1
00:00:00,040 --> 00:00:04,280
Speaker 1: First Republic Bank has become the second largest bank failure

2
00:00:04,360 --> 00:00:05,240
Speaker 1: in US history.

3
00:00:05,320 --> 00:00:07,360
Speaker 2: Another Bay Area bank goes down.

4
00:00:07,560 --> 00:00:09,200
Speaker 3: We're back with some breaking news this morning.

5
00:00:09,240 --> 00:00:12,760
Speaker 4: First Republic Bank has been taken over by federal regulators

6
00:00:12,760 --> 00:00:14,560
Speaker 4: and sold to JP Morgan.

7
00:00:14,320 --> 00:00:17,560
Speaker 1: Chase as America's bank and crisis flares up again. In

8
00:00:17,600 --> 00:00:18,239
Speaker 1: a statement this.

9
00:00:18,200 --> 00:00:26,239
Speaker 5: Morning, Hello Stephanomics, here the podcast that brings you the

10
00:00:26,239 --> 00:00:29,760
Speaker 5: global economy. We're back a few weeks later than expected,

11
00:00:29,760 --> 00:00:32,320
Speaker 5: but just in time to talk about the collapse of

12
00:00:32,440 --> 00:00:35,880
Speaker 5: First Republic, the fourth US bank to hit the rails

13
00:00:36,120 --> 00:00:38,400
Speaker 5: since we went off air at the end of January.

14
00:00:39,120 --> 00:00:42,839
Speaker 5: Why are these smaller lenders under pressure and if they

15
00:00:42,880 --> 00:00:45,480
Speaker 5: stop lending, is that going to be enough to tank

16
00:00:45,560 --> 00:00:48,680
Speaker 5: the economy? I found myself asking these questions in Los

17
00:00:48,720 --> 00:00:52,400
Speaker 5: Angeles this week at the Milklin Institute's big annual conference.

18
00:00:53,000 --> 00:00:56,760
Speaker 5: It's not a bad place to get expert answers. Some

19
00:00:56,800 --> 00:00:59,600
Speaker 5: of the biggest names in US finance were here, along

20
00:00:59,600 --> 00:01:03,160
Speaker 5: with some senior US politicians and the Managing Director of

21
00:01:03,160 --> 00:01:06,600
Speaker 5: the International Monetary Fund, Chris Selina Gorgieva. I'll play you

22
00:01:06,680 --> 00:01:10,240
Speaker 5: my chat with her and with Milkin's chief economist William

23
00:01:10,319 --> 00:01:13,360
Speaker 5: Lee in a few minutes. But with the best will

24
00:01:13,360 --> 00:01:16,800
Speaker 5: in the world, these movers and shakers aren't going to

25
00:01:16,800 --> 00:01:18,360
Speaker 5: be able to tell you how it feels to be

26
00:01:18,440 --> 00:01:22,080
Speaker 5: at the sharp end of this slow moving US credit crunch.

27
00:01:22,560 --> 00:01:26,520
Speaker 5: For that, we ask Bloomberg's Mike Sasso to go to Florida.

28
00:01:28,920 --> 00:01:31,679
Speaker 1: Pickleball has exploded in popularity across the country at.

29
00:01:31,640 --> 00:01:37,560
Speaker 6: Kickleball and now Picklebob, popularity has exploded, with an estimated

30
00:01:37,600 --> 00:01:40,440
Speaker 6: more than four point eight million players nationwide.

31
00:01:40,480 --> 00:01:44,080
Speaker 7: If a pickleball business is having trouble getting alone these days,

32
00:01:44,680 --> 00:01:47,840
Speaker 7: then you know the credit crunch sweeping the US must

33
00:01:47,920 --> 00:01:54,760
Speaker 7: be syric. In Nakatie, Florida, a suburb in the fast

34
00:01:54,800 --> 00:01:59,320
Speaker 7: growing Jacksonville area, Lauren Garvey and her husband are eager

35
00:01:59,360 --> 00:02:02,640
Speaker 7: to open a new bar and grill with quartz for pickleball,

36
00:02:03,000 --> 00:02:06,240
Speaker 7: the popular paddle sport that's kind of like tennis for

37
00:02:06,280 --> 00:02:09,840
Speaker 7: the everyman. They want to combine it with a restaurant,

38
00:02:10,320 --> 00:02:14,320
Speaker 7: either by creating their own spot or buying a franchise

39
00:02:14,440 --> 00:02:18,000
Speaker 7: of Chicken and pickle where you can gobble down some

40
00:02:18,040 --> 00:02:20,880
Speaker 7: wings with a beer then hit the quartz.

41
00:02:23,120 --> 00:02:26,919
Speaker 1: When I started noticing pickleball was when you know maybe

42
00:02:26,960 --> 00:02:29,120
Speaker 1: five seven years back, when my grandmother was in her

43
00:02:29,160 --> 00:02:32,200
Speaker 1: retirement community and she was playing pickleball and she was

44
00:02:32,280 --> 00:02:34,760
Speaker 1: raving about it, and it sounded like such a funny

45
00:02:34,840 --> 00:02:38,720
Speaker 1: term until we started noticing more and more people playing

46
00:02:38,760 --> 00:02:44,200
Speaker 1: in our community in Nokti, and there were multiple pickleball

47
00:02:44,240 --> 00:02:47,560
Speaker 1: courts and they're constantly full in the mornings. When I

48
00:02:47,600 --> 00:02:50,079
Speaker 1: take walks past there, I'll see people playing pick a ball,

49
00:02:50,520 --> 00:02:52,919
Speaker 1: you know, as early as seven am, and they're there

50
00:02:52,960 --> 00:02:55,919
Speaker 1: until the sun goes down. So we just realized what

51
00:02:56,440 --> 00:02:57,760
Speaker 1: kind of opportunity was there.

52
00:02:59,040 --> 00:03:02,880
Speaker 7: But like so many other lately, the Garvey's entrepreneurial dreams

53
00:03:03,240 --> 00:03:05,560
Speaker 7: are a little more remote than they were just a

54
00:03:05,600 --> 00:03:08,960
Speaker 7: few weeks ago. Getting a two and a half million

55
00:03:09,000 --> 00:03:12,320
Speaker 7: dollar loan from their bank once looked all but certain,

56
00:03:13,040 --> 00:03:15,520
Speaker 7: but when the best rate they could get was around

57
00:03:15,600 --> 00:03:19,400
Speaker 7: nine percent or ten percent, the Garvey's put the brakes on.

58
00:03:20,360 --> 00:03:20,480
Speaker 8: You know.

59
00:03:20,560 --> 00:03:23,000
Speaker 1: It got to that point where when we were told

60
00:03:23,000 --> 00:03:24,880
Speaker 1: that the interest rates were going to be at ten

61
00:03:24,919 --> 00:03:27,160
Speaker 1: plus percent, we realized that's just higher than what we

62
00:03:27,160 --> 00:03:29,919
Speaker 1: could afford or what made sense. And there's a high

63
00:03:29,919 --> 00:03:32,640
Speaker 1: probability that you know, they wouldn't approved the concept or

64
00:03:32,639 --> 00:03:37,240
Speaker 1: the loan anyway, and obviously it doesn't support our financial model.

65
00:03:37,320 --> 00:03:39,440
Speaker 1: We you know, it would make it difficult for us

66
00:03:39,440 --> 00:03:43,000
Speaker 1: to even break even, let alone make money time soon,

67
00:03:43,080 --> 00:03:44,840
Speaker 1: so you know, we had to cut that off.

68
00:03:48,360 --> 00:03:49,600
Speaker 9: It was expected over the weekend as well.

69
00:03:49,640 --> 00:03:51,880
Speaker 3: Let's get a little bit more insight on the collapse

70
00:03:51,880 --> 00:03:53,800
Speaker 3: of Silicon Valley Banks is rapid.

71
00:03:53,960 --> 00:03:56,640
Speaker 1: How quickly this bank went into total collapse. It was

72
00:03:56,720 --> 00:03:58,559
Speaker 1: just a couple of days, and it happened.

73
00:03:58,280 --> 00:03:58,760
Speaker 9: In the middle.

74
00:03:58,840 --> 00:04:02,480
Speaker 7: The banking turmoil that sunk Silicon Valley Bank in rattled

75
00:04:02,600 --> 00:04:07,040
Speaker 7: markets worldwide. So far hasn't led to the wholesale crisis

76
00:04:07,080 --> 00:04:11,360
Speaker 7: that some feared. Yet it's causing banks in other lenders

77
00:04:11,560 --> 00:04:15,360
Speaker 7: to think harder about making loans, and it's reducing the

78
00:04:15,400 --> 00:04:19,240
Speaker 7: size of the loans they do make. This credit crunch

79
00:04:19,360 --> 00:04:22,760
Speaker 7: is more than a little worrying for the world's biggest economy,

80
00:04:23,760 --> 00:04:27,760
Speaker 7: especially as the US Federal Reserve met this week in

81
00:04:27,960 --> 00:04:32,039
Speaker 7: raised interest rates for their tenth and possibly final time

82
00:04:32,200 --> 00:04:36,400
Speaker 7: of the current cycle. Those higher borrowing costs played a

83
00:04:36,520 --> 00:04:41,560
Speaker 7: role in stoking today's banking trouble. A year ago, the

84
00:04:41,680 --> 00:04:45,680
Speaker 7: US Central Bank launched an aggressive campaign to squelch the

85
00:04:45,680 --> 00:04:51,279
Speaker 7: worst inflation America had seen in forty years. Suddenly, new

86
00:04:51,360 --> 00:04:54,400
Speaker 7: car loans that once had low four point four percent

87
00:04:54,480 --> 00:04:59,680
Speaker 7: interest rates now carry burdensome seven percent rates. And for

88
00:04:59,760 --> 00:05:02,880
Speaker 7: a min America's mom and pop shops, the average loan

89
00:05:03,040 --> 00:05:07,400
Speaker 7: backed by the US Small Business Administration has nearly doubled

90
00:05:07,680 --> 00:05:11,120
Speaker 7: to more than eleven percent interest. It was too much

91
00:05:11,160 --> 00:05:12,480
Speaker 7: to stomach for the Garvey's.

92
00:05:13,360 --> 00:05:14,800
Speaker 1: Yeah, we kind of got to the point where we

93
00:05:14,920 --> 00:05:16,520
Speaker 1: just realized it was too high for us.

94
00:05:21,720 --> 00:05:24,080
Speaker 2: Only about twenty percent of the money in the United

95
00:05:24,120 --> 00:05:28,320
Speaker 2: States is in currency and coin. The other eighty percent

96
00:05:28,640 --> 00:05:32,120
Speaker 2: is check with money, and that check with money is

97
00:05:32,160 --> 00:05:36,520
Speaker 2: in the form of deposits in our commercial banking system

98
00:05:36,560 --> 00:05:37,480
Speaker 2: commercial banks.

99
00:05:37,640 --> 00:05:40,520
Speaker 7: Americans have generally parked their money in banks for a

100
00:05:40,560 --> 00:05:44,760
Speaker 7: long time without moving it, but they started to withdraw

101
00:05:45,040 --> 00:05:49,680
Speaker 7: when the FED began raising rates last year. When svb's

102
00:05:49,720 --> 00:05:54,160
Speaker 7: troubles made headlines in March. In First Republic and Signature

103
00:05:54,200 --> 00:05:58,880
Speaker 7: Bank soon followed, depositors got spooted and yanked their cash

104
00:05:58,920 --> 00:06:00,760
Speaker 7: out calls all three to.

105
00:06:00,720 --> 00:06:04,760
Speaker 8: Fail, and as those deposits flow out of the bank,

106
00:06:05,200 --> 00:06:10,560
Speaker 8: that severely cuts down on their ability to make new loans.

107
00:06:10,839 --> 00:06:15,480
Speaker 7: Here's Ben Johnston Enough Capitis a lender to small businesses.

108
00:06:15,880 --> 00:06:19,200
Speaker 8: And in fact many cases, these banks are needing to

109
00:06:19,240 --> 00:06:23,400
Speaker 8: shed assets and courtail lending in the future in order

110
00:06:23,480 --> 00:06:27,680
Speaker 8: to make sure that they can supply that outflow of deposits.

111
00:06:28,480 --> 00:06:32,479
Speaker 7: Eventually, bank regulators in a coalition of large banks stepped

112
00:06:32,480 --> 00:06:36,280
Speaker 7: in to quell the crisis, but many see troubling signs

113
00:06:36,480 --> 00:06:40,479
Speaker 7: for the bank loans and the companies that depend on them.

114
00:06:41,160 --> 00:06:45,440
Speaker 7: Just this week, JP Morgan agreed to acquire First Republic

115
00:06:45,520 --> 00:06:51,320
Speaker 7: Bank after it was seized by authorities. John Tuhig works

116
00:06:51,320 --> 00:06:55,960
Speaker 7: for the investment bank Raymond James Financial, overseeing a unit

117
00:06:56,040 --> 00:07:01,040
Speaker 7: that packages up loans and trades them. He normally surveyed

118
00:07:01,120 --> 00:07:05,000
Speaker 7: about two hundred regional banks recently and found that about

119
00:07:05,000 --> 00:07:10,000
Speaker 7: a quarter had toughened their lending standards after svb's collapse.

120
00:07:10,880 --> 00:07:14,480
Speaker 10: They're charging higher rates, so that again that comes back

121
00:07:14,520 --> 00:07:17,120
Speaker 10: to liquidity, right, their cost of funds is going up.

122
00:07:18,440 --> 00:07:21,000
Speaker 10: It's not necessarily credit, but I mean if they have

123
00:07:21,120 --> 00:07:23,320
Speaker 10: to do a borrowing or have to do a CD special,

124
00:07:23,360 --> 00:07:26,520
Speaker 10: they're borrowing costs or four or five percent today, they

125
00:07:26,560 --> 00:07:29,840
Speaker 10: have to charge something north of that, right, But you're

126
00:07:29,840 --> 00:07:34,560
Speaker 10: starting to see lending slow because of those higher rates.

127
00:07:35,120 --> 00:07:39,160
Speaker 7: Meantime, the amount of corporate debt trading at distress levels

128
00:07:39,480 --> 00:07:44,280
Speaker 7: has soared by twenty eight percent since SVB collapsed in March,

129
00:07:45,200 --> 00:07:52,000
Speaker 7: and bankruptcies are climbing, especially among small firms with money

130
00:07:52,040 --> 00:07:55,600
Speaker 7: harder to get at traditional banks. More firms likely will

131
00:07:55,640 --> 00:08:00,320
Speaker 7: turn to high interest alternative lenders like Cappitis. The New

132
00:08:00,360 --> 00:08:03,720
Speaker 7: York based company offers loans in other forms of credit

133
00:08:04,080 --> 00:08:07,200
Speaker 7: with interest rates starting in the teens and going up

134
00:08:07,240 --> 00:08:12,120
Speaker 7: from there. Despite its priceier loans, the companies saw loan

135
00:08:12,240 --> 00:08:16,920
Speaker 7: applications spike to their highest level ever in March. Here's

136
00:08:17,040 --> 00:08:20,480
Speaker 7: chief operating Officer Ben Johnston again, and.

137
00:08:20,520 --> 00:08:25,840
Speaker 8: We expect that volume to continue to be at quite

138
00:08:25,880 --> 00:08:28,000
Speaker 8: high levels for the foreseeable future.

139
00:08:33,559 --> 00:08:36,680
Speaker 7: Back in Florida, the Garvey's are going to wait out

140
00:08:36,720 --> 00:08:40,720
Speaker 7: the high interest rates and credit crunch, hopefully returning to

141
00:08:40,800 --> 00:08:44,720
Speaker 7: their pickleball, grill and bar concept when things settle down.

142
00:08:46,320 --> 00:08:48,520
Speaker 1: No doubt that it would be profitable and that the

143
00:08:48,559 --> 00:08:50,880
Speaker 1: demand is there, and it's something that we would love

144
00:08:50,920 --> 00:08:54,040
Speaker 1: to pursue down the line, especially if the interest rates

145
00:08:54,080 --> 00:08:56,000
Speaker 1: come down. It's not going to come off of our radar.

146
00:08:56,120 --> 00:08:59,880
Speaker 1: We're going to continue to proactically pursue it. There's just

147
00:09:00,040 --> 00:09:12,040
Speaker 1: so much demand for it, especially in this area.

148
00:09:16,240 --> 00:09:19,560
Speaker 5: So we're sitting in a crowded hall at the Milkin

149
00:09:20,000 --> 00:09:25,760
Speaker 5: Institute's big annual shindig in LA at the kind of

150
00:09:25,840 --> 00:09:30,640
Speaker 5: charmingly old fashioned Beverly Hilton, and I'm delighted to be

151
00:09:30,720 --> 00:09:34,319
Speaker 5: joined by William Lee, who's the Milcan Institute's chief economist

152
00:09:35,200 --> 00:09:38,680
Speaker 5: and often helps us explain what's going on in the

153
00:09:38,679 --> 00:09:40,400
Speaker 5: global economy. So I appreciate William.

154
00:09:40,480 --> 00:09:43,240
Speaker 6: Well, I've had the privilege of being on Bloomberg Radio

155
00:09:43,679 --> 00:09:47,360
Speaker 6: in Asia, so I visit almost every Bloomberg office in

156
00:09:47,520 --> 00:09:50,240
Speaker 6: places where I've worked my entire professional life.

157
00:09:49,960 --> 00:09:52,000
Speaker 5: And somehow we've not had you on Stephanomics. So I'm

158
00:09:52,000 --> 00:09:55,400
Speaker 5: glad we finally resolved that problem. I want to talk

159
00:09:55,440 --> 00:09:59,400
Speaker 5: to you about lots of things, but let's get into

160
00:09:59,800 --> 00:10:03,600
Speaker 5: the all this talk of credit crunch. And you know,

161
00:10:03,600 --> 00:10:10,400
Speaker 5: obviously this conference this week began with the resolution of

162
00:10:10,480 --> 00:10:14,960
Speaker 5: the First Republic situation, the JP Morgan buying this bank.

163
00:10:15,800 --> 00:10:18,000
Speaker 5: We've had four US banks fail in the last few

164
00:10:18,040 --> 00:10:20,840
Speaker 5: years for a few months, and not all of them big,

165
00:10:21,679 --> 00:10:26,800
Speaker 5: but certainly raising questions about mistakes being made in their

166
00:10:26,840 --> 00:10:29,720
Speaker 5: business model, but also the impact of this big increase

167
00:10:29,760 --> 00:10:33,280
Speaker 5: in interest rates that we've had in the US. So

168
00:10:33,360 --> 00:10:37,720
Speaker 5: I guess I should ask you how concerned are you

169
00:10:38,080 --> 00:10:41,760
Speaker 5: by the state of the US banking system, which of

170
00:10:41,800 --> 00:10:43,959
Speaker 5: course lends to a lot of households and a lot

171
00:10:43,960 --> 00:10:47,880
Speaker 5: of companies, and if they can't lend, then the economy

172
00:10:48,000 --> 00:10:48,679
Speaker 5: might be affected.

173
00:10:48,840 --> 00:10:50,640
Speaker 6: You know, when you bump into anybody here at Milkin

174
00:10:50,800 --> 00:10:53,600
Speaker 6: as an icebreaker, they always ask you. In fact, they've

175
00:10:53,640 --> 00:10:55,760
Speaker 6: been asking me all morning, what do you think of

176
00:10:55,840 --> 00:10:58,400
Speaker 6: happened in the First Republic? Is this the start of

177
00:10:58,440 --> 00:11:00,640
Speaker 6: something really big in the banking is just them? Will

178
00:11:00,679 --> 00:11:03,480
Speaker 6: the banking system be in trouble? And I think if

179
00:11:03,520 --> 00:11:06,400
Speaker 6: you're given answer of the sort that says, oh gee,

180
00:11:06,400 --> 00:11:08,880
Speaker 6: the credit crunch might lead to a recession, they shake

181
00:11:08,880 --> 00:11:12,760
Speaker 6: your hand and they leave because they know. The professionals

182
00:11:12,800 --> 00:11:16,840
Speaker 6: here are capital markets people. They know that corporate America

183
00:11:17,200 --> 00:11:20,240
Speaker 6: raises most of its money through debt and equity, and

184
00:11:20,320 --> 00:11:23,440
Speaker 6: bank lending right now has become much less important source

185
00:11:23,600 --> 00:11:28,600
Speaker 6: of capital for major corporations. Where banks are still very

186
00:11:28,600 --> 00:11:32,520
Speaker 6: important would be among the smaller and medium sized businesses

187
00:11:32,840 --> 00:11:37,040
Speaker 6: and in certain sectors like real estate. They're the local banks,

188
00:11:37,080 --> 00:11:40,720
Speaker 6: the small and medium sized regional banks are incredibly important

189
00:11:40,760 --> 00:11:45,079
Speaker 6: in supplying money to these particular businesses. So if indeed

190
00:11:45,120 --> 00:11:48,360
Speaker 6: there were a banking credit crunch, and there's a banking

191
00:11:48,400 --> 00:11:52,360
Speaker 6: crisis that prevented banks from lending, you'll see the impact

192
00:11:52,520 --> 00:11:56,000
Speaker 6: mainly in those areas. Now, when I say it's only

193
00:11:56,200 --> 00:11:59,320
Speaker 6: eleven percent of total corporate borrowing, do you think, oh

194
00:11:59,320 --> 00:12:00,880
Speaker 6: my god, that's such a small number. Why are we

195
00:12:00,880 --> 00:12:03,960
Speaker 6: so worried about it? Well, small businesses account for the

196
00:12:04,000 --> 00:12:07,600
Speaker 6: bulk of the employment, and the real estate market is

197
00:12:07,640 --> 00:12:10,320
Speaker 6: absolutely vital to a lot of people, because, let's face it,

198
00:12:10,960 --> 00:12:12,880
Speaker 6: we didn't want to go through two thousand and eight again.

199
00:12:13,400 --> 00:12:17,320
Speaker 6: But as far as tanking the entire use economy is concerned,

200
00:12:17,600 --> 00:12:20,160
Speaker 6: that's unlikely to happen unless we really have a very

201
00:12:20,200 --> 00:12:23,520
Speaker 6: severe banking crisis that spreads into the capital markets that

202
00:12:23,640 --> 00:12:25,559
Speaker 6: prevents companies from raising money there.

203
00:12:25,679 --> 00:12:27,719
Speaker 5: So what we're basically saying is that you know, a

204
00:12:27,800 --> 00:12:31,640
Speaker 5: mum and pop store or a small business can't go

205
00:12:31,880 --> 00:12:35,160
Speaker 5: and issue debt, issue a bond from mom and pop.

206
00:12:36,120 --> 00:12:37,880
Speaker 5: They have to go to their local bank. And so

207
00:12:38,000 --> 00:12:40,439
Speaker 5: whether or not that bank is feeling able to lend,

208
00:12:40,679 --> 00:12:46,600
Speaker 5: and how tough requirements that are is going to make

209
00:12:46,640 --> 00:12:48,680
Speaker 5: a difference on whether or not they can get that loan.

210
00:12:49,000 --> 00:12:52,160
Speaker 5: But I guess if you're the FED, that's kind of

211
00:12:52,160 --> 00:12:53,680
Speaker 5: why you're raising interest rates.

212
00:12:53,480 --> 00:12:54,240
Speaker 3: Right exactly.

213
00:12:54,559 --> 00:12:57,000
Speaker 6: One of the reasons why the FED is so worried

214
00:12:57,040 --> 00:13:00,520
Speaker 6: about the efficacy and the power of mantrap policy these

215
00:13:00,600 --> 00:13:03,319
Speaker 6: days is that they have been raising rates really almost

216
00:13:03,400 --> 00:13:07,040
Speaker 6: at an unprecedented rate, from zero to now near five percent,

217
00:13:07,440 --> 00:13:10,120
Speaker 6: and they still see the economy chudging along fairly strongly,

218
00:13:10,400 --> 00:13:13,160
Speaker 6: and more importantly, the unemployment rate it's three and a

219
00:13:13,200 --> 00:13:17,520
Speaker 6: half percent. So they're asking themselves, is has the transmission

220
00:13:17,559 --> 00:13:21,280
Speaker 6: of monetary policy change It somehow has become less powerful. Well,

221
00:13:21,480 --> 00:13:25,120
Speaker 6: it may have, but certainly the indicator they want to

222
00:13:25,160 --> 00:13:32,440
Speaker 6: see change is consumers spending easing off. And we heard

223
00:13:32,600 --> 00:13:36,160
Speaker 6: in today's session Jane Fraser, the head of City Banks,

224
00:13:36,160 --> 00:13:40,760
Speaker 6: say the top two quintiles of people still have a

225
00:13:40,800 --> 00:13:44,000
Speaker 6: lot of spending power. And it really struck me to say, yeah,

226
00:13:44,040 --> 00:13:46,320
Speaker 6: you're right, it's the top two quintiles, But what about

227
00:13:46,320 --> 00:13:49,680
Speaker 6: the rest of the population. They're going to paycheck to paycheck,

228
00:13:49,720 --> 00:13:54,000
Speaker 6: they're using their credit cards, So we have two Americas.

229
00:13:54,640 --> 00:13:57,760
Speaker 6: In America where the very rich are comfortably spending and

230
00:13:57,760 --> 00:14:00,319
Speaker 6: going on vacation and filling up all the airplane going

231
00:14:00,320 --> 00:14:03,280
Speaker 6: to Europe, but we have the bulk of US population

232
00:14:03,520 --> 00:14:08,240
Speaker 6: still suffering from not having enough money to meet their

233
00:14:08,320 --> 00:14:11,600
Speaker 6: daily needs because prices keep going up faster than their income.

234
00:14:11,960 --> 00:14:15,280
Speaker 6: So when the Fed wants to ease inflation, the first

235
00:14:15,280 --> 00:14:17,760
Speaker 6: thing they want to do is start to get the

236
00:14:17,960 --> 00:14:20,720
Speaker 6: economy to slow down so that people don't demand as

237
00:14:20,800 --> 00:14:24,240
Speaker 6: much goods and services and so that the price pressures

238
00:14:24,280 --> 00:14:25,000
Speaker 6: are eased off.

239
00:14:25,240 --> 00:14:27,320
Speaker 3: And I think that is starting to work now.

240
00:14:28,000 --> 00:14:30,560
Speaker 6: In the latest GDP numbers, we're starting to see income

241
00:14:30,640 --> 00:14:34,160
Speaker 6: gross domestic income has actually turned down, and that's a

242
00:14:34,200 --> 00:14:37,680
Speaker 6: good sign that maybe we will have something that will

243
00:14:37,720 --> 00:14:39,960
Speaker 6: restrain the economy. And if the banks start to ease

244
00:14:39,960 --> 00:14:42,880
Speaker 6: off on lending to specifically to businesses that hire a

245
00:14:42,920 --> 00:14:45,720
Speaker 6: lot of people, more people will get frightened that, my god,

246
00:14:46,000 --> 00:14:47,320
Speaker 6: my job really is at risk.

247
00:14:47,520 --> 00:14:49,440
Speaker 3: Maybe I shouldn't be going on that vacation. I can

248
00:14:49,480 --> 00:14:50,680
Speaker 3: maybe delayed till next year.

249
00:14:50,800 --> 00:14:53,560
Speaker 5: It's an uncomfortable conversation, though, isn't it, Because we tend

250
00:14:53,600 --> 00:14:55,680
Speaker 5: to we talk about higher interest rates in the abstract,

251
00:14:56,360 --> 00:15:00,200
Speaker 5: and maybe we encourage the idea that it's you know,

252
00:15:00,360 --> 00:15:03,880
Speaker 5: going to just at the edges make people cut their spending.

253
00:15:03,880 --> 00:15:06,240
Speaker 5: And you talk about holidays, some people think of the

254
00:15:06,280 --> 00:15:11,000
Speaker 5: holidays a pretty essential item in their basket. But you know,

255
00:15:11,000 --> 00:15:13,480
Speaker 5: the uncomfortable truth is you the whole point of the

256
00:15:13,520 --> 00:15:16,960
Speaker 5: policy is to make it harder for people to get alone, right.

257
00:15:16,920 --> 00:15:18,640
Speaker 6: So I'd rather have the money in my plucket now

258
00:15:18,680 --> 00:15:20,720
Speaker 6: rather than spending it and then worry that I will

259
00:15:20,760 --> 00:15:23,040
Speaker 6: get laid off for six months after I come back

260
00:15:23,080 --> 00:15:26,280
Speaker 6: from my vacation. So I think those are the social

261
00:15:26,320 --> 00:15:28,400
Speaker 6: issues that I think the FED is well aware of.

262
00:15:28,920 --> 00:15:31,920
Speaker 6: But there is really only one policy instrument they have

263
00:15:32,160 --> 00:15:34,680
Speaker 6: to control inflation, and that's by raising interest rates.

264
00:15:34,720 --> 00:15:37,440
Speaker 5: I guess the only upside of this for people who

265
00:15:37,480 --> 00:15:41,240
Speaker 5: don't like the sound of working Americans being hurt is

266
00:15:41,240 --> 00:15:43,800
Speaker 5: that it's pretty tough for banks in the US at

267
00:15:43,800 --> 00:15:46,440
Speaker 5: the moment for lots of reasons. But this increase in

268
00:15:46,440 --> 00:15:48,920
Speaker 5: interest rates actually has turned out to be a bit

269
00:15:48,960 --> 00:15:50,480
Speaker 5: of a problem for them. You know, normally they can

270
00:15:50,520 --> 00:15:52,160
Speaker 5: make a lot of money from having a big gap

271
00:15:52,160 --> 00:15:53,880
Speaker 5: between what you can get in a savings account and

272
00:15:53,880 --> 00:15:56,360
Speaker 5: what they're lending out for but it hasn't quite worked

273
00:15:56,360 --> 00:15:56,760
Speaker 5: out like.

274
00:15:56,800 --> 00:15:59,600
Speaker 3: That well it so definitely I'm not sympathetic. I'm sorry.

275
00:16:00,640 --> 00:16:03,560
Speaker 6: My former boss, Jane Frasier at City is doing quite

276
00:16:03,560 --> 00:16:06,760
Speaker 6: well because they have a very diversified business model.

277
00:16:06,520 --> 00:16:08,680
Speaker 3: So those banks that are able.

278
00:16:08,440 --> 00:16:11,200
Speaker 6: To manage their businesses and manage their risks are doing

279
00:16:11,280 --> 00:16:13,920
Speaker 6: quite well. What we have seen is that banks that

280
00:16:14,000 --> 00:16:17,840
Speaker 6: go on the fringes and into fringe markets, like trying

281
00:16:17,880 --> 00:16:21,080
Speaker 6: to service the venture capitalists in Silicon Valley, are going

282
00:16:21,120 --> 00:16:23,560
Speaker 6: to really high net worth people and saying come do

283
00:16:23,680 --> 00:16:27,000
Speaker 6: business with me, and offering very very specialized services to them.

284
00:16:27,480 --> 00:16:33,240
Speaker 6: Those business models that are less diversified are also more risky.

285
00:16:33,480 --> 00:16:36,040
Speaker 6: And what we've discovered is that as interest rates went up,

286
00:16:36,360 --> 00:16:39,480
Speaker 6: they could no longer fund these special services as they

287
00:16:39,480 --> 00:16:43,320
Speaker 6: did before with cheap money, and once funding became expensive,

288
00:16:43,800 --> 00:16:46,560
Speaker 6: suddenly their customers noticed, oh gee, I can get better

289
00:16:46,720 --> 00:16:50,000
Speaker 6: services or better return someplace else. And guess what rich

290
00:16:50,040 --> 00:16:52,800
Speaker 6: people do. They really move their money fast when they

291
00:16:52,840 --> 00:16:57,800
Speaker 6: see higher returns now. Silicon Valley also operated with no

292
00:16:57,960 --> 00:16:59,600
Speaker 6: chief risk officer for nine months.

293
00:17:00,720 --> 00:17:03,240
Speaker 3: They didn't have the kind.

294
00:17:03,080 --> 00:17:07,120
Speaker 6: Of corporate governance that held them accountable for making management

295
00:17:07,160 --> 00:17:12,639
Speaker 6: mistakes similarly, but First Republic also was subject to not

296
00:17:12,800 --> 00:17:15,000
Speaker 6: enough corporate governance that said, hey, you should divorse by

297
00:17:15,000 --> 00:17:17,399
Speaker 6: your business model. So the fact that individual banks like

298
00:17:17,400 --> 00:17:19,800
Speaker 6: that they are not well run, failed is a good thing.

299
00:17:20,200 --> 00:17:22,920
Speaker 6: What we actually do have, which we haven't talked about enough,

300
00:17:23,000 --> 00:17:24,360
Speaker 6: is a crisis in.

301
00:17:24,320 --> 00:17:26,600
Speaker 3: Supervision, not regulation.

302
00:17:26,680 --> 00:17:30,200
Speaker 6: But supervision regulation is for everyone out there is having

303
00:17:30,200 --> 00:17:32,720
Speaker 6: a lot of bunch of rules and having very stiff

304
00:17:32,800 --> 00:17:33,919
Speaker 6: rules or less stiff.

305
00:17:33,680 --> 00:17:35,159
Speaker 3: Rules applying to various banks.

306
00:17:35,600 --> 00:17:39,359
Speaker 6: But a supervisor supposed to come in and actually say, hey,

307
00:17:39,680 --> 00:17:45,080
Speaker 6: you're not following the rules. And the vice chairman Barre testified,

308
00:17:45,359 --> 00:17:50,199
Speaker 6: we gave these banks three notices saying you've got to

309
00:17:50,440 --> 00:17:53,320
Speaker 6: correct what you're doing. That's like saying when I was

310
00:17:53,520 --> 00:17:55,600
Speaker 6: in grade school, my teacher said, this is going to

311
00:17:55,600 --> 00:17:57,479
Speaker 6: go on your permanent record if you don't correct yourself.

312
00:17:57,680 --> 00:18:00,280
Speaker 3: Well, these guys just said, well, so what now?

313
00:18:01,400 --> 00:18:03,399
Speaker 6: From where you come from the Bank of England, the

314
00:18:03,960 --> 00:18:06,320
Speaker 6: worst fear of every banker is to be invited to

315
00:18:06,359 --> 00:18:07,520
Speaker 6: tea at the Bank of England.

316
00:18:07,880 --> 00:18:10,119
Speaker 5: Back in the day, anyway, I'm not sure not just

317
00:18:10,160 --> 00:18:12,080
Speaker 5: because the quality of the t we should say.

318
00:18:11,880 --> 00:18:12,640
Speaker 3: Well, that could be true.

319
00:18:13,320 --> 00:18:16,480
Speaker 6: But here the supervisors allowed these banks to continue, and

320
00:18:16,520 --> 00:18:19,720
Speaker 6: that was the sin that really cannot be forgiven. And

321
00:18:19,800 --> 00:18:23,720
Speaker 6: the fact that the FED on internal review said, oh gee,

322
00:18:23,760 --> 00:18:27,840
Speaker 6: you know, this era of deregulation from Trump has caused

323
00:18:27,840 --> 00:18:30,320
Speaker 6: our supervisory staff to feel that they really shouldn't be

324
00:18:30,400 --> 00:18:31,520
Speaker 6: enforcing regulations.

325
00:18:31,760 --> 00:18:36,600
Speaker 3: I'm sorry. That is not a reasonable excuse for supervisors

326
00:18:36,600 --> 00:18:37,560
Speaker 3: pointing out in their jobs.

327
00:18:38,359 --> 00:18:42,480
Speaker 5: But there is something that is not specific to those

328
00:18:42,520 --> 00:18:45,000
Speaker 5: banks that you've talked about, or even the band supervision

329
00:18:46,040 --> 00:18:49,399
Speaker 5: which we saw in these crises, all these failures of

330
00:18:49,440 --> 00:18:53,280
Speaker 5: these banks. There's, as you mentioned, the sort of digital

331
00:18:53,280 --> 00:18:57,639
Speaker 5: bank run that can happen overnight billions of dollars in

332
00:18:57,680 --> 00:19:00,480
Speaker 5: twenty four hours going out of senecon valid bank example,

333
00:19:01,160 --> 00:19:07,560
Speaker 5: which feels like a game changer, but also now a

334
00:19:07,600 --> 00:19:12,080
Speaker 5: pretty large gap between where short term interest rates are

335
00:19:12,400 --> 00:19:15,600
Speaker 5: and still where most banks are, you know, off what

336
00:19:15,680 --> 00:19:18,080
Speaker 5: are offering in terms of savings rates. Now you look

337
00:19:18,080 --> 00:19:19,440
Speaker 5: at a back that is one of the main ways

338
00:19:19,440 --> 00:19:22,000
Speaker 5: they make money by having that gap and hoping that

339
00:19:22,080 --> 00:19:24,520
Speaker 5: kind of people won't notice, or they talk about the

340
00:19:24,560 --> 00:19:28,040
Speaker 5: deposits being sticky. You know, it does seem to be

341
00:19:28,520 --> 00:19:31,359
Speaker 5: relevant to every bank if it's going to be harder

342
00:19:31,400 --> 00:19:33,639
Speaker 5: to do to make money from that in the future.

343
00:19:33,800 --> 00:19:37,840
Speaker 3: Absolutely, And so you have a business model.

344
00:19:38,240 --> 00:19:40,920
Speaker 6: Every bank does what the fancy term in business school

345
00:19:40,960 --> 00:19:43,919
Speaker 6: they call it maturity transformation, right, which means, you know,

346
00:19:44,400 --> 00:19:46,879
Speaker 6: you're ripping the consumer up, you rip off the depositors,

347
00:19:46,880 --> 00:19:49,800
Speaker 6: and you give you know, very expensive loans to to

348
00:19:49,840 --> 00:19:52,679
Speaker 6: your to your clients. What they did instead was, in

349
00:19:52,680 --> 00:19:55,000
Speaker 6: the case of first of Public, they gave very cheap

350
00:19:55,080 --> 00:19:57,960
Speaker 6: loans to these very rich people to attract them to

351
00:19:58,040 --> 00:20:01,520
Speaker 6: come to their to their bank. And while the amount

352
00:20:01,560 --> 00:20:05,560
Speaker 6: of deposits they were paying off were also low, the

353
00:20:06,200 --> 00:20:09,399
Speaker 6: fact that they could fund these very low interest mortgages

354
00:20:09,640 --> 00:20:12,720
Speaker 6: and very large size mortgages was really at the heart

355
00:20:12,760 --> 00:20:15,240
Speaker 6: of their business model, aside from the touch aphead, you know,

356
00:20:15,280 --> 00:20:17,359
Speaker 6: you can call your bank or any time stuff. So

357
00:20:17,880 --> 00:20:20,919
Speaker 6: when interest rates rose, what's the first thing a banker

358
00:20:21,040 --> 00:20:24,919
Speaker 6: knows that? You have to match your assets and liabilities.

359
00:20:25,160 --> 00:20:29,640
Speaker 6: Maturity matching is something that every risk manager learns from

360
00:20:29,680 --> 00:20:30,560
Speaker 6: the first day.

361
00:20:30,800 --> 00:20:31,840
Speaker 3: Why didn't they do that?

362
00:20:32,280 --> 00:20:34,520
Speaker 6: I'm sorry, it wasn't a surprise that the FED started

363
00:20:34,560 --> 00:20:38,520
Speaker 6: raising rates four or five maybe even six percent interest rates.

364
00:20:39,200 --> 00:20:41,399
Speaker 6: Not to have that as part of a contingency plan

365
00:20:41,840 --> 00:20:43,520
Speaker 6: is a failure of bank management.

366
00:20:44,000 --> 00:20:46,480
Speaker 5: Fascinating Well, William Lee, thank you very much.

367
00:20:46,520 --> 00:20:48,159
Speaker 6: Well Seth, It's been a pleasure to talk to you,

368
00:20:48,280 --> 00:20:51,159
Speaker 6: and I really feel privileged to be in your presence.

369
00:21:00,000 --> 00:21:00,119
Speaker 2: Now.

370
00:21:00,119 --> 00:21:02,159
Speaker 5: He's not the only one saying I told you so

371
00:21:02,520 --> 00:21:05,800
Speaker 5: to First Republic and to the US supervisors who were

372
00:21:05,800 --> 00:21:09,640
Speaker 5: asleep at the wheel. Crystallina Gorgieva said more or less

373
00:21:09,640 --> 00:21:11,639
Speaker 5: the same thing when I spoke to her in the

374
00:21:11,680 --> 00:21:18,000
Speaker 5: opening session of this milk and conference. So, Crystallina, you

375
00:21:18,119 --> 00:21:20,520
Speaker 5: have the great and good of American finance, well at

376
00:21:20,600 --> 00:21:25,240
Speaker 5: least the great of American finance arrayed in front of

377
00:21:25,280 --> 00:21:29,359
Speaker 5: you as head of the IMF. What do you wake

378
00:21:29,440 --> 00:21:31,480
Speaker 5: up thinking about in the morning that you want them

379
00:21:31,560 --> 00:21:33,200
Speaker 5: to think about more.

380
00:21:34,800 --> 00:21:36,000
Speaker 4: The unthinkable.

381
00:21:37,600 --> 00:21:41,120
Speaker 9: What we have lived through in the last years has

382
00:21:41,240 --> 00:21:48,480
Speaker 9: been series of unthinkable events, the pandemic, the war in Ukraine,

383
00:21:48,680 --> 00:21:53,880
Speaker 9: the rapid jump of interest rates after many, many, many

384
00:21:53,960 --> 00:21:58,359
Speaker 9: years of staying Lowell. And it is upon all of

385
00:21:58,440 --> 00:22:06,400
Speaker 9: us to anticipate shocks and be ready to act when

386
00:22:06,440 --> 00:22:09,920
Speaker 9: they occur, because they will be coming. So if your

387
00:22:10,000 --> 00:22:14,280
Speaker 9: risk officers are only thinking about the predictable and well

388
00:22:14,320 --> 00:22:20,240
Speaker 9: known from history. Risks, they're falling a little short, so

389
00:22:20,560 --> 00:22:24,080
Speaker 9: give them a little push to think of what.

390
00:22:24,560 --> 00:22:28,159
Speaker 4: Is so impossible to think.

391
00:22:28,480 --> 00:22:31,360
Speaker 5: We're clearly still seeing continued strength on the consumer side

392
00:22:31,400 --> 00:22:33,720
Speaker 5: of the economy in the US and indeed other places

393
00:22:34,200 --> 00:22:37,679
Speaker 5: in response to this massive increase in interest rates, But

394
00:22:37,840 --> 00:22:42,239
Speaker 5: there are building concerns of a credit crunch, a sort

395
00:22:42,280 --> 00:22:45,440
Speaker 5: of slow motion credit crunch. Do you think we're underestimating

396
00:22:45,560 --> 00:22:47,840
Speaker 5: the impact of those rate rises? Where are you looking?

397
00:22:48,280 --> 00:22:48,440
Speaker 10: Well?

398
00:22:48,480 --> 00:22:53,320
Speaker 9: The first we need to accept that we have handled

399
00:22:53,960 --> 00:23:01,320
Speaker 9: incredibly significant challenges, actually not so badly. In twenty twenty,

400
00:23:01,480 --> 00:23:03,440
Speaker 9: we were anticipating depression.

401
00:23:03,800 --> 00:23:04,560
Speaker 4: Did not happen.

402
00:23:04,680 --> 00:23:07,760
Speaker 9: Yes, the world economy is shrank by three point one percent,

403
00:23:08,480 --> 00:23:12,119
Speaker 9: but that was far from our worst fears.

404
00:23:12,400 --> 00:23:14,080
Speaker 4: So resiliency is for real.

405
00:23:14,240 --> 00:23:16,639
Speaker 9: And actually, since it is morning and we need to

406
00:23:16,680 --> 00:23:20,040
Speaker 9: all wake up, I'm gonna ask you to give a

407
00:23:20,080 --> 00:23:23,840
Speaker 9: big round of applause to yourself because we have.

408
00:23:23,920 --> 00:23:26,159
Speaker 4: Lived through these events.

409
00:23:27,480 --> 00:23:31,560
Speaker 5: Shameless pandering to the audience, but of course there is

410
00:23:31,600 --> 00:23:33,960
Speaker 5: a bud here and the bodies.

411
00:23:35,000 --> 00:23:39,680
Speaker 4: They have not been without consequences.

412
00:23:39,760 --> 00:23:44,240
Speaker 9: We still have the scarring from the pandemic, the geo

413
00:23:44,280 --> 00:23:48,200
Speaker 9: political tensions that have been fueled by a Russia's invasion

414
00:23:48,280 --> 00:23:53,800
Speaker 9: of Ukraine. Are accelerating something that has been already happening,

415
00:23:54,520 --> 00:23:59,119
Speaker 9: more fragmentation in the world economy that has causing consequences.

416
00:23:59,800 --> 00:24:05,160
Speaker 9: And as you pointed out to Stephanie, this rapid transition

417
00:24:05,400 --> 00:24:10,320
Speaker 9: from low interest rates to high interest rates did what

418
00:24:10,359 --> 00:24:14,159
Speaker 9: should be expected to do. It exposed vulnerabilities in the

419
00:24:14,200 --> 00:24:18,480
Speaker 9: financial sector. I want to say that this should not

420
00:24:18,560 --> 00:24:22,480
Speaker 9: be a surprise because it is just not possible to

421
00:24:22,680 --> 00:24:27,760
Speaker 9: have that jump in interest rates and to find that

422
00:24:27,960 --> 00:24:32,640
Speaker 9: everybody has matched the liabilities and assets and looked into

423
00:24:33,240 --> 00:24:35,040
Speaker 9: the interest rates.

424
00:24:35,920 --> 00:24:37,600
Speaker 4: In a responsible manner.

425
00:24:38,000 --> 00:24:40,919
Speaker 9: What was a surprise, though, was that it happened in

426
00:24:40,960 --> 00:24:45,080
Speaker 9: the banking sector, not in the non banking institutions, where

427
00:24:45,119 --> 00:24:49,959
Speaker 9: we feared that may occur. So what should we be thinking, Well,

428
00:24:50,400 --> 00:24:53,320
Speaker 9: it hasn't happened in the non banking sector. It doesn't

429
00:24:53,359 --> 00:24:57,360
Speaker 9: mean that we have a free pass. It doesn't mean

430
00:24:57,400 --> 00:25:00,280
Speaker 9: that there wouldn't be more vulnerabilities to come.

431
00:25:01,160 --> 00:25:02,600
Speaker 4: And here is our reality.

432
00:25:04,240 --> 00:25:12,560
Speaker 9: Growth is slowing down, but inflation is not going down

433
00:25:12,720 --> 00:25:16,879
Speaker 9: as fast as we wanted to go. And unfortunately, with

434
00:25:17,440 --> 00:25:21,199
Speaker 9: more protectionism, we are trying cold water on what is

435
00:25:21,240 --> 00:25:26,080
Speaker 9: an anemic growth to begin with. You want me to

436
00:25:26,080 --> 00:25:27,480
Speaker 9: finish on a positive site.

437
00:25:28,320 --> 00:25:30,159
Speaker 4: Sure, well.

438
00:25:30,680 --> 00:25:33,399
Speaker 9: The positive site is that we have proven to be

439
00:25:33,840 --> 00:25:38,080
Speaker 9: incredibly resourceful, and I think it is now time to

440
00:25:39,320 --> 00:25:42,159
Speaker 9: do that to prove it again resourceful.

441
00:25:42,200 --> 00:25:44,760
Speaker 5: But as you pointed out, also kind of a bit

442
00:25:44,880 --> 00:25:47,840
Speaker 5: stupid in the sense that we were worried about hidden

443
00:25:47,920 --> 00:25:52,000
Speaker 5: risks and the non banking sector, and yet right there

444
00:25:52,080 --> 00:25:57,240
Speaker 5: in plain sight was potential interest rate risks in a

445
00:25:57,320 --> 00:26:01,320
Speaker 5: digitized world. When you think about the un thinkable, we

446
00:26:01,359 --> 00:26:04,040
Speaker 5: certainly haven't seen nominal rates at four or five, six

447
00:26:04,040 --> 00:26:08,000
Speaker 5: percent whatever in a world where money can immediately come

448
00:26:08,040 --> 00:26:12,840
Speaker 5: out of billions could come out of deposits instantly, and

449
00:26:12,960 --> 00:26:14,520
Speaker 5: banks have made a lot of money over the years

450
00:26:14,520 --> 00:26:17,199
Speaker 5: from years of rising interest rates and not passing on

451
00:26:17,280 --> 00:26:20,760
Speaker 5: those short term interest rate rises. Should that completely change

452
00:26:20,800 --> 00:26:22,880
Speaker 5: the way we think about financial stability risk?

453
00:26:22,960 --> 00:26:28,760
Speaker 9: Well, let's first recognize that since the global financial crisis,

454
00:26:29,560 --> 00:26:33,600
Speaker 9: a lot has been done to strengthen banking sector, to

455
00:26:33,720 --> 00:26:39,000
Speaker 9: strengthen our financial system. Banks are better regulated, they're better capitalized,

456
00:26:39,480 --> 00:26:41,720
Speaker 9: and very important decision makers.

457
00:26:41,760 --> 00:26:43,439
Speaker 4: Policy makers are very fast.

458
00:26:45,359 --> 00:26:49,959
Speaker 9: This being said, now I'm going to say something that

459
00:26:50,040 --> 00:26:55,040
Speaker 9: I avoid saying we told you so, the IMF, the

460
00:26:55,080 --> 00:26:56,240
Speaker 9: IMF rot.

461
00:26:56,320 --> 00:26:58,320
Speaker 5: The IMF, always saying we told you so.

462
00:26:58,440 --> 00:27:01,240
Speaker 4: Well in this particular case, read the books.

463
00:27:01,560 --> 00:27:07,200
Speaker 9: In the In the financial sector assessment we have done

464
00:27:07,280 --> 00:27:10,240
Speaker 9: for the United States in twenty one and twenty two,

465
00:27:10,440 --> 00:27:15,640
Speaker 9: we zero in on the problem that blew up the

466
00:27:16,240 --> 00:27:17,840
Speaker 9: bank here in California.

467
00:27:18,000 --> 00:27:18,720
Speaker 4: It's there.

468
00:27:19,359 --> 00:27:24,119
Speaker 9: So there is a bit of complacency and now we

469
00:27:24,200 --> 00:27:28,200
Speaker 9: saw the price to pay. We saw that you provision

470
00:27:28,280 --> 00:27:30,239
Speaker 9: has not been quite up to par sol. There are

471
00:27:30,240 --> 00:27:34,000
Speaker 9: things that can be done to reduce these risks. But

472
00:27:34,080 --> 00:27:37,720
Speaker 9: you put your finger on something that for all of

473
00:27:37,800 --> 00:27:40,800
Speaker 9: us is novelty and we are all going to be

474
00:27:40,840 --> 00:27:45,280
Speaker 9: wrestling with it. It is the speed money can move

475
00:27:45,320 --> 00:27:48,760
Speaker 9: from one place to another and the role of social media.

476
00:27:50,240 --> 00:27:51,200
Speaker 4: Again, it goes.

477
00:27:51,080 --> 00:27:56,360
Speaker 9: Into the into the territory of the unthinkable. But I

478
00:27:56,400 --> 00:27:59,879
Speaker 9: am pretty confident we will see quite a lot of

479
00:28:00,560 --> 00:28:06,520
Speaker 9: new regulatory and disclosure thinking around how we deal with this.

480
00:28:07,000 --> 00:28:10,119
Speaker 5: Christina, good yeav Thank you so much. This has been

481
00:28:10,160 --> 00:28:11,840
Speaker 5: a great start to the week.

482
00:28:12,240 --> 00:28:14,120
Speaker 4: Thank you. Thanks, You'll be back much, jem Bag.

483
00:28:24,680 --> 00:28:26,919
Speaker 5: Well, that's it for this episode of Stephanomics. We'll be

484
00:28:26,920 --> 00:28:29,800
Speaker 5: back next week. In the meantime, as ever, you can

485
00:28:29,840 --> 00:28:32,639
Speaker 5: get a lot more economic insight and news from the

486
00:28:32,640 --> 00:28:36,760
Speaker 5: Bloomberg Terminal website or app. This episode was produced by

487
00:28:36,800 --> 00:28:39,880
Speaker 5: Magnus Henrickson with help from Yang Yang and Summer Sadi.

488
00:28:40,480 --> 00:28:44,080
Speaker 5: The new executive producer of Stephanomics is Molly Smith and

489
00:28:44,120 --> 00:28:47,040
Speaker 5: the head of Bloomberg Podcasts is Sage Bowman.

490
00:29:02,000 --> 00:29:03,720
Speaker 9: Two desc