --> 00:33:19,080 Speaker 17: I think there may be other explanations as to why 696 00:33:19,120 --> 00:33:22,320 Speaker 17: this is being looked at differently than what happened on SVB, 697 00:33:22,440 --> 00:33:26,120 Speaker 17: which was unexpected. If you talk about bipartisanship, yeah, I 698 00:33:26,120 --> 00:33:28,600 Speaker 17: think it's fair to say that there's not many things 699 00:33:28,640 --> 00:33:33,520 Speaker 17: that are bipartisan in Washington, DC these days, but certainly 700 00:33:33,640 --> 00:33:37,160 Speaker 17: concern or awareness for the role of community banks, even 701 00:33:37,200 --> 00:33:40,520 Speaker 17: regional banks, is sort of bipartisan. A lot of folks 702 00:33:40,680 --> 00:33:43,320 Speaker 17: know on both sides of the aisle that the JP 703 00:33:43,400 --> 00:33:45,720 Speaker 17: Morgan's and city banks so the world don't lend money 704 00:33:45,720 --> 00:33:48,479 Speaker 17: to the local pizza shop. That's not how the banking 705 00:33:48,520 --> 00:33:52,120 Speaker 17: system works. So well, it's short to say the sort 706 00:33:52,160 --> 00:33:54,200 Speaker 17: of by partisanship that you get when you deal with 707 00:33:54,600 --> 00:33:58,880 Speaker 17: challenging China, say, you do get at least a fair 708 00:33:58,960 --> 00:34:02,040 Speaker 17: discussion and an open dialogue when it comes to how 709 00:34:02,080 --> 00:34:05,800 Speaker 17: to make sure that we don't mistreat community banks. 710 00:34:06,400 --> 00:34:09,720 Speaker 5: Mick Elizabeth Warren tweeted a little while ago in reaction 711 00:34:09,800 --> 00:34:12,120 Speaker 5: to this deal. This is just a portion of the tweet. 712 00:34:12,120 --> 00:34:15,479 Speaker 5: A poorly supervised bank was snapped up by an even 713 00:34:15,480 --> 00:34:19,799 Speaker 5: bigger bank. Ultimately taxpayers will be on the hook. We're 714 00:34:19,840 --> 00:34:23,000 Speaker 5: talking about thirteen billion dollars already in FDIC insurance, and 715 00:34:23,040 --> 00:34:24,640 Speaker 5: there are some lawmakers who would tell you in the 716 00:34:24,719 --> 00:34:27,000 Speaker 5: end that comes out of taxpayers pockets. But we're going 717 00:34:27,080 --> 00:34:29,040 Speaker 5: to get back to this was it a bailout or 718 00:34:29,080 --> 00:34:32,359 Speaker 5: not a bailout? Conversation? And is she right taxpayers end 719 00:34:32,440 --> 00:34:33,000 Speaker 5: up on the hook? 720 00:34:34,080 --> 00:34:36,040 Speaker 17: Well, I think she's right to raise the issue because 721 00:34:36,040 --> 00:34:37,800 Speaker 17: that goes to the point I just made to Kayley, 722 00:34:37,800 --> 00:34:41,120 Speaker 17: which is what took so long? Why did this take 723 00:34:41,160 --> 00:34:43,200 Speaker 17: three or four weeks to work out? What was happening? 724 00:34:43,200 --> 00:34:46,720 Speaker 17: What was JP Morgan waiting for? Are the terms dramatically different? 725 00:34:46,719 --> 00:34:49,360 Speaker 17: And are you setting a precedent now? I saw my 726 00:34:49,360 --> 00:34:51,360 Speaker 17: good friend Gary Cone this morning on Telepsion make a 727 00:34:51,360 --> 00:34:54,120 Speaker 17: comment about are we entering a new moral hazard, which 728 00:34:54,160 --> 00:34:57,080 Speaker 17: is where no one buys a bank till after they're 729 00:34:57,120 --> 00:35:00,439 Speaker 17: in receivership because the deal just gets better and better. 730 00:35:00,480 --> 00:35:03,400 Speaker 17: Perhaps the longer that you wait, and if the longer 731 00:35:03,400 --> 00:35:05,680 Speaker 17: you wait the more that the taxpayers are on the hook, 732 00:35:06,239 --> 00:35:09,960 Speaker 17: maybe Elizabeth as a point, it needs to be addressed. 733 00:35:09,960 --> 00:35:12,799 Speaker 17: So look, anytime we go through this, it's not a 734 00:35:12,840 --> 00:35:16,319 Speaker 17: banking crisis. Everybody says it's limited to maybe these three. 735 00:35:16,360 --> 00:35:18,839 Speaker 17: I don't know if I believe that or not, but 736 00:35:18,880 --> 00:35:21,160 Speaker 17: certainly it's not the immediate sort of crisis we saw 737 00:35:21,160 --> 00:35:22,479 Speaker 17: in two thousand and eight. So we have a chance 738 00:35:22,520 --> 00:35:26,640 Speaker 17: to sit back and look at this thoroughly and intelligently, 739 00:35:26,680 --> 00:35:29,399 Speaker 17: as opposed to panicking like I think many regulators did 740 00:35:29,440 --> 00:35:32,120 Speaker 17: and many lawmakers did back in the Great Financial Crisis. 741 00:35:32,360 --> 00:35:34,279 Speaker 5: It's been an entire week since we talked about the 742 00:35:34,320 --> 00:35:38,759 Speaker 5: debt ceiling. MIC Speaker McCarthy got his bill passed, even 743 00:35:38,760 --> 00:35:40,840 Speaker 5: though some said that would not happen, and now he 744 00:35:40,960 --> 00:35:43,279 Speaker 5: seems to think the ball is in Joe Biden's court. 745 00:35:43,800 --> 00:35:45,759 Speaker 5: But here's what Joe Biden said this morning in the 746 00:35:45,800 --> 00:35:49,200 Speaker 5: Rose Garden. Because they really are trying to delineate between 747 00:35:49,239 --> 00:35:52,840 Speaker 5: the debt ceiling and budget negotiations, even though Kevin McCarthy 748 00:35:52,840 --> 00:35:54,160 Speaker 5: wants to deal with both at once. 749 00:35:54,200 --> 00:35:55,000 Speaker 4: Here's the president. 750 00:35:55,239 --> 00:35:58,800 Speaker 6: America is not a dead beat nation. We have never 751 00:35:58,960 --> 00:36:02,600 Speaker 6: ever failed to meet the debt now as a result, 752 00:36:03,120 --> 00:36:06,000 Speaker 6: one of the most respected nations of the world. We 753 00:36:06,080 --> 00:36:09,240 Speaker 6: pay our bills, and we should do so without reckless 754 00:36:09,239 --> 00:36:12,720 Speaker 6: hostage taking from some of the mega Republicans in Congress. 755 00:36:12,719 --> 00:36:14,560 Speaker 5: We're gonna get a next date. It looks like today, 756 00:36:14,600 --> 00:36:18,120 Speaker 5: maybe tomorrow, Mick, Is he right? This is hostage taking? 757 00:36:18,160 --> 00:36:19,960 Speaker 5: Why not just raise the debt ceiling and get on 758 00:36:20,040 --> 00:36:20,800 Speaker 5: with the conversation. 759 00:36:21,440 --> 00:36:23,600 Speaker 17: Well, the reason is that, the short answer is because 760 00:36:23,640 --> 00:36:25,880 Speaker 17: the law says, so, the law says, you know, you're 761 00:36:25,920 --> 00:36:28,800 Speaker 17: supposed to go, you're supposed to negotiate, but the Congress 762 00:36:28,840 --> 00:36:31,359 Speaker 17: has to vote. And again, if you have to vote 763 00:36:31,400 --> 00:36:33,719 Speaker 17: on something, would why do you have to say it's 764 00:36:33,719 --> 00:36:36,480 Speaker 17: a rubber stamp. I don't get those I don't understand 765 00:36:36,480 --> 00:36:38,839 Speaker 17: what people say will automatically have to raise the debt. 766 00:36:38,880 --> 00:36:41,200 Speaker 17: Every time I hear that line, and you hear it 767 00:36:41,239 --> 00:36:42,800 Speaker 17: a lot is times. Every time we deal with the 768 00:36:42,840 --> 00:36:44,560 Speaker 17: day thing, Oh we pay our bills. We've already paid 769 00:36:44,560 --> 00:36:47,160 Speaker 17: our bills. Now we paid it with borrowed money. And 770 00:36:47,239 --> 00:36:50,640 Speaker 17: it's not like we're we're borrowing money today to pay 771 00:36:50,680 --> 00:36:52,719 Speaker 17: for something that we spent eight months ago or ten 772 00:36:52,719 --> 00:36:55,960 Speaker 17: months ago. That money's already been borrowed and been incurred 773 00:36:56,440 --> 00:36:59,440 Speaker 17: and then been spent, So we're really borrowing money to 774 00:36:59,600 --> 00:37:03,040 Speaker 17: spend money tomorrow. And that's one of those sorts of 775 00:37:03,080 --> 00:37:05,600 Speaker 17: things where I think the Democrats especially have one fee 776 00:37:06,280 --> 00:37:08,560 Speaker 17: sort of the narrative because it's it makes it look 777 00:37:08,600 --> 00:37:10,799 Speaker 17: like we're not paying our credit card debt, and that's 778 00:37:10,840 --> 00:37:12,920 Speaker 17: not that's not what's that's not the equivalent here. 779 00:37:13,280 --> 00:37:16,839 Speaker 7: But isn't it spending that we have agreed to pay for? 780 00:37:17,120 --> 00:37:18,839 Speaker 7: So even if we haven't paid for it yet, we've 781 00:37:18,840 --> 00:37:20,399 Speaker 7: already agreed to do it. 782 00:37:20,480 --> 00:37:20,719 Speaker 17: I do. 783 00:37:21,560 --> 00:37:22,959 Speaker 7: I'm just trying to follow you here. 784 00:37:23,480 --> 00:37:25,480 Speaker 17: You're exactly right. And that's where this sort of becomes 785 00:37:25,520 --> 00:37:27,640 Speaker 17: different than most people look at it as a credit card. 786 00:37:27,680 --> 00:37:29,120 Speaker 17: At least most people want you to look at it 787 00:37:29,160 --> 00:37:30,920 Speaker 17: as a credit card because they, oh, we've already we've 788 00:37:30,920 --> 00:37:34,120 Speaker 17: already bought this bridge, now we have to pay for it. 789 00:37:34,239 --> 00:37:36,960 Speaker 17: That's not how this works. The bridge that we've built 790 00:37:36,960 --> 00:37:39,400 Speaker 17: has already been paid for. It's something we want to 791 00:37:39,440 --> 00:37:42,560 Speaker 17: do tomorrow now. Yes, Congress has agreed that they want 792 00:37:42,600 --> 00:37:45,680 Speaker 17: to do this tomorrow, right, but there's no money to 793 00:37:45,680 --> 00:37:47,600 Speaker 17: do it tomorrow, so the have to borrow more money 794 00:37:47,640 --> 00:37:49,160 Speaker 17: tomorrow to do it, and I have to raise the 795 00:37:49,200 --> 00:37:51,480 Speaker 17: debt ceiling to do it. So we're not paying for 796 00:37:51,560 --> 00:37:55,560 Speaker 17: stuff that's already been incurred, already been spent, already been built. 797 00:37:55,600 --> 00:37:58,440 Speaker 17: You need to borrow money to do something tomorrow that 798 00:37:58,560 --> 00:38:02,120 Speaker 17: you have agreed to do. You're right that they've agreed 799 00:38:02,160 --> 00:38:03,840 Speaker 17: to do it, and there's just no money left to 800 00:38:03,880 --> 00:38:06,520 Speaker 17: do it. So again there's because it's government. It's not 801 00:38:06,600 --> 00:38:10,359 Speaker 17: exactly that. The analogy of the household credit cards does 802 00:38:10,400 --> 00:38:14,120 Speaker 17: not hold. You have to ask yourself, if not building 803 00:38:14,160 --> 00:38:17,040 Speaker 17: a bridge tomorrow that we all agreed three weeks ago 804 00:38:17,080 --> 00:38:20,000 Speaker 17: to pay for, is that a default. I don't believe 805 00:38:20,040 --> 00:38:21,799 Speaker 17: that to be a default. Be the default is when 806 00:38:21,800 --> 00:38:23,839 Speaker 17: you don't pay the interest and the principle and money 807 00:38:23,880 --> 00:38:26,160 Speaker 17: you owe. But some people do consider that to be 808 00:38:26,239 --> 00:38:26,720 Speaker 17: a default. 809 00:38:26,920 --> 00:38:29,560 Speaker 5: You're redefining the terms before our eyes here, mack. Or 810 00:38:29,640 --> 00:38:32,200 Speaker 5: maybe you're looking at it a little differently than some have, 811 00:38:32,239 --> 00:38:36,640 Speaker 5: because the talking points on both sides. They Speaker McCarthy 812 00:38:36,640 --> 00:38:39,040 Speaker 5: loves talking about that credit card every days. 813 00:38:40,640 --> 00:38:42,280 Speaker 17: I know, and this is what I tell my friends, 814 00:38:42,280 --> 00:38:45,640 Speaker 17: and like guys, we don't really know how the government functions. 815 00:38:45,680 --> 00:38:48,919 Speaker 17: When you're in Congress, you vote to appropriate, you vote 816 00:38:48,920 --> 00:38:52,279 Speaker 17: to authorize money, you vote to appropriate money, but the 817 00:38:52,400 --> 00:38:55,080 Speaker 17: money gets spent down at the Office of Management budget 818 00:38:55,120 --> 00:38:57,240 Speaker 17: and then ultimately it is drawn in by the Treasury. 819 00:38:57,320 --> 00:38:59,880 Speaker 17: So not even embers of Congress understand how the system. 820 00:39:00,239 --> 00:39:03,160 Speaker 17: They're not talking about a debt ceiling to pay for 821 00:39:03,239 --> 00:39:05,560 Speaker 17: something last week. They're talking about a debt ceiling to 822 00:39:05,600 --> 00:39:06,840 Speaker 17: pay for something next week. 823 00:39:07,520 --> 00:39:11,279 Speaker 7: But ultimately this entire conversation that they are having, regardless 824 00:39:11,280 --> 00:39:14,960 Speaker 7: of level of understanding, we understand, especially as watchers of 825 00:39:15,000 --> 00:39:18,600 Speaker 7: financial market that markets, that it could have massive economic 826 00:39:18,640 --> 00:39:22,160 Speaker 7: implications and ultimately even result in the downgrade of the 827 00:39:22,239 --> 00:39:27,480 Speaker 7: United States is credit rating. I mean, semantics are semantics, 828 00:39:27,520 --> 00:39:31,320 Speaker 7: but this is real potential consequence mac. 829 00:39:31,800 --> 00:39:35,200 Speaker 17: It is and the downgrade is consequential. There's no question. 830 00:39:35,200 --> 00:39:37,160 Speaker 17: My understanding is that if we if we lose the 831 00:39:37,200 --> 00:39:41,480 Speaker 17: triple A rating on the second rating agency, always get 832 00:39:41,520 --> 00:39:43,799 Speaker 17: the next up as to which one downgraded US back 833 00:39:43,840 --> 00:39:45,880 Speaker 17: in twenty eleven two that thirteen. But that could be 834 00:39:45,920 --> 00:39:49,960 Speaker 17: important in that it might disqualify certain financial institutions from 835 00:39:50,000 --> 00:39:56,000 Speaker 17: holding US treasuries as collateral. And that's absolutely important. By 836 00:39:56,000 --> 00:39:57,680 Speaker 17: the same token, if you go back and you read 837 00:39:57,680 --> 00:39:59,080 Speaker 17: and I believe it was the S and P that 838 00:39:59,200 --> 00:40:03,480 Speaker 17: downgraders a decade ago. If you leave the report, it said, yes, 839 00:40:03,680 --> 00:40:08,080 Speaker 17: that the political mayhem necessary to raise the debt ceiling 840 00:40:08,239 --> 00:40:10,799 Speaker 17: is part of the reason for our downgrade. But if 841 00:40:10,800 --> 00:40:13,520 Speaker 17: you continue to read the port, it says, and what's 842 00:40:13,560 --> 00:40:16,200 Speaker 17: even worse is that they haven't made a provision for 843 00:40:16,280 --> 00:40:18,799 Speaker 17: how to handle their fiscal situation and that in the 844 00:40:18,840 --> 00:40:22,040 Speaker 17: long term, contributes to this downgrade as well. So just 845 00:40:22,160 --> 00:40:25,640 Speaker 17: automatically raising the debt ceiling without drama, as every you 846 00:40:25,680 --> 00:40:28,759 Speaker 17: know the Democrats say they want to do, doesn't necessarily 847 00:40:28,800 --> 00:40:30,879 Speaker 17: guarantee that you're not going to get downgrade because we're 848 00:40:30,920 --> 00:40:33,520 Speaker 17: still not addressing the spending problem and the long term 849 00:40:33,560 --> 00:40:34,240 Speaker 17: debt issue. 850 00:40:34,280 --> 00:40:36,680 Speaker 5: Well, God forbidd are you telling our lists that you 851 00:40:36,760 --> 00:40:39,000 Speaker 5: still need to worry about a downgrade even if they 852 00:40:39,040 --> 00:40:39,440 Speaker 5: solve this. 853 00:40:40,200 --> 00:40:42,040 Speaker 17: Sure, you're starting one twllion dollars in debt. You have 854 00:40:42,080 --> 00:40:45,279 Speaker 17: no you have no plan to change the curve. I mean, 855 00:40:45,320 --> 00:40:48,000 Speaker 17: look at the unfunded the Yeah. Absolutely, that's what I'm saying. 856 00:40:48,040 --> 00:40:50,000 Speaker 17: But that's a longer discussion for another day. Look, I 857 00:40:50,000 --> 00:40:54,000 Speaker 17: think we're approaching nearly one hundred trillion dollars in unfunded 858 00:40:54,040 --> 00:40:57,239 Speaker 17: government liabilities one hundred trying three times the current debt 859 00:40:57,320 --> 00:40:59,840 Speaker 17: right now. So yeah, you should be concerned about the 860 00:40:59,840 --> 00:41:03,239 Speaker 17: long term stability and the long term financial health of 861 00:41:03,280 --> 00:41:06,640 Speaker 17: the country when you've got a fiscal situation where Congress 862 00:41:06,719 --> 00:41:11,760 Speaker 17: is incapable, not literally not possible for them to balance 863 00:41:11,800 --> 00:41:12,160 Speaker 17: the budget. 864 00:41:13,520 --> 00:41:13,680 Speaker 18: Bick. 865 00:41:13,800 --> 00:41:16,640 Speaker 7: As we are having this conversation and literally with every 866 00:41:16,680 --> 00:41:19,399 Speaker 7: passing minute in theory getting closer to the X, State 867 00:41:19,920 --> 00:41:22,440 Speaker 7: Speaker Kevin McCarthy maybe thinks, you know, his part of 868 00:41:22,440 --> 00:41:24,360 Speaker 7: this job is done because he got the bill passed 869 00:41:24,440 --> 00:41:26,759 Speaker 7: last week, but he's not even in the country. He 870 00:41:26,800 --> 00:41:28,880 Speaker 7: was in Israel today, only the second speaker of the 871 00:41:28,880 --> 00:41:31,600 Speaker 7: House to address the Knesset. What do you make of 872 00:41:31,280 --> 00:41:32,600 Speaker 7: his trip over there? 873 00:41:33,560 --> 00:41:36,600 Speaker 17: Well, it's not unusual, I would think that, you know, 874 00:41:36,680 --> 00:41:39,719 Speaker 17: the fact that certainly it's unprecedented in terms of he's 875 00:41:39,719 --> 00:41:42,680 Speaker 17: only the second person. But I think it's fair to 876 00:41:43,000 --> 00:41:44,920 Speaker 17: say that he passed his bill and he's got a 877 00:41:45,000 --> 00:41:48,440 Speaker 17: chance to do some other stuff. His work is not finished, 878 00:41:48,480 --> 00:41:51,160 Speaker 17: but at least, as you you know, proceed down the 879 00:41:51,920 --> 00:41:54,759 Speaker 17: sort of the chess board, he made his moves. So 880 00:41:54,800 --> 00:41:56,719 Speaker 17: now the question is, you know, what are the Democrats 881 00:41:56,760 --> 00:41:59,239 Speaker 17: going to do next? I don't think the Democrats had 882 00:41:59,280 --> 00:42:01,480 Speaker 17: decided yet whether or not it's going to be the 883 00:42:01,480 --> 00:42:04,759 Speaker 17: White House that handles the negotiations or the Senate. When 884 00:42:04,800 --> 00:42:06,880 Speaker 17: we talked last week, I was under the impression it 885 00:42:06,960 --> 00:42:09,080 Speaker 17: might be the Senate. It would be Mitch McConnell working 886 00:42:09,520 --> 00:42:12,960 Speaker 17: with Chuck Schumer. Now I hear some grum Lindsay Graham, 887 00:42:13,000 --> 00:42:15,759 Speaker 17: I think, said over the week that he thinks it's 888 00:42:15,800 --> 00:42:19,040 Speaker 17: incumbent upon McCarthy to deal with Biden. I'm not sure 889 00:42:19,040 --> 00:42:21,640 Speaker 17: why that would be. We all know, we all know 890 00:42:21,800 --> 00:42:24,120 Speaker 17: that the bill that's going to pass ultimately is going 891 00:42:24,160 --> 00:42:25,600 Speaker 17: to be the pass that comes out of the Senate 892 00:42:25,680 --> 00:42:28,120 Speaker 17: because they need the sixty votes. And people forget about 893 00:42:28,120 --> 00:42:30,840 Speaker 17: that this is not a reconcile leble. In terms of 894 00:42:30,880 --> 00:42:33,760 Speaker 17: the budget reconciliation bill, you need to have sixty votes, 895 00:42:34,160 --> 00:42:36,520 Speaker 17: which means you're going to have to have Republican support. 896 00:42:36,800 --> 00:42:39,040 Speaker 17: So I'm not sure why everybody looks to the White 897 00:42:39,040 --> 00:42:41,279 Speaker 17: House and the Kevin McCarthy. McCarthy did his job, he 898 00:42:41,320 --> 00:42:44,520 Speaker 17: passed a bill people said he couldn't that he did. Typically, 899 00:42:44,520 --> 00:42:47,120 Speaker 17: now the bill goes to the Senate and that's the 900 00:42:47,120 --> 00:42:49,840 Speaker 17: way that the sausage gets made. So I'm surprised that 901 00:42:49,920 --> 00:42:52,040 Speaker 17: the Senate isn't taking it up, but I'm surprised that 902 00:42:52,120 --> 00:42:55,120 Speaker 17: more people aren't asking why Schumer and McConnell aren't talk 903 00:42:55,160 --> 00:42:56,400 Speaker 17: about what their bill might look like. 904 00:42:56,480 --> 00:42:57,680 Speaker 4: Well, rest assured, Mick. 905 00:42:57,719 --> 00:43:01,360 Speaker 5: We're asking a lot of people that question, namely lawmakers 906 00:43:01,400 --> 00:43:03,280 Speaker 5: in the House, and I sure you know I'm hoping 907 00:43:03,280 --> 00:43:05,160 Speaker 5: that we'll actually be able to talk to a senator. 908 00:43:05,160 --> 00:43:07,560 Speaker 5: I believe Bill Haggerty is joining us a little bit 909 00:43:07,640 --> 00:43:11,000 Speaker 5: later on on Balance of Power mech good luck over there, 910 00:43:11,000 --> 00:43:13,440 Speaker 5: and thank you for joining us from the Milken Institute 911 00:43:14,120 --> 00:43:15,080 Speaker 5: in Beverly Hills. 912 00:43:16,080 --> 00:43:19,560 Speaker 1: You're listening to the Bloomberg Sound On podcast. Catch us 913 00:43:19,600 --> 00:43:21,680 Speaker 1: live weekdays at one Eastern. 914 00:43:21,360 --> 00:43:24,560 Speaker 2: On Bloomberg dot com, the iHeartRadio app, and the Bloomberg 915 00:43:24,600 --> 00:43:25,480 Speaker 2: Business App. 916 00:43:25,440 --> 00:43:28,000 Speaker 3: Or listen on demand wherever you get your podcasts. 917 00:43:30,560 --> 00:43:31,360 Speaker 4: I'm Joe Matthew. 918 00:43:31,400 --> 00:43:34,040 Speaker 5: This is sound On, the fastest show in politics, with 919 00:43:34,120 --> 00:43:38,080 Speaker 5: some breaking news around US today and certainly the acquisition 920 00:43:38,160 --> 00:43:40,920 Speaker 5: of First Republic among them. But Kaylee, we're hearing about 921 00:43:41,040 --> 00:43:46,440 Speaker 5: FDIC breaking news as well as they consider potential changes 922 00:43:46,960 --> 00:43:49,640 Speaker 5: to deposit insurance to keep another bank from going down. 923 00:43:49,640 --> 00:43:51,760 Speaker 5: And it's not the two hundred and fifty thousand dollars 924 00:43:51,760 --> 00:43:53,440 Speaker 5: cap that we all deal with as individuals. 925 00:43:53,440 --> 00:43:54,640 Speaker 4: This would be for business accounts. 926 00:43:54,800 --> 00:43:57,879 Speaker 7: Yeah, that's one thing they're considering, is that they're looking 927 00:43:57,960 --> 00:44:01,680 Speaker 7: at potentially a targeted cover approach where business accounts do 928 00:44:01,719 --> 00:44:04,640 Speaker 7: get more coverage than that current cap, and the FDIC 929 00:44:04,800 --> 00:44:07,560 Speaker 7: things that would be the best option for financial stability. 930 00:44:07,560 --> 00:44:09,520 Speaker 7: This is just one of three options they have laid 931 00:44:09,560 --> 00:44:12,479 Speaker 7: out for the Deposit Insurance Fund as they are looking 932 00:44:12,520 --> 00:44:14,840 Speaker 7: at some kind of overhaul in the aftermath of the 933 00:44:15,000 --> 00:44:17,479 Speaker 7: series of bank failures we have seen. The issue, Joe 934 00:44:17,560 --> 00:44:19,920 Speaker 7: is is that there's only so much that the FDIC 935 00:44:20,120 --> 00:44:23,960 Speaker 7: can do unilaterally. A move like that, raising the cap 936 00:44:24,000 --> 00:44:27,200 Speaker 7: for even just one group would require congressional buy in, 937 00:44:27,239 --> 00:44:29,120 Speaker 7: and that kind of remains an open question as to 938 00:44:29,160 --> 00:44:32,040 Speaker 7: whether or not that would be something that this divided 939 00:44:32,040 --> 00:44:33,000 Speaker 7: Congress could get behind. 940 00:44:33,120 --> 00:44:35,239 Speaker 5: As mcmilvaney said, how do you pay for it? That 941 00:44:35,280 --> 00:44:38,080 Speaker 5: would of course be the first question on Capitol Hill. 942 00:44:38,120 --> 00:44:41,600 Speaker 5: I wonder what Keith Naraka makes of this. Executive VP 943 00:44:41,800 --> 00:44:45,280 Speaker 5: chare Banking Supervision and Regulation Group at Potomac Global partners. 944 00:44:45,360 --> 00:44:46,480 Speaker 4: Keith is back with us when. 945 00:44:46,360 --> 00:44:50,040 Speaker 5: We spoke right after, Yeah, the initial round of collapses 946 00:44:50,120 --> 00:44:53,799 Speaker 5: or at least the attempts to prevent further contagion here 947 00:44:53,840 --> 00:44:54,919 Speaker 5: and Keith, welcome back. 948 00:44:55,520 --> 00:44:56,560 Speaker 4: It's great to have you with us. 949 00:44:56,600 --> 00:44:58,880 Speaker 5: We thought we'd be talking about this FED report and 950 00:44:58,920 --> 00:45:00,800 Speaker 5: maybe you want to get to that from Friday on 951 00:45:00,840 --> 00:45:05,799 Speaker 5: the failure of SVB. But this first Republic story obviously 952 00:45:05,920 --> 00:45:08,080 Speaker 5: is a major one. And now the FD I see 953 00:45:08,920 --> 00:45:11,680 Speaker 5: putting up a menu of options we'll say here on 954 00:45:12,239 --> 00:45:16,840 Speaker 5: a strengthening at least targeted to some extent, Like Hailey said, 955 00:45:17,320 --> 00:45:20,000 Speaker 5: changes to deposit insurance is at the right move. 956 00:45:20,920 --> 00:45:23,799 Speaker 18: Well, look, I think something needs to be done right 957 00:45:23,920 --> 00:45:28,640 Speaker 18: because you know, we've seen some runs basically by these 958 00:45:28,680 --> 00:45:33,719 Speaker 18: type of accounts, and certainly in the payroll context, it's 959 00:45:34,440 --> 00:45:38,279 Speaker 18: it's troublesome for workers who who may have to you know, 960 00:45:38,320 --> 00:45:40,160 Speaker 18: get paid on a Friday and not get paid in 961 00:45:40,200 --> 00:45:44,400 Speaker 18: the context of SVB. So you know, I think a 962 00:45:44,400 --> 00:45:48,239 Speaker 18: lot of people here in Washington are looking at, you know, 963 00:45:48,360 --> 00:45:51,680 Speaker 18: targeted ways to you know, maybe stop the run, but 964 00:45:51,880 --> 00:45:55,000 Speaker 18: not grant unlimited deposit insurance to everyone, which I think 965 00:45:55,040 --> 00:45:59,720 Speaker 18: would have some negative ramifications. In the sense of being 966 00:45:59,800 --> 00:46:02,520 Speaker 18: you know, impossible to pay for might be the top 967 00:46:02,560 --> 00:46:05,040 Speaker 18: of the list. And then also you know, make bank 968 00:46:05,120 --> 00:46:07,120 Speaker 18: debt and equity a lot more expensive. 969 00:46:07,560 --> 00:46:11,120 Speaker 7: Yeah, Keith A. So you're making that payroll port payroll point. 970 00:46:11,160 --> 00:46:14,719 Speaker 7: I'm thinking back to when Silicon Valley Bank was on 971 00:46:14,840 --> 00:46:17,040 Speaker 7: the verge of failure and then ultimately did fail on 972 00:46:17,120 --> 00:46:19,359 Speaker 7: March tenth, before we knew a few days later that 973 00:46:19,360 --> 00:46:21,480 Speaker 7: the government was going to make all of those uninsured 974 00:46:21,520 --> 00:46:24,680 Speaker 7: depositors whole. You had, you know, the startup folks out 975 00:46:24,680 --> 00:46:27,240 Speaker 7: in Silicon Valley saying this is an extinction level event 976 00:46:27,320 --> 00:46:28,840 Speaker 7: for some of these startups. They're not going to be 977 00:46:28,880 --> 00:46:31,360 Speaker 7: able to pay any of their bills. You know, so 978 00:46:31,440 --> 00:46:35,160 Speaker 7: many of them had millions. So it definitely is, you know, 979 00:46:35,239 --> 00:46:37,279 Speaker 7: for a good reason, something that the FDI see is 980 00:46:37,320 --> 00:46:39,880 Speaker 7: looking at. But politically, do you really think that this 981 00:46:40,000 --> 00:46:43,000 Speaker 7: is something that Congress could get behind because they're going 982 00:46:43,080 --> 00:46:43,600 Speaker 7: to need to. 983 00:46:44,080 --> 00:46:47,680 Speaker 18: Well, look, I think in the financial crisis, as you'll recall, 984 00:46:47,800 --> 00:46:51,400 Speaker 18: the FDIC did this. They did a temporary account guarantee 985 00:46:51,800 --> 00:46:54,600 Speaker 18: of what they called transaction accounts, which were meant to 986 00:46:54,600 --> 00:46:58,799 Speaker 18: get at the business account issue that then became outlawed 987 00:46:59,239 --> 00:47:03,960 Speaker 18: by Frank. So it's the proverbial you know, Congress outlaws 988 00:47:03,960 --> 00:47:07,360 Speaker 18: the fire department after the fire type thing. And so 989 00:47:07,480 --> 00:47:09,719 Speaker 18: I think, you know, we're having to revisit some of 990 00:47:09,760 --> 00:47:12,480 Speaker 18: these issues from Dodd Frank, and I think you know 991 00:47:12,480 --> 00:47:16,080 Speaker 18: there are larger issues to be you know, potentially revisited 992 00:47:16,120 --> 00:47:17,840 Speaker 18: in light of all of this, right. 993 00:47:18,560 --> 00:47:21,560 Speaker 7: Yeah, Well we know that the FEDS Vice Chair Supervision, 994 00:47:21,600 --> 00:47:23,520 Speaker 7: Michael Barr, is looking at some of that revisitation. 995 00:47:24,000 --> 00:47:27,240 Speaker 18: Well, and it's not even like the rollback of Dodd Frank. 996 00:47:27,320 --> 00:47:30,560 Speaker 18: I mean, I think, like what you know, the headline 997 00:47:30,600 --> 00:47:33,160 Speaker 18: of the First Republic is like, we have the same 998 00:47:33,239 --> 00:47:36,080 Speaker 18: solution that we had in two thousand and eight to 999 00:47:36,120 --> 00:47:39,239 Speaker 18: bear Stearns, right, which is JP Morgan coming to buy 1000 00:47:39,280 --> 00:47:42,440 Speaker 18: them out? Right, So what did we spend billions of 1001 00:47:42,520 --> 00:47:47,000 Speaker 18: dollars in hundreds of thousands of hours of time to 1002 00:47:47,080 --> 00:47:50,080 Speaker 18: do to get ourselves back in the same situation? Right? 1003 00:47:50,160 --> 00:47:53,359 Speaker 18: I mean something needs to be looked at, and we're 1004 00:47:53,560 --> 00:47:57,200 Speaker 18: very you know, the the remedy of Dodd Frank was 1005 00:47:57,239 --> 00:48:00,480 Speaker 18: to be very prescriptive in what needs to be done, 1006 00:48:00,960 --> 00:48:04,800 Speaker 18: and I'm not sure being more prescriptive. It's like telling 1007 00:48:04,840 --> 00:48:07,200 Speaker 18: you the exact things you need to do to drive 1008 00:48:07,200 --> 00:48:09,800 Speaker 18: a car, and having so many you can't look outside 1009 00:48:09,840 --> 00:48:13,480 Speaker 18: the window and smashing into the car in front of you. 1010 00:48:13,520 --> 00:48:17,440 Speaker 18: And that's almost I think a good analogy to what 1011 00:48:17,560 --> 00:48:21,760 Speaker 18: happened here. The defect in what we saw in Silicon 1012 00:48:21,840 --> 00:48:25,200 Speaker 18: Valley Bank and signature in First Republic is, I think, 1013 00:48:25,239 --> 00:48:28,000 Speaker 18: as Jamie Diamond said in a shareholder letter, a defect 1014 00:48:28,040 --> 00:48:32,480 Speaker 18: hiding and plain sight. And so what in our regulatory culture, 1015 00:48:32,600 --> 00:48:36,520 Speaker 18: in our risk management culture, has made us so focused 1016 00:48:36,560 --> 00:48:39,960 Speaker 18: on backward looking that we can't have a resilient and 1017 00:48:40,080 --> 00:48:43,319 Speaker 18: adaptable system to deal with the unknown, to deal with 1018 00:48:43,360 --> 00:48:46,880 Speaker 18: the unexpected. That's sort of where we need to head. 1019 00:48:46,960 --> 00:48:50,319 Speaker 18: And it can't be oh, you know, like in the 1020 00:48:50,360 --> 00:48:54,400 Speaker 18: process of streamlining in twenty eighteen, that was wrong and 1021 00:48:54,440 --> 00:48:58,000 Speaker 18: we need to you know, roll back to like very heavily, 1022 00:48:58,160 --> 00:49:02,320 Speaker 18: you know, focused on preventing lead men from failing again. Well, that, obviously, 1023 00:49:02,360 --> 00:49:05,719 Speaker 18: I think was more of the takeaway I had from 1024 00:49:05,800 --> 00:49:08,880 Speaker 18: the Bar report, which was there was a lot going on, 1025 00:49:09,080 --> 00:49:12,800 Speaker 18: a lot of plates being joggled, people that regularly inside 1026 00:49:12,840 --> 00:49:16,000 Speaker 18: the regulatory agencies and inside of the banks were being 1027 00:49:16,040 --> 00:49:18,440 Speaker 18: forced to be jack of all Trades and Master of 1028 00:49:18,480 --> 00:49:21,840 Speaker 18: None and some plates got dropped, right, big plates that 1029 00:49:21,880 --> 00:49:25,560 Speaker 18: are very expensive plates. I mean, we just had again 1030 00:49:25,719 --> 00:49:30,680 Speaker 18: the second largest bank failure in history after Silicon Valley Bank. 1031 00:49:30,800 --> 00:49:34,319 Speaker 18: So within the course of one quarter of one year, 1032 00:49:35,320 --> 00:49:35,719 Speaker 18: you know that. 1033 00:49:35,960 --> 00:49:40,360 Speaker 7: This is massive failures. Let's talk about the resolution of that, 1034 00:49:40,400 --> 00:49:43,479 Speaker 7: because the FDIC came in, took receivership of the bank, 1035 00:49:43,760 --> 00:49:46,040 Speaker 7: sold it to JP Morgan, already a bank that was 1036 00:49:46,080 --> 00:49:48,680 Speaker 7: too big to fail. Now it's even way way too 1037 00:49:48,719 --> 00:49:51,560 Speaker 7: big to fail. Perhaps what is your view on that 1038 00:49:51,560 --> 00:49:54,319 Speaker 7: that JP Morgan ultimately was the winning bidder even though 1039 00:49:54,320 --> 00:49:57,879 Speaker 7: it required regulatory approval to have more deposits than it's 1040 00:49:57,880 --> 00:50:00,080 Speaker 7: technically allowed. And what does this mean for feture for 1041 00:50:00,200 --> 00:50:01,640 Speaker 7: consolidation in this industry. 1042 00:50:02,000 --> 00:50:04,600 Speaker 18: Yeah, so a couple of reactions. First, I think we 1043 00:50:04,640 --> 00:50:08,120 Speaker 18: are getting back to more of reverting to norm of 1044 00:50:08,200 --> 00:50:12,239 Speaker 18: like this. The FDIC is under statutory requirement to have 1045 00:50:12,400 --> 00:50:17,080 Speaker 18: least cost resolution. It seems like at least we're getting 1046 00:50:17,120 --> 00:50:20,120 Speaker 18: more in the neighborhood of that than where we were 1047 00:50:20,200 --> 00:50:23,560 Speaker 18: with Silicon Valley Bank and signature which is don't allow 1048 00:50:23,600 --> 00:50:27,279 Speaker 18: any consolidation, allow them to fail. And then you know 1049 00:50:27,360 --> 00:50:30,200 Speaker 18: the government has to pick up the tab for everyone. 1050 00:50:30,280 --> 00:50:33,839 Speaker 18: I think that's a bad model. So this is more 1051 00:50:34,560 --> 00:50:36,600 Speaker 18: of like what used to happen in the old days, 1052 00:50:36,680 --> 00:50:39,759 Speaker 18: which is like a bank gets in trouble, you know, 1053 00:50:39,880 --> 00:50:42,879 Speaker 18: the FDIC, to avoid a larger loss to the fund 1054 00:50:43,680 --> 00:50:46,839 Speaker 18: will do an assisted transaction. Probably should have been done 1055 00:50:46,880 --> 00:50:50,480 Speaker 18: with Silicon Valley Bank, and a lot of times in 1056 00:50:50,520 --> 00:50:53,000 Speaker 18: the old days, you know, there would be a lot 1057 00:50:53,000 --> 00:50:55,759 Speaker 18: of criticism of regulators from doing this, and you know, 1058 00:50:56,000 --> 00:51:00,200 Speaker 18: seems a little bit quiet today, so maybe people have 1059 00:51:00,280 --> 00:51:03,800 Speaker 18: learned their lesson somewhat. I think the larger looking forward 1060 00:51:03,880 --> 00:51:06,520 Speaker 18: is you need more consolidation in the banking industry so 1061 00:51:06,560 --> 00:51:07,880 Speaker 18: you don't get to this point. 1062 00:51:08,040 --> 00:51:11,040 Speaker 4: So the smaller banks are going to start getting married now. 1063 00:51:11,440 --> 00:51:11,720 Speaker 18: Yeah. 1064 00:51:11,920 --> 00:51:14,239 Speaker 5: Elizabeth Warren, by the way, talks to this, says the 1065 00:51:14,280 --> 00:51:17,960 Speaker 5: failure of First Republic on Twitter shows how deregulation has 1066 00:51:18,000 --> 00:51:21,080 Speaker 5: made the too big to fail problem even worse, and 1067 00:51:21,160 --> 00:51:23,680 Speaker 5: says ultimately taxpayers will be on the hook. 1068 00:51:23,719 --> 00:51:24,520 Speaker 4: Do you agree with that? 1069 00:51:25,239 --> 00:51:28,200 Speaker 18: Well, look, I think she needs to get over her 1070 00:51:29,160 --> 00:51:32,160 Speaker 18: inhibitions on bank mergers right and on any mergers. She 1071 00:51:32,239 --> 00:51:34,839 Speaker 18: has a bill pending in the Senate that would bar 1072 00:51:35,120 --> 00:51:38,680 Speaker 18: all mergers over five billion dollars in the economy. And 1073 00:51:38,719 --> 00:51:40,919 Speaker 18: you know what, some may be bad, but a lot 1074 00:51:40,920 --> 00:51:43,200 Speaker 18: are good and there's a reason for doing them, and 1075 00:51:43,239 --> 00:51:46,560 Speaker 18: it's called capitalism. And I think she needs to embrace capitalism. 1076 00:51:47,040 --> 00:51:49,200 Speaker 18: And so, you know, I would say she's a big 1077 00:51:49,239 --> 00:51:52,120 Speaker 18: part behind why we're in this mess in the first place, 1078 00:51:52,160 --> 00:51:54,759 Speaker 18: because no one wants to step up the plate. No 1079 00:51:54,800 --> 00:51:58,320 Speaker 18: one wants to do engage in a road to nowhere 1080 00:51:58,480 --> 00:52:02,920 Speaker 18: of a transaction that maybe economically beneficial and save us 1081 00:52:03,000 --> 00:52:06,120 Speaker 18: all these problems in the future. So you know, a 1082 00:52:06,120 --> 00:52:08,120 Speaker 18: lot of self reflection need to be done by a 1083 00:52:08,160 --> 00:52:10,800 Speaker 18: lot of people, including Elizabeth Warren Keith. 1084 00:52:10,800 --> 00:52:13,040 Speaker 7: We only have about twenty seconds left. But speaking of 1085 00:52:13,080 --> 00:52:16,240 Speaker 7: problems of the future, does this end with first Republic? 1086 00:52:16,400 --> 00:52:18,120 Speaker 7: Is this a contained incident or could we see more 1087 00:52:18,160 --> 00:52:18,880 Speaker 7: ripple effects? 1088 00:52:19,000 --> 00:52:21,440 Speaker 18: Well, look, I mean I think in one way, you know, 1089 00:52:21,600 --> 00:52:25,080 Speaker 18: they rushed out the Silicon Valley and signature reports to 1090 00:52:25,120 --> 00:52:28,120 Speaker 18: say they were isolated incidents to get it out before 1091 00:52:28,120 --> 00:52:30,560 Speaker 18: the next one, right and so so no, I mean, 1092 00:52:30,560 --> 00:52:33,279 Speaker 18: you have the three of the largest bank failures in 1093 00:52:33,400 --> 00:52:36,920 Speaker 18: history happening in one quarter. They aren't isolated. This is 1094 00:52:36,960 --> 00:52:40,520 Speaker 18: what happens when monetary policy has to be increased in 1095 00:52:40,600 --> 00:52:44,279 Speaker 18: a compressed timeframe. So there's going to be more. There's 1096 00:52:44,320 --> 00:52:47,239 Speaker 18: going to be a credit cycle coming. So so I 1097 00:52:47,239 --> 00:52:51,480 Speaker 18: think we need to buckle our seatbelts, you know, for more, 1098 00:52:51,719 --> 00:52:53,200 Speaker 18: you know, bumps in the road. 1099 00:52:53,480 --> 00:52:54,239 Speaker 4: I was really helping you. 1100 00:52:54,239 --> 00:52:56,200 Speaker 5: Weren't going to say that, Keith. This is how we 1101 00:52:56,280 --> 00:52:58,759 Speaker 5: have to part Keith near Reika. We'll have you back, 1102 00:52:58,760 --> 00:53:02,640 Speaker 5: of course when this happens. He's with Potomac Global partner's 1103 00:53:02,680 --> 00:53:04,280 Speaker 5: former acting control or the currency. 1104 00:53:04,400 --> 00:53:06,080 Speaker 4: Just something good to think about when you go on 1105 00:53:06,120 --> 00:53:09,320 Speaker 4: to bed tonight, Kaylee, sweet Train, he said no before 1106 00:53:09,320 --> 00:53:15,200 Speaker 4: you even got the question out. Thanks for listening to 1107 00:53:15,200 --> 00:53:16,320 Speaker 4: the Sound On podcast. 1108 00:53:16,400 --> 00:53:19,520 Speaker 5: Make sure to subscribe if you haven't already, at Apple, Spotify, 1109 00:53:19,560 --> 00:53:22,000 Speaker 5: and anywhere else you get your podcasts, and you can 1110 00:53:22,000 --> 00:53:25,040 Speaker 5: find us live every weekday from Washington, DC at one 1111 00:53:25,080 --> 00:53:29,040 Speaker 5: pm Eastern Time at Bloomberg dot com