WEBVTT - Latest Inflation Print and Musk Talks X App 0:00:01.440 --> 0:00:04.200 From the heart of We're Innovation of Money and power. 0:00:04.320 --> 0:00:09.080 Collie in Silicon Valley, NBR. This is Bloomberg Technology with 0:00:09.240 --> 0:00:25.400 Caroline Hyde and Ed loved Love. I'm Caroline Hyde of 0:00:25.440 --> 0:00:28.280 Bloomberg's World take quarters in New York, and I'med Lovelow 0:00:28.280 --> 0:00:31.480 in San Francisco. This is Lindberg Technology. Coming up. We 0:00:31.520 --> 0:00:34.800 will break down the latest inflation print, what it means 0:00:34.800 --> 0:00:37.320 for tech stalks in the environment for investing in startups. 0:00:37.400 --> 0:00:39.320 And now she surmires with us. A Goldman Sachs MG 0:00:39.400 --> 0:00:42.559 Volpi of indexpensures fast we'll get a read on the 0:00:42.600 --> 0:00:44.920 health of the banking system in the wake of Silicon 0:00:45.000 --> 0:00:48.760 Valley banks collapse. Aaron Kleine of the Brookings Institution joins 0:00:48.800 --> 0:00:51.800 with perspective an Elon Musk. He's back in the spotlight, 0:00:51.840 --> 0:00:54.360 this time with a two hour long Twitter spaces that 0:00:54.440 --> 0:00:57.279 played out before millions of listeners. We're bringing the takeaways 0:00:57.280 --> 0:01:01.480 and why American Notprofit Media MPR's quit the platform that 0:01:01.680 --> 0:01:04.679 has so much coming up throughout this hour. First has 0:01:04.760 --> 0:01:06.800 checking on what's happening in the public markets, you know, 0:01:06.959 --> 0:01:09.959 the catalysts from a macro perspective. The CPI print inflation 0:01:10.080 --> 0:01:13.240 data actually some soothing of concerns, maybe pulling back a 0:01:13.240 --> 0:01:16.200 little bit, but not enough to actually really put some 0:01:16.280 --> 0:01:18.160 fire beneath these stocks. And the moment, we're flat on 0:01:18.200 --> 0:01:20.440 the Nasdak but bouncing off of the loads of the day, 0:01:20.440 --> 0:01:22.280 as we still think that the Federal Reserve will have 0:01:22.319 --> 0:01:24.520 to hike by twenty five basis points come the next month, 0:01:24.760 --> 0:01:27.200 but maybe there's more appetite for some of those risk assets. 0:01:27.240 --> 0:01:29.160 Two year yield flat on the day. For the two 0:01:29.240 --> 0:01:31.280 year We've been moving around throughout the trading day, but 0:01:31.480 --> 0:01:34.320 at four percentage points. I'm looking at Goldman and in 0:01:34.319 --> 0:01:37.319 particular the Nasdack Golden Dragon. This is just showing that 0:01:37.360 --> 0:01:39.120 some of the heats coming out of those Chinese stocks 0:01:39.120 --> 0:01:42.120 today Ali Baba's on the downside. We're seeing JD off 0:01:42.160 --> 0:01:45.200 as well, some key movement out of Chinese stocks on 0:01:45.200 --> 0:01:47.600 the day. From their American depository receipts perspective, we're off 0:01:47.600 --> 0:01:49.400 by three percent. Moving on, let's look at what's happening 0:01:49.440 --> 0:01:52.000 in the world of crypto. All eyes on the upgrade 0:01:52.440 --> 0:01:54.480 movement on some months from the merge. We look at 0:01:54.520 --> 0:01:56.840 what's happening with the lights of the Shanghai upgrade. I'm 0:01:56.880 --> 0:01:59.480 looking at what's happening therefore, with E up more than 0:01:59.520 --> 0:02:02.400 a percentage points, so not that much wire nerves ahead 0:02:02.560 --> 0:02:04.280 of what could be a bit of volatility around six 0:02:04.280 --> 0:02:07.360 thirty pm today. Yet, yeah, there are some single tech 0:02:07.440 --> 0:02:10.400 names moving on cell side sentiment. Netflix actually flat but 0:02:10.520 --> 0:02:13.320 kind of slightly outperforming the NASTAC one hundred city saying 0:02:13.480 --> 0:02:16.240 forget the noise around earnings and the stock volatility. This 0:02:16.320 --> 0:02:19.600 is a long term by Microsoft price target upgraded at 0:02:19.639 --> 0:02:23.519 Wedbush durable cloud growth on the horizon for that name. 0:02:23.639 --> 0:02:26.640 And then Cyrus Logic a number of analysts of concern 0:02:26.680 --> 0:02:30.000 about this Apple supplier because of a potential redesign around 0:02:30.000 --> 0:02:32.760 iPhone fifteen that could hurt a name like Cyrus that 0:02:32.919 --> 0:02:35.639 stock down twelve percent. Elsewhere, you look at some of 0:02:35.680 --> 0:02:37.960 the biggest points movers on the NASTAC one hundred, there 0:02:37.960 --> 0:02:40.720 are names like Tesla that are markedly lowered now or 0:02:40.800 --> 0:02:43.119 down one point three percent on Tesla as an example. 0:02:43.360 --> 0:02:46.600 That's a stock that jumped in premarket after the CPI print. 0:02:46.680 --> 0:02:48.120 And that's where we want to go with this, right. 0:02:48.120 --> 0:02:50.520 I think Goldman I saw a headline crossing the terminal 0:02:50.600 --> 0:02:53.560 was sticking with that twenty five basis points call for 0:02:53.600 --> 0:02:57.239 the upcoming meeting. But the psychology here changed really quick 0:02:57.800 --> 0:03:00.639 when the data was on estimates. Yeah, and I think 0:03:00.639 --> 0:03:03.800 it's on estimate. We're still seeing inflationary pressure, it's obvious, 0:03:03.800 --> 0:03:05.520 but it is daling back in certain areas. Ed we 0:03:05.520 --> 0:03:08.160 know it's dialing back perhaps on the price of rent, 0:03:08.240 --> 0:03:11.079 the price of housing, particularly the grocery prices. I saw 0:03:11.120 --> 0:03:13.079 that eggs perhaps aren't going to be such an inflationary 0:03:13.120 --> 0:03:16.200 pressure going forward. But really this is all about the 0:03:16.240 --> 0:03:18.520 moon music around risk assets, all around whether or not 0:03:18.560 --> 0:03:21.160 you want to be holding growth stocks in particular. Right, 0:03:21.160 --> 0:03:23.520 and it's not just public markets. Right. When you have 0:03:23.680 --> 0:03:26.440 that narrative around higher rates, that impacts the cost of 0:03:26.480 --> 0:03:29.280 capital for startups of all sizes. So let's think about 0:03:29.320 --> 0:03:31.959 the private markets as well and where the impact is there. 0:03:32.120 --> 0:03:34.760 Perfect guest maasally some eyes with us to talk about 0:03:34.800 --> 0:03:36.720 all of that. Just appointed a senior leadership role at 0:03:36.720 --> 0:03:39.840 Goldman Sachs Private Wealth Unit. SMIs now the global head 0:03:39.840 --> 0:03:42.640 of wealth management private banking lending in deposits. I've most 0:03:42.680 --> 0:03:45.160 recently been the cohead of Growth Equity also with us, 0:03:45.160 --> 0:03:47.320 and we thank her for bringing this interview, as Shinali Bassek, 0:03:47.400 --> 0:03:50.960 friend of the show, she would an extraordinary environment we 0:03:51.000 --> 0:03:53.240 all live in, and let's just talk a little bit 0:03:53.280 --> 0:03:55.400 about the macro perspective. And I want to go back 0:03:55.400 --> 0:03:57.280 to your previous role, the fact that you were such 0:03:57.280 --> 0:04:01.360 a star at raising funds for still a companies startups. 0:04:01.720 --> 0:04:03.680 Is it good time? Is it still very difficult to 0:04:03.720 --> 0:04:07.800 raise funds? So I'd say for private companies, particular growth 0:04:07.840 --> 0:04:10.920 equity space, there's obviously been a huge dislocation. You've seen 0:04:10.920 --> 0:04:15.320 public market stocks drop by circus seventy percent, and I 0:04:15.360 --> 0:04:19.240 think the challenge for these companies is accepting in the 0:04:19.320 --> 0:04:24.599 private market space that valuations need to need to move 0:04:24.640 --> 0:04:28.039 along where be reflective and where public markets are, and 0:04:28.120 --> 0:04:33.920 many companies don't want to raise in a depressed valuation environment. However, 0:04:34.160 --> 0:04:36.120 you know, there's a notable exception with Stripe, as have 0:04:36.240 --> 0:04:38.279 been much talked about, and I think it was very 0:04:38.320 --> 0:04:40.360 interesting that Stripe was able to raise six and a 0:04:40.400 --> 0:04:43.640 half billion dollars of funding, which would say that there's 0:04:43.720 --> 0:04:47.800 plenty of money still available to growth companies in that 0:04:47.880 --> 0:04:51.240 asset class with for strong talented management teams who are 0:04:51.240 --> 0:04:56.240 able to utilize transformative technology to continue to scale as 0:04:56.240 --> 0:04:59.640 long as they're realistic about the valuation environment or in NI. 0:05:00.000 --> 0:05:02.400 It's so interesting because you are stepping into this role. 0:05:02.480 --> 0:05:04.400 This is a business that had two point five billion 0:05:04.440 --> 0:05:07.160 dollars in revenue last year at Goldman Sachs, a lending 0:05:07.200 --> 0:05:09.440 business in the private wealth arm where a lot of 0:05:09.440 --> 0:05:11.360 people are founders, like the ones you've worked with when 0:05:11.400 --> 0:05:14.000 you were the growth equity head. And so I'm really 0:05:14.000 --> 0:05:17.160 wondering with Silicon Valley Bank and the struggles that they've faced, 0:05:17.440 --> 0:05:20.120 what kind of opening does that create for Goldman Sacks. 0:05:20.120 --> 0:05:22.279 How much will Goldman be taking on a lot of 0:05:22.320 --> 0:05:24.799 clients that are maybe being turned away in a market 0:05:24.839 --> 0:05:27.839 like this. Yeah, this is a really exciting time for 0:05:27.880 --> 0:05:29.880 the private bank in many ways. I mean, we have 0:05:30.440 --> 0:05:34.800 what I think is an unparalleled origination channel for this business. 0:05:34.880 --> 0:05:37.800 If we think about, in particular, the founders that you're 0:05:37.839 --> 0:05:40.839 referring to from the growth equity space, the capital markets 0:05:40.839 --> 0:05:42.960 are essentially closed to them, as we just talked about, 0:05:43.320 --> 0:05:46.279 and if they don't want to take these depressed valuations 0:05:46.279 --> 0:05:49.240 and the private markets, you know, life happens for individuals, 0:05:49.240 --> 0:05:51.400 for entrepreneurs who they may have a tax bill upcoming, 0:05:51.400 --> 0:05:53.000 they may have a house purchase, they may be going 0:05:53.000 --> 0:05:55.839 to a divorce, and to create that liquidity, then there's 0:05:55.880 --> 0:05:58.039 only really one solution, which is to go down the 0:05:58.080 --> 0:06:01.520 private banking route and try to get leverage against the 0:06:01.560 --> 0:06:03.520 collateral that they have or the stakes that they have 0:06:03.560 --> 0:06:06.400 in their own companies. I think we're very uniquely positioned 0:06:06.720 --> 0:06:08.599 to pre able to provide that sort of one stop 0:06:08.640 --> 0:06:11.560 solution for those clients, given we know how to underwrite 0:06:11.600 --> 0:06:14.360 those companies. We understand those risks, and we have great 0:06:14.360 --> 0:06:17.880 relationships with these founders, both from our Alternatives investing franchise, 0:06:17.960 --> 0:06:21.240 my old business, but also from our world class banking franchise. 0:06:21.320 --> 0:06:23.440 Now it's interesting. I know this business is much broader 0:06:23.440 --> 0:06:25.640 than the growth business, but when you think about growth 0:06:25.640 --> 0:06:28.400 in particular, a lot of these founders they're already highly 0:06:28.480 --> 0:06:31.000 levered to the point they're learning against assets that are 0:06:31.000 --> 0:06:33.880 still fluctuating a price even in private markets. What are 0:06:33.920 --> 0:06:36.560 the risks that you at Goldman are not willing to 0:06:36.600 --> 0:06:39.640 take what is too risky to leign too. I think 0:06:39.640 --> 0:06:42.520 it really is very situation specific. So, as you rightly mentioned, 0:06:42.520 --> 0:06:46.640 we're very focused on leverage embedded within the companies themselves, 0:06:46.640 --> 0:06:49.240 So if you're looking to the company to take as collateral, 0:06:49.279 --> 0:06:52.440 we're very focused on shallow preference stacks, so where there 0:06:52.520 --> 0:06:55.280 isn't a lot of leverage on those companies. Also really 0:06:55.279 --> 0:06:58.040 sustainable unit economics, so a lot of that is driven 0:06:58.040 --> 0:07:01.080 by stage of company and the ability to sort of 0:07:01.160 --> 0:07:03.320 navigate through dis cycle. And there'll be things where be 0:07:03.360 --> 0:07:07.240 looking to have the company cost appropriately, Is there a 0:07:07.240 --> 0:07:10.200 path to profitability over time? Is there an exit on 0:07:10.240 --> 0:07:13.080 the horizon within a near term timeframe. I think those 0:07:13.080 --> 0:07:14.720 are some of the types of things will be looking 0:07:14.720 --> 0:07:17.760 for when we have these conversations. And interesting that you 0:07:17.800 --> 0:07:20.400 say what you're looking for in terms of strength of 0:07:20.440 --> 0:07:23.800 business and really strength of founder and ability to navigate 0:07:23.840 --> 0:07:26.800 these turbulent times. What about strength of sector? At one 0:07:26.800 --> 0:07:28.560 point it was all about crypto. No, it's all about 0:07:28.640 --> 0:07:31.679 artificial intelligence. Are you that specific or do you actually 0:07:31.720 --> 0:07:33.400 step back and say, no, we cannot be as grand 0:07:33.400 --> 0:07:36.360 nearer as which particular area of technology, which particularly area 0:07:36.440 --> 0:07:39.240 of innovation or indeed just business building that your founders 0:07:39.240 --> 0:07:42.600 are in. Yeah. Historically, in the growth equity franchise in particular, 0:07:42.600 --> 0:07:46.840 we really place a huge emphasis on recurring revenue types 0:07:46.880 --> 0:07:50.120 of businesses which were really primarily in the enterprise software space. 0:07:50.360 --> 0:07:53.120 There's a nice visibility of revenue stream that comes with 0:07:53.200 --> 0:07:55.920 those types of businesses, and so I think those are 0:07:55.920 --> 0:07:58.520 always preferred from a lending perspective, because you want that 0:07:58.600 --> 0:08:01.400 visibility for every news, but it's not always. You know, 0:08:01.560 --> 0:08:03.360 we're going to have to service our clients needs wherever 0:08:03.400 --> 0:08:05.280 they come, and so I think we'll be flexible and 0:08:05.280 --> 0:08:09.280 open minded around that nicely. Hello from San Francisco. I 0:08:09.320 --> 0:08:11.800 wonder how you, in your former role and your new 0:08:11.880 --> 0:08:15.560 role past the data and the FED. If you're underwriting 0:08:16.080 --> 0:08:18.760 a private market deal right now, how much pressure are 0:08:18.840 --> 0:08:22.760 you specifically under to seek a lower valuation. I think 0:08:22.800 --> 0:08:24.920 we saw the headline that Goldman's sticking with that twenty 0:08:24.920 --> 0:08:28.360 five basis points call for the next meeting. But if 0:08:28.400 --> 0:08:31.880 this inflation and FED regime stays in place, how do 0:08:31.920 --> 0:08:35.600 you balance that return against the risk of operating in 0:08:35.640 --> 0:08:38.839 private markets in that environment? Yeah, I mean, obviously, when 0:08:38.840 --> 0:08:40.439 we're looking at lending, we have to take our own 0:08:40.480 --> 0:08:42.520 view on what we think the business is worth on 0:08:42.559 --> 0:08:45.199 a spot basis. Part of the reason many of these 0:08:45.880 --> 0:08:48.840 entrepreneurs might be looking for this alternative source of liquidity 0:08:49.280 --> 0:08:51.880 is because they don't want to take that valuation risk 0:08:52.080 --> 0:08:55.400 in the private markets. So we will obviously be factoring 0:08:55.400 --> 0:08:59.360 our own views around what a spot capital markets valuation 0:08:59.440 --> 0:09:01.720 may look like, maybe even be taking a discount to that. 0:09:02.040 --> 0:09:04.280 But we only need a shortain amount of coverage for 0:09:04.320 --> 0:09:06.360 our loan to be whole, as it were, so we 0:09:06.720 --> 0:09:09.600 do sort of overlay our own valuation methodology within the 0:09:09.640 --> 0:09:13.079 private bank on these companies that we're looking at. I'm 0:09:13.120 --> 0:09:15.400 really interested in the client base as well, which I'm 0:09:15.440 --> 0:09:18.440 sure you now have a pretty broad understanding of where 0:09:18.440 --> 0:09:20.360 does the demand come from. You know, I've broken a 0:09:20.400 --> 0:09:22.800 lot of news over the last few years on Rivian, 0:09:22.880 --> 0:09:25.640 for example, these kind of late growth stage companies. Rivan 0:09:25.720 --> 0:09:28.800 did go public, but you see names like t row Price, 0:09:28.920 --> 0:09:35.520 Goldman Fidelity coming in alongside traditional venture capital. Where does 0:09:35.600 --> 0:09:37.920 Goldman sit in that landscape and where are its clients 0:09:37.960 --> 0:09:41.720 pushing for more access to those private companies. So from 0:09:41.720 --> 0:09:44.800 a private company perspective, I mean our entire growth equity 0:09:45.120 --> 0:09:49.120 franchise and platform is built around sourcing those companies, investing 0:09:49.160 --> 0:09:52.760 in them, hopefully scaling them along the way, and creating 0:09:52.840 --> 0:09:56.160 liquidity events with strategic takeouts. Which where our banking franchise 0:09:56.200 --> 0:09:59.280 can be very helpful. So we are, and you know, 0:09:59.320 --> 0:10:01.640 I would say what we've really seen over the past 0:10:01.679 --> 0:10:04.480 eighteen months is a bit of a retrenchment of the 0:10:04.520 --> 0:10:07.320 growth equity tourists, and in fact, this is a great 0:10:07.360 --> 0:10:09.840 time as a growth equity investor if you have dry 0:10:09.880 --> 0:10:13.600 powder and have some patience. We think that this will 0:10:13.640 --> 0:10:15.480 be a great opportunity to be able to continue to 0:10:15.520 --> 0:10:18.839 invest in world class companies given the valuation environment is 0:10:18.880 --> 0:10:21.599 so rapidly changing. I want to talk about valuations a 0:10:21.640 --> 0:10:24.440 little more here because you did work on Stripe that 0:10:24.520 --> 0:10:27.320 was pretty fascinating four billion dollar fundraise and a lot 0:10:27.360 --> 0:10:29.560 of money came from Goldman's own private clients, high net 0:10:29.600 --> 0:10:32.200 worth individuals, But there was a down round that was 0:10:32.240 --> 0:10:34.280 associated with a lot of this have we hit rock 0:10:34.320 --> 0:10:37.720 bottom when you look across the industry, have do we 0:10:37.720 --> 0:10:39.360 have more to go? When you look at these growth 0:10:39.480 --> 0:10:43.000 names and how much further down the valuations are headed. 0:10:43.320 --> 0:10:45.800 I think Stripe's just a fascinating example because I think 0:10:45.840 --> 0:10:49.160 they really bit the bullet and did the right thing 0:10:49.360 --> 0:10:51.880 for the capital structure. They recognized the environment we were 0:10:51.880 --> 0:10:54.040 in and they wanted to be able to create enough 0:10:54.400 --> 0:10:57.200 incentives for retention for the employees to be able to 0:10:57.240 --> 0:11:00.880 continue this journey, this growth journey, even at reduce growth rates, 0:11:00.880 --> 0:11:03.199 which perhaps you could argue more durable than the hyper 0:11:03.200 --> 0:11:05.480 growth that they've been experiencing at the peak of the 0:11:05.520 --> 0:11:09.719 pandemic in terms of actual valuations. I think what you're 0:11:09.760 --> 0:11:15.320 seeing as many companies hoping to survive this period by 0:11:15.400 --> 0:11:19.240 managing costs and expenses and just preserving as much cash 0:11:19.240 --> 0:11:21.959 as possible at the expensive growth to not have to 0:11:21.960 --> 0:11:26.800 test the valuation environment. And so I think as an investor, 0:11:26.840 --> 0:11:29.480 you're hoping that's what Stripe will do is unlock more 0:11:29.559 --> 0:11:31.880 down round so that you can actually help we capitalize 0:11:31.880 --> 0:11:33.800 these companies on the next leg of their journey. We 0:11:33.840 --> 0:11:36.440 haven't seen that yet. Do you think also that we 0:11:36.480 --> 0:11:38.760 are indeed in a credit crunch from somebody that's entering 0:11:38.800 --> 0:11:41.480 this lending business here? The reality is it's not just 0:11:41.480 --> 0:11:43.920 a Silicon Valley bank. The reality is is that they're 0:11:43.960 --> 0:11:46.120 investors that are under pressure. Some of the folks that 0:11:46.120 --> 0:11:48.840 would have gotten into things like strife, they are under pressure. 0:11:49.679 --> 0:11:51.400 Do you think that there's going to be a lot 0:11:51.400 --> 0:11:53.679 more pain when companies go out there and look for 0:11:53.760 --> 0:11:56.440 more capital ahead. Yeah, I think there's no doubt that 0:11:56.480 --> 0:11:59.839 we are in a much more challenging macro environment, and 0:12:00.320 --> 0:12:02.640 you know, you're seeing credit contraction, as you rightfully said, 0:12:03.200 --> 0:12:05.720 but we're at the very early innings of the credit cycle. 0:12:06.600 --> 0:12:10.199 You know, you're seeing pockets of pain, most prevalently right 0:12:10.200 --> 0:12:11.839 now in commercial real estate. There's been a lot of 0:12:11.840 --> 0:12:14.600 press about that office buildings in particular, So I think 0:12:14.600 --> 0:12:18.520 we're paying particular focus to clients sort of large exposure 0:12:18.600 --> 0:12:21.400 debt exposures to that as a class. But I think 0:12:21.400 --> 0:12:24.479 this is going to be an environment with as huge opportunities. 0:12:24.520 --> 0:12:26.760 I mean, you're already seeing in public fixed income markets 0:12:27.040 --> 0:12:29.720 you're able to earn yields wider than I've seen for 0:12:29.720 --> 0:12:32.440 the last fifteen years for the same credit risk. That 0:12:32.480 --> 0:12:36.520 will reflect in private markets too. All Right, Nishi Samayer 0:12:36.559 --> 0:12:38.960 of Goldman Sachs, thank you, and of course thank you 0:12:39.000 --> 0:12:41.840 to our own Shhali Bassett for bringing us that conversation 0:12:41.920 --> 0:12:45.560 going from growth equity deployment to Goldman's banking. That was 0:12:45.559 --> 0:12:57.400 an in depth conversation. We're all talking about it. Last night, 0:12:57.640 --> 0:13:01.680 Elon Muskok to Twitter to talk about Twitter during a 0:13:01.800 --> 0:13:05.120 two hour long spaces conversation with a BBC that played 0:13:05.160 --> 0:13:08.160 out before millions of listeners. Musk reaffirmed that Twitter is 0:13:08.200 --> 0:13:11.120 operating and about break even and actually could become cash 0:13:11.120 --> 0:13:13.320 flow positive as soon as this quarter. Yeah. Look, he 0:13:13.360 --> 0:13:16.719 dodged a lot of questions, pretty simple direct questions, most 0:13:16.720 --> 0:13:18.960 of them about how he felt about laying people off, 0:13:19.240 --> 0:13:21.240 but he reiterated this point that if he had not 0:13:21.360 --> 0:13:25.239 done that, then Twitter would be in a precarious financial situation. 0:13:25.600 --> 0:13:28.320 He did say the advertisers have started to come back 0:13:28.640 --> 0:13:31.920 and X is the future of the everything at But 0:13:32.000 --> 0:13:34.199 beyond that, there wasn't a lot new that we learned, Carrot. 0:13:34.480 --> 0:13:37.120 What was interesting is the aftermath, right, and the fact 0:13:37.120 --> 0:13:41.960 that the BBC was conducting this interview. NPR, which itself 0:13:42.080 --> 0:13:46.720 is very much an independent media which is not government funded, 0:13:46.720 --> 0:13:49.679 as they would say, is eventually quitting Twitter today, right 0:13:49.760 --> 0:13:53.360 because of the concern over labeling. Yeah, and over the 0:13:53.360 --> 0:13:56.160 two hours, NPR did not specifically come up, to the 0:13:56.160 --> 0:13:59.000 best of my memory, BBC did and must discuss about 0:13:59.040 --> 0:14:02.400 the idea that a more appropriate label might be publicly 0:14:02.480 --> 0:14:05.800 funded rather than its current label, but didn't sort of 0:14:05.840 --> 0:14:08.959 commit to when that change would be made. So I 0:14:09.040 --> 0:14:11.400 don't know if you had any other key takeaways carry 0:14:11.760 --> 0:14:14.560 what just the length of it and the matter the 0:14:14.720 --> 0:14:17.080 manner in which it all occurred. But what's interesting is 0:14:17.200 --> 0:14:20.240 the competitive threats, right, he's seen the key takeaway was, Look, 0:14:20.280 --> 0:14:22.600 people are coming back to the platform advertisers even though 0:14:22.600 --> 0:14:25.960 they lose a key Twitter, which is MPR. But what 0:14:26.080 --> 0:14:29.240 about that competitive threat in particular coming from new places 0:14:29.280 --> 0:14:32.920 like substack. Yeah, so subtacts interesting because it's also emerged 0:14:32.960 --> 0:14:35.600 as this challenger to Twitter because it's a news let 0:14:35.720 --> 0:14:38.240 the platform. But it's announced this new product that looks 0:14:38.280 --> 0:14:41.880 remarkably similar, right, called substack notes. Remember what the CEO 0:14:41.920 --> 0:14:43.640 Chris Bess had to say on the show about that. 0:14:44.840 --> 0:14:47.320 So I think all of on my media is basically 0:14:47.360 --> 0:14:49.840 either going to have to turn into TikTok or is 0:14:49.880 --> 0:14:51.840 going to have to turn into substack in the next 0:14:51.880 --> 0:14:57.240 little bit. And substack notes is sort of our way 0:14:57.280 --> 0:15:00.680 to bring the easy sort of sharing a short form, 0:15:00.720 --> 0:15:04.800 the ability to recommand anything to the subscription network that 0:15:05.080 --> 0:15:09.480 is substack, and we're tremendously excited about it. So substack 0:15:09.560 --> 0:15:11.520 fancies itself as a competitor. What I would say is 0:15:11.520 --> 0:15:14.640 that must said, you know, user hours are just surging 0:15:14.880 --> 0:15:18.600 user uses up. He was pretty bullish about the health 0:15:18.600 --> 0:15:20.920 of the Twitter platform. We'll have to wait and see. 0:15:21.320 --> 0:15:22.960 Coming up there, Caroline, We're going to dig him more 0:15:23.120 --> 0:15:25.880 into the impact of the Silicon Valley bank collapse on 0:15:25.920 --> 0:15:28.920 the banking system at large. We have Brooking's fellow and 0:15:29.000 --> 0:15:32.239 economists Aaron Klein on the program. Coming up, this is Bloomberg. 0:15:52.800 --> 0:15:55.880 Deposits at JP Morgan, Wells Fargo, and Bank of America 0:15:55.920 --> 0:16:00.640 are expected to have tumbled twenty one billion dollars from 0:16:00.640 --> 0:16:02.680 a year earlier, the biggest drop in a decade that 0:16:02.760 --> 0:16:06.160 according to the analyst estimates compiled by Bloomberg, the coming 0:16:06.200 --> 0:16:10.120 first quartered disclosures from big US banks could intensify concerns 0:16:10.160 --> 0:16:13.720 about deposit mix and should lend. This mis expectation set 0:16:13.760 --> 0:16:16.560 off more inquiries about the health and future of the 0:16:16.560 --> 0:16:19.800 industry in the wake of Silicon Valley banks collapse. More 0:16:19.800 --> 0:16:22.560 on the topic, let's bring in Aaron Klein, economic senior 0:16:22.560 --> 0:16:25.720 fellow at the Brookings Institution and an expert in financial 0:16:25.760 --> 0:16:29.760 regulatory reform. You know, immediately following that SVB collapse weekend, 0:16:29.800 --> 0:16:31.840 Caroline and I were there. We all talked about the 0:16:31.840 --> 0:16:35.400 winners who took deposit outflows. Now we're talking about the 0:16:35.400 --> 0:16:38.040 health of this sector. Which is it where they're winners 0:16:38.040 --> 0:16:40.320 in the banking sector or is the whole industry as 0:16:40.440 --> 0:16:43.240 serious risk here? Well, look, I think one of the 0:16:43.240 --> 0:16:45.520 big problems here is that a lot of the money 0:16:45.560 --> 0:16:48.440 loved the banking system to money market mutual funds. And 0:16:48.520 --> 0:16:51.520 you say, why money market mutual funds. They're less guaranteed 0:16:51.560 --> 0:16:54.160 than bank deposits. Part of the problem here is the 0:16:54.160 --> 0:16:56.640 Federal Reserve and the Treasury Department have built out money 0:16:56.680 --> 0:17:00.480 market mutual funds twice, once during COVID and once during 0:17:00.520 --> 0:17:02.880 the two thousand and eight financial crisis. So there's a 0:17:02.920 --> 0:17:05.360 bit of a feeling from investors that there's an implicit 0:17:05.359 --> 0:17:08.280 guarantee in these money market mutual funds, and then they're 0:17:08.359 --> 0:17:10.960 searching for yield. So I think in some ways the 0:17:11.000 --> 0:17:14.320 banking sector is going to contract further as a result 0:17:14.320 --> 0:17:20.080 of prior government bailouts offer having a lingering effect. Let's 0:17:20.119 --> 0:17:22.639 just look at some of your writing now, Aaron, and 0:17:22.680 --> 0:17:25.560 I've given my production team no help to tell them 0:17:25.600 --> 0:17:27.800 that we're going to bring up one of the key 0:17:27.840 --> 0:17:31.159 focuses of your writings from Brookings is the dirty secret 0:17:31.200 --> 0:17:34.280 about bank holding company regulation. And I think we think 0:17:34.320 --> 0:17:38.080 about the repercussions of what time to SVB on amount 0:17:38.119 --> 0:17:42.440 of deposits and who's winning, who's losing, but who didn't 0:17:42.440 --> 0:17:45.000 come off well as the regulators here perhaps, do you 0:17:45.040 --> 0:17:47.840 think there's been enough of a feedback yet to decide 0:17:47.880 --> 0:17:50.840 on the way in which well, ultimately the FED needs 0:17:50.840 --> 0:17:53.200 to be think about the way it chanalyzes these banks. Yeah, 0:17:53.200 --> 0:17:56.240 America has a really strange banking system and a bank 0:17:56.359 --> 0:18:00.360 regulatory system that corresponds. The Federal Reserve regulates a bank 0:18:00.400 --> 0:18:03.800 holding companies, which are the top level parent that have 0:18:03.920 --> 0:18:07.680 subsidiary banks and other companies. Sometimes that bank is regulated 0:18:07.720 --> 0:18:10.080 by the FED, as in the case of SVB, other 0:18:10.160 --> 0:18:13.439 times it's not. There's the occ the FDIC. We have 0:18:13.480 --> 0:18:16.240 too many bank regulators, in my opinion in the US. 0:18:16.400 --> 0:18:17.919 But the feed is a rare case where you have 0:18:17.920 --> 0:18:21.040 this holding company and the bank, Silicon Valley Bank. So far, 0:18:21.280 --> 0:18:23.400 all the conversation has been focused on the bank. I'm 0:18:23.440 --> 0:18:26.639 interested in this venture capital arm, this other arm of 0:18:26.880 --> 0:18:31.000 SVB and what their relationship were to the depositors, to 0:18:31.080 --> 0:18:34.040 the companies, the tech companies that were at SVB. Why 0:18:34.040 --> 0:18:36.760 did the FED allow a bank like SVB to be 0:18:36.880 --> 0:18:41.560 ninety five percent uninsured deposits? Was there some relationship where 0:18:41.600 --> 0:18:44.919 when the vcs invested through Silicon Valley Bank or one 0:18:44.960 --> 0:18:48.760 of their other partners, that it forced the tech companies 0:18:48.800 --> 0:18:51.639 to stay and so they wouldn't move out. And I 0:18:51.640 --> 0:18:54.400 don't think we focused enough nearly on the FED role 0:18:54.520 --> 0:18:57.119 as a bank holding company regulator. And in my writing 0:18:57.160 --> 0:18:58.960 you'll see I point out not just SVB, but they 0:18:59.000 --> 0:19:01.800 are all these other little smaller bank holding companies that 0:19:01.960 --> 0:19:05.160 seem to not be regulated at all. Meanwhile, they're focused 0:19:05.760 --> 0:19:09.400 heavily on JP Morgan, Chase, Boa, maryl So what about 0:19:09.440 --> 0:19:12.320 a First Republic or some of the other lenders that 0:19:12.359 --> 0:19:15.280 have been tainted with a right yal wrong me? Because 0:19:15.280 --> 0:19:17.320 it felt like in many ways Silicon Valley Bank was 0:19:17.320 --> 0:19:20.280 pretty idiosyncratic. But still we see so much pressure on 0:19:20.320 --> 0:19:22.320 some of these small lean enders. Yeah. So I think 0:19:22.359 --> 0:19:26.600 there've been problems at a wide number of lenders through 0:19:26.680 --> 0:19:29.199 the holding company and the FED just hasn't done anything. 0:19:29.320 --> 0:19:31.760 I can't explain to you why a company like Dickinson 0:19:31.880 --> 0:19:35.119 Financial out of Kansas City, which runs a series of 0:19:35.160 --> 0:19:37.960 banks who do nothing other than milk people for overdraft 0:19:38.000 --> 0:19:41.560 fees has been allowed to exist. This is a regulatory 0:19:41.680 --> 0:19:44.840 strategy that they have at the holding company level because 0:19:44.840 --> 0:19:47.440 they're all these little banks, armed Forces, bank, Academy bank, 0:19:47.560 --> 0:19:50.400 all these things do or overdrafts their check cashers, yet 0:19:50.440 --> 0:19:53.360 the Federal Reserve keeps giving them a clean bill of health. 0:19:53.720 --> 0:19:55.480 I don't know what it's going to take to stop 0:19:55.560 --> 0:19:58.840 this and have more serious bank holding company regulation, because 0:19:59.400 --> 0:20:02.280 so far Congress has not yet held the Feds accountable. 0:20:03.840 --> 0:20:06.240 Aaron will go to those banks for comment that you 0:20:06.480 --> 0:20:10.280 say in your opinion and milking depositors for overdraft fees. 0:20:10.480 --> 0:20:13.240 Let's end it here very quickly. What's the net result 0:20:13.280 --> 0:20:17.960 of this regulation, government intervention? What happens? Well, I think 0:20:18.160 --> 0:20:21.000 the net result is twofold number one. The government's found 0:20:21.040 --> 0:20:24.440 itself in an untenable situation of having bailed out the 0:20:24.520 --> 0:20:27.520 uninsured depositors at these handful of banks, and the question 0:20:27.680 --> 0:20:30.720 is what are the uninsured depositors in other situations. There's 0:20:30.840 --> 0:20:33.720 mounting pressure and Congress to raise a deposit insurance cap, 0:20:33.800 --> 0:20:36.040 which I think would be a mistake, a big transfer 0:20:36.119 --> 0:20:39.960 of wealth. But that political pressure seems to be snowballing. 0:20:40.560 --> 0:20:42.720