WEBVTT - Banks, Markets, Connecticut, and FedEx 0:00:00.760 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.520 --> 0:00:15.560 with essential market moving news on the Bloomberg Markets Podcast, 0:00:15.560 --> 0:00:18.400 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.640 at Bloomberg dot com Slash podcast. Let's have Alison Williams 0:00:22.640 --> 0:00:25.759 in every week. What do you say, Well, I will, 0:00:27.160 --> 0:00:28.960 but we'll schedule out of you. One of the best 0:00:29.120 --> 0:00:32.680 bank analysts, international bank outlet analysts in the world, and 0:00:33.240 --> 0:00:36.639 she works for us, so that's a bonus. Plus, she 0:00:36.880 --> 0:00:39.520 loves talking about credit sweets. There is no one who 0:00:39.560 --> 0:00:43.360 prefers talking about credit sweets more than Alison Williams. All right, Alison, 0:00:43.680 --> 0:00:46.360 we had a just more going on, A million ways 0:00:46.360 --> 0:00:47.800 we can go. As Matt was say, let's start with 0:00:47.880 --> 0:00:52.800 credit squeez. Is it going to survive the weekend? Well, 0:00:52.840 --> 0:00:57.000 it's it's it's gonna be tough. We think that we 0:00:57.120 --> 0:01:00.360 think that you know for sure, and regular just have 0:01:00.440 --> 0:01:03.720 said that they're closely monitoring the situation. They have to 0:01:03.760 --> 0:01:06.759 be in discussions with the bank. I think that the 0:01:06.800 --> 0:01:10.240 moves that we saw this week were meant to study 0:01:10.760 --> 0:01:15.760 sentiment and assure investors. Um, the stock is telling us 0:01:15.840 --> 0:01:20.759 today that that hasn't necessarily helped. I think that there's 0:01:20.800 --> 0:01:25.160 there's two things. One is the liquidity and soundness of 0:01:25.200 --> 0:01:27.880 the bank. And I think that the SNB coming out 0:01:27.920 --> 0:01:30.600 and sank Swiss National Bank we have to differentiate because 0:01:30.640 --> 0:01:35.160 they also have the shareholder SNB. But um, you know 0:01:35.680 --> 0:01:40.920 that's yes, so they borrow the fifty four billion, or 0:01:40.920 --> 0:01:42.440 said they were going to borrow the fifty four billion. 0:01:42.440 --> 0:01:44.480 Credit swis from the government. The government has said, or 0:01:44.560 --> 0:01:47.280 the regulator has said, you know they are there. They're 0:01:47.319 --> 0:01:50.400 there to backstop the liquidity. But you know, to us, 0:01:50.440 --> 0:01:53.160 the issue with Credit Swiss is, you know, you have 0:01:53.280 --> 0:01:56.240 to study the confidence, you have to study the flows. 0:01:56.440 --> 0:02:00.200 You have to because that that really is their core business. 0:02:00.240 --> 0:02:04.840 And the move was meant to study client sentiment. The 0:02:04.960 --> 0:02:10.480 investor sentiment is telling you that they're not assured. I mean, 0:02:11.040 --> 0:02:13.480 there's so many ways we could go with this. First 0:02:13.480 --> 0:02:16.679 of all, when someone asks you if you're going to 0:02:16.760 --> 0:02:21.000 increase your investment in a bank in which you already 0:02:21.000 --> 0:02:25.320 owned ten percent, don't say absolutely not. Don't be vehement 0:02:25.360 --> 0:02:27.200 about the fact that you're never going to give this 0:02:27.240 --> 0:02:29.920 bank any more money again, because that's a bad idea. 0:02:30.040 --> 0:02:34.640 I guess the most important questions, though, Allison, are why 0:02:34.680 --> 0:02:38.000 would you work for this bank? I mean, clearly it's 0:02:38.040 --> 0:02:40.360 because you can't get a job somewhere else. Why would 0:02:40.360 --> 0:02:42.920 you have your money at this bank? Do you really 0:02:42.960 --> 0:02:45.320 trust that it's going to continue? And then why would 0:02:45.360 --> 0:02:50.239 you trade with this bank? There are already very important, 0:02:50.400 --> 0:02:54.320 large national banks that are cutting that relationship off, so 0:02:56.880 --> 0:03:00.560 I can't imagine how it goes on and in anything 0:03:00.600 --> 0:03:04.239 like the same form. Well, let's start with your last 0:03:04.960 --> 0:03:09.120 point with regard to trading and counterparty risk, because I 0:03:09.120 --> 0:03:12.040 think that that's the issue that we've probably gotten the 0:03:12.080 --> 0:03:17.520 most questions from investors about this week. And we certainly 0:03:17.560 --> 0:03:20.600 saw to your point, when their largest investors so that 0:03:20.600 --> 0:03:25.080 they weren't going to add additional investments that people you 0:03:25.080 --> 0:03:27.840 started to see that in the stocks of some of 0:03:27.919 --> 0:03:30.919 the biggest US banks. But when we look at that, 0:03:31.200 --> 0:03:32.960 you know, the two things that we think about are one, 0:03:33.000 --> 0:03:36.680 this isn't a new situation. It's been a couple of years, 0:03:36.760 --> 0:03:40.760 and you know, we would expect that the counterparty risk 0:03:41.440 --> 0:03:44.280 management departments of these banks have been managing down their 0:03:44.360 --> 0:03:47.960 exposures accordingly. And then secondly, if we look at the 0:03:48.000 --> 0:03:52.880 trading operations, which is something that we've discussed, I mean, 0:03:52.920 --> 0:03:57.000 they're a shadow of their former self. And that also 0:03:57.080 --> 0:04:02.040 tells you just that their activity with banks globally has 0:04:02.040 --> 0:04:06.360 slowed a bit on that front. So certainly there are 0:04:06.400 --> 0:04:11.400 still relationships out there we would expect, but that those 0:04:11.760 --> 0:04:14.640 exposures have have been mounaged down in terms of a 0:04:14.920 --> 0:04:17.680 counterparty if we and I guess I would like and 0:04:17.720 --> 0:04:19.640 it's if we look back to what happened with bear 0:04:19.720 --> 0:04:23.119 Stearns and Lehman, I think, you know, counterparties with Lehman 0:04:23.160 --> 0:04:28.200 were sort of on high alert beginning with m bear Stearns, 0:04:29.200 --> 0:04:34.279 which happened actually this month, several several years ago. But 0:04:34.400 --> 0:04:38.840 by the time when you know, when Lehman eventually went under, 0:04:38.920 --> 0:04:42.279 the issues really related to you know, money markets that 0:04:42.360 --> 0:04:44.960 held investment in leaning. It was less about sort of 0:04:45.000 --> 0:04:49.000 remaining counterparty risk. Yeah, that's kind of what we learned. Boy, 0:04:49.160 --> 0:04:51.240 Just as even as a neophyte boy, if you have 0:04:51.360 --> 0:04:53.800 if you lose confidence in the marketplace and counterparty risk 0:04:53.839 --> 0:04:56.880 comes into play, it's almost a game over. Alison on 0:04:56.960 --> 0:05:00.840 Credit Swiss. Is there anything more the government can do? Really? Um? 0:05:01.040 --> 0:05:04.120 I mean, I'm not even sure how to map out 0:05:04.160 --> 0:05:07.400 a scenario, you know where this scene kind of survives. 0:05:07.760 --> 0:05:09.760 I don't know. Did they take control of the bank, 0:05:09.839 --> 0:05:13.880 Can they force a sale to UBS? I buy the way. 0:05:13.920 --> 0:05:16.440 We'll discourage the use of the word merger because there's 0:05:16.440 --> 0:05:18.520 no way anybody's coming together with credit suite as an 0:05:18.600 --> 0:05:22.160 un part. Yeah, that's true. So I think I think 0:05:22.160 --> 0:05:25.360 that you know, when when we think about the government, 0:05:25.400 --> 0:05:28.279 I mean, and it's been very interesting just seeing what's 0:05:28.279 --> 0:05:31.560 happening both in the US and in Europe as as 0:05:31.560 --> 0:05:35.360 the government is trying to assure investors and certainly that 0:05:35.680 --> 0:05:39.000 the size and nature of credit suitezes is not comparable 0:05:39.120 --> 0:05:42.640 to the banks that failed in the US or First Republic, 0:05:43.240 --> 0:05:46.279 which investors are also worried about. But the connection is 0:05:46.400 --> 0:05:49.400 market sentiment and you have, you know, regulators in both 0:05:49.400 --> 0:05:54.080 of these countries trying trying to you know, stabley sentiment 0:05:54.160 --> 0:05:59.080 at the specific bank, but then also more broadly, and 0:05:59.400 --> 0:06:02.719 you know, as measures don't work, you have to try 0:06:03.320 --> 0:06:06.760 different things. I think when we think about credit suis um. 0:06:07.000 --> 0:06:09.040 You know, for for years people have talked about it 0:06:09.160 --> 0:06:12.800 as you know, as you said, a merger partner. Now 0:06:12.839 --> 0:06:16.520 it's you know, more of a takeout candidate. What exactly happens? 0:06:16.560 --> 0:06:19.800 I think when we think about, you know, what what 0:06:19.839 --> 0:06:24.320 the bank looked like today versus a couple of years ago. Um. Again, 0:06:24.360 --> 0:06:28.120 there their trading operations are have a shadow of their 0:06:28.120 --> 0:06:33.320 former self. Um. The Swiss bank unit is what the 0:06:33.400 --> 0:06:37.800 Swiss government is going to want to protect. And then 0:06:37.839 --> 0:06:40.840 we have the wealth business, which I think you know 0:06:40.880 --> 0:06:42.920 a lot of people will think is a great fit 0:06:42.960 --> 0:06:47.320 with UBS, But what we've seen with UBS is they're 0:06:47.400 --> 0:06:53.039 taking a lot of those flows without the combination. So um, 0:06:53.440 --> 0:06:56.000 and I think it circles back to your earlier point it, 0:06:56.200 --> 0:07:00.760 you know, is what will regulators do in terms of 0:07:01.400 --> 0:07:05.680 forcing the issue or trying to help you know, some 0:07:05.760 --> 0:07:10.800 kind of combination that can protect the Swiss unit And 0:07:10.840 --> 0:07:15.200 really that's the unit that's important to their economy and 0:07:15.320 --> 0:07:18.280 the system that they oversee. All right, Allison, thank you 0:07:18.360 --> 0:07:21.679 as always for helping out here. Alison Williams Senior Global 0:07:21.720 --> 0:07:25.320 Banks and Asset Manager for Bloomberg Intelligence, and not only that, 0:07:25.400 --> 0:07:28.760 she was recently promoted to be co director of Research 0:07:28.800 --> 0:07:31.760 for the Americas for Bloomberg Intelligence. So she's got to 0:07:31.800 --> 0:07:34.520 now manage, along with her partner, you know, more than 0:07:34.560 --> 0:07:37.400 one hundred and fifty analysts, which is like hurting cats. 0:07:37.440 --> 0:07:39.000 I mean, these people take a lot of work. It's 0:07:39.040 --> 0:07:40.280 a lot of work, but she's up to it and 0:07:40.280 --> 0:07:42.080 she does a great job. She's got great experience on 0:07:42.120 --> 0:07:44.800 Wall Street, and she's been indispensable here as we try 0:07:44.840 --> 0:07:47.320 to figure out what's going on in the banking space, 0:07:47.720 --> 0:07:50.760 not just in the US, but overseas as well, focusing 0:07:50.800 --> 0:07:55.400 really on credit Swiss. You're listening to the team. Ken's 0:07:55.400 --> 0:07:59.800 her live program, Bloomberg Markets weekdays at ten am Eastern Bloomberg, 0:08:00.520 --> 0:08:03.080 the r Heart Radio app, and the Bloomberg Business App. 0:08:03.200 --> 0:08:07.960 We're listening on demand wherever you get your podcast. We 0:08:08.080 --> 0:08:10.280 actually know a couple of people in the rates business. 0:08:10.400 --> 0:08:13.400 Erica Aidelberg, she covers the mortgage back security business for 0:08:13.480 --> 0:08:16.520 Bloomberg Intelligence. She joins us here on our Bloomberg Interactive 0:08:16.520 --> 0:08:19.040 Broker studio, so a double gold star for being in 0:08:19.080 --> 0:08:22.200 the studio on a Friday. And Ira Jersey, he's a 0:08:22.320 --> 0:08:24.679 US interest rate strategist. I'm just gonna guess he's mailing 0:08:24.760 --> 0:08:27.960 it in from home, but so Erica, since you're here, Um, 0:08:28.240 --> 0:08:30.080 we're gonna go with you first. We may not even 0:08:30.120 --> 0:08:35.040 talk to to you, know. Um. So in this bank quote, 0:08:35.040 --> 0:08:37.480 I'm not gonna call it a crisis, although many people do. 0:08:37.720 --> 0:08:40.080 John Authors has said, don't call it a crisis yet. 0:08:40.200 --> 0:08:43.400 I'm I'm with John. I'm with John. But there's turmoil. 0:08:44.559 --> 0:08:47.560 Does that mean banks pull back? Can I not get 0:08:47.600 --> 0:08:51.000 my jumbo mortgage for this the Matt Miller estate up 0:08:51.040 --> 0:08:53.760 in Westchester? I mean, what are we seeing in a 0:08:53.800 --> 0:08:58.960 mortgage part market? Yeah, we are actually saying, according to 0:08:59.160 --> 0:09:01.960 the data, that I've seen banks pulling back on credit, 0:09:02.000 --> 0:09:04.760 and that was before this latest turmoil as we're calling 0:09:04.800 --> 0:09:09.560 it now. The mortgage credit availability index that the NBA tracks, 0:09:09.600 --> 0:09:13.199 which is depending on a mix of variables, is at 0:09:13.320 --> 0:09:16.360 decade lows. So that could make it harder. The one 0:09:16.360 --> 0:09:18.760 sector that's interesting, by the way, that's fascinating. So even 0:09:18.800 --> 0:09:21.400 as I look at the bank rate thirty year mortgage 0:09:21.440 --> 0:09:24.680 index just as my benchmark, and it has come down, 0:09:24.720 --> 0:09:26.320 it bounced back up in the last couple of days. 0:09:26.320 --> 0:09:30.320 But even if that rate is lower, mortgages still may 0:09:30.320 --> 0:09:34.079 not be available. Banks may not be giving out loans 0:09:34.120 --> 0:09:36.920 even if you could get them for cheaper, it definitely 0:09:36.960 --> 0:09:39.880 could tighten credit. Yeah, and I think this latest turmoil 0:09:40.000 --> 0:09:42.400 is going to make that even more of an issue. 0:09:42.640 --> 0:09:46.240 That being said, the jumbo credit index actually is the 0:09:46.280 --> 0:09:49.200 one sector that hasn't fallen quite as much as Fannie 0:09:49.200 --> 0:09:53.000 Freddie Jenny, you know, standard conventional mortgages. And I think 0:09:53.080 --> 0:09:57.080 that's partly because for better for worse, that is already 0:09:57.120 --> 0:10:00.679 a very high credit product, and the larger loans are 0:10:00.679 --> 0:10:02.840 more attractive for banks to originating than a lot of 0:10:02.840 --> 0:10:05.440 types hold on their balance sheets. So and a lot 0:10:05.440 --> 0:10:07.680 of those are actually in adjustable rate mortgages, which do 0:10:07.800 --> 0:10:11.000 have a better asset liability mix with the bank's balances. 0:10:11.000 --> 0:10:17.280 But bottom line financial conditions have tightened substantially since the 0:10:17.320 --> 0:10:20.880 failure of SVB Ira Jersey. Is that going to make 0:10:20.920 --> 0:10:25.360 a difference to our federal Reserve? It's ours yours again 0:10:25.440 --> 0:10:27.400 and iras Paul Okay. Is that going to make a 0:10:27.400 --> 0:10:30.600 difference to our Federal Reserve when they meet to decide 0:10:30.600 --> 0:10:33.720 whether or not to raise rates. Yeah, it absolutely will, 0:10:34.320 --> 0:10:37.560 I think in part because the Fed is worried about, 0:10:38.120 --> 0:10:40.320 you know, the financial sector and some of the knock 0:10:40.400 --> 0:10:42.600 on effects that you could have if you have additional 0:10:42.640 --> 0:10:46.040 bank failures and credit tightening even more. That being said, 0:10:46.200 --> 0:10:48.920 I still think that you know, with some of the 0:10:49.000 --> 0:10:52.240 lending facilities that they've they've used, there's a big a 0:10:52.240 --> 0:10:54.800 lot of people worrying about the fact that the discount 0:10:54.800 --> 0:10:57.280 window is over one hundred and fifty billion dollars in usage. 0:10:57.320 --> 0:11:00.880 It's probably just from a couple of institutions. They're worried 0:11:00.880 --> 0:11:03.520 that that show is a signal that there might be 0:11:03.880 --> 0:11:06.240 wider systemic risk. But I think that what the FED 0:11:06.240 --> 0:11:08.559 will will do here is say, look, we're gonna we're 0:11:08.559 --> 0:11:10.720 gonna hike twenty five baits points because inflation is still 0:11:10.760 --> 0:11:16.240 a problem. But we're also going to continue to have 0:11:16.320 --> 0:11:20.400 liquidity facilities as needed and encourage banks to use the 0:11:20.440 --> 0:11:23.840 existing liquidity facilities in order to stop any runs on 0:11:23.880 --> 0:11:27.439 additional banks that might have some liquidity issues. Well, they 0:11:27.440 --> 0:11:30.080 sure are doing that. You don't need to encourage them, right, 0:11:30.120 --> 0:11:35.000 They've already used the discount window like more than they 0:11:35.040 --> 0:11:38.760 did at the height of the Great Financial Crisis. Yeah, 0:11:38.800 --> 0:11:40.960 And I think that one of the issues that the 0:11:41.040 --> 0:11:43.280 FED had at the height of the financial crisis, or 0:11:43.320 --> 0:11:46.640 even at the very beginning, was trying to convince institutions 0:11:46.679 --> 0:11:49.520 to use some of the existing facilities. So they created 0:11:49.920 --> 0:11:52.800 all of these other you know, alphabet soup of facilities 0:11:52.800 --> 0:11:55.160 like the TOFF and the TAFF and all of these 0:11:55.160 --> 0:11:59.240 other facilities that ultimately where the discount window brought to you, right, 0:11:59.320 --> 0:12:02.079 instead of people actually using it. So so we actually 0:12:02.120 --> 0:12:04.080 just put out a note just about an hour ago 0:12:04.200 --> 0:12:06.760 talking about the fact that that the usage of the 0:12:06.800 --> 0:12:09.880 discount window might show that there's a little less stigma 0:12:09.920 --> 0:12:12.320 today than there was in say two thousand and seven, 0:12:12.360 --> 0:12:14.960 when it probably should have been used the first time. UM. 0:12:15.000 --> 0:12:17.559 And because of that, you know, there is this backstop 0:12:17.679 --> 0:12:21.280 for uh, for bank liquidity that that hopefully will be 0:12:21.400 --> 0:12:24.760 used in times of need, not in times of you know, 0:12:24.800 --> 0:12:28.040 to try to avoid that that crisis level UM that 0:12:28.080 --> 0:12:30.320 could potentially rear up and and and there is risk 0:12:30.360 --> 0:12:33.160 here for for sure. And that's one reason why I 0:12:33.160 --> 0:12:36.560 think people are still skittish about about markets and why 0:12:36.600 --> 0:12:39.400 the Federal Reserve had to step in create another new facility. 0:12:39.640 --> 0:12:43.120 What's the new acronym BTFP or whatever. Yeah, yeah, So 0:12:43.160 --> 0:12:47.160 it's the it's the the Bank Term Financing Program. And 0:12:47.520 --> 0:12:51.160 so so what that allows is for banks that own 0:12:51.240 --> 0:12:54.600 treasury and agency securities UM to basically fund them for 0:12:54.640 --> 0:12:58.160 a year UM and not have to worry about UM, 0:12:58.200 --> 0:12:59.679 you know, whether or not they have to go into 0:12:59.679 --> 0:13:01.800 the open market. Well, the best part about that is 0:13:01.840 --> 0:13:03.480 they can do it at par even if they're trading 0:13:03.480 --> 0:13:05.920 at seventy or eighty cents, right, you get one hundred? Yeah, 0:13:06.120 --> 0:13:08.200 I mean that's that's like a consent. That's like a 0:13:08.320 --> 0:13:13.040 great free lunch, isn't it, Erica? These are mortgage backed securities, right, 0:13:13.080 --> 0:13:14.960 So what are they trading at right now? If you 0:13:15.000 --> 0:13:16.640 go out, are some of them trading at a lot 0:13:16.720 --> 0:13:19.520 less than par? Yeah? A lot of them are trading 0:13:19.520 --> 0:13:21.600 in the load of mid part. So of course you 0:13:21.640 --> 0:13:25.560 know they're money good. So ultimately they're worth par if 0:13:25.559 --> 0:13:27.640 you want to call it that, UM. But right now, 0:13:27.640 --> 0:13:29.440 if you had to trade him on a market market basis, 0:13:29.480 --> 0:13:31.839 because they were low coupon securities that were issued when 0:13:31.880 --> 0:13:34.760 rates were lower in twenty twenty one, in twenty twenty, 0:13:35.200 --> 0:13:37.400 they are trading in a much lower dollar price because 0:13:37.480 --> 0:13:39.440 it's a lot of lower coupon than you'd get for 0:13:39.480 --> 0:13:41.920 a current coupon today. So Eric, I know you got 0:13:41.920 --> 0:13:43.960 a no doubt, you know, calling out that the bank's 0:13:44.040 --> 0:13:48.000 mortgage backed security demand falling. Ira, No, I'm also talking 0:13:48.000 --> 0:13:51.480 to Erica. Oh Erica, okay, okay, sorry, sorry, So Erica 0:13:51.520 --> 0:13:53.800 talks to us about the banks MBS demand here, what's 0:13:53.840 --> 0:13:57.960 going on there in the marketplace? Well, even prior to 0:13:58.000 --> 0:14:00.600 this current um what do we call it? At it tomorrow? 0:14:01.640 --> 0:14:05.320 In this current turmoil, bank demand had been falling all year. 0:14:05.920 --> 0:14:08.440 Part of the reason that it's been following is because 0:14:08.480 --> 0:14:11.240 their deposits have been falling. I think there's also, um, 0:14:11.440 --> 0:14:14.600 you know, lower reserves they need to invest want to invest, 0:14:14.640 --> 0:14:17.480 but mostly it's the deposit base had been falling all 0:14:17.520 --> 0:14:20.560 a year. It had risen sharply at the beginning of 0:14:20.600 --> 0:14:23.800 the pandemic, as savings that had risen, and you know, 0:14:24.000 --> 0:14:28.800 people had pandemic cash to spend, and then their securities 0:14:29.080 --> 0:14:31.760 holdings had gone up abruptly. Both of those have been 0:14:31.760 --> 0:14:35.480 declining as cash reserves and cash balances have been fallowing. 0:14:35.560 --> 0:14:37.520 Cash deposits. By the way, I thought you were I 0:14:37.520 --> 0:14:39.920 didn't know you're going to Aidelberg. I thought you were 0:14:40.120 --> 0:14:44.360 confusing Jersey with Kazatski. You know, because a lot of 0:14:44.400 --> 0:14:46.920 times Eric Kazatski joins us here on Newnies and it's 0:14:46.960 --> 0:14:49.880 kind of the same universe. But um, Jersey, let me 0:14:49.920 --> 0:14:53.240 ask you about what the FED does in relation to 0:14:53.240 --> 0:14:56.280 what the ECB did. I was on the IDEs of March, 0:14:56.360 --> 0:14:59.080 sitting at home and the throes of COVID hallucinations, reading 0:14:59.080 --> 0:15:01.120 Ben Emmon's note about the two thousand and seven two 0:15:01.160 --> 0:15:03.760 thousand and eight parallels, and I was like literally terrified 0:15:04.080 --> 0:15:06.880 about what was happening. And then we got the news 0:15:07.000 --> 0:15:13.320 that the ECB raised rates fifty basis points, and I 0:15:13.400 --> 0:15:17.640 felt a real sigh of relief because to me, it's like, 0:15:17.960 --> 0:15:20.520 if they can raise rates in this environment, it must 0:15:20.560 --> 0:15:23.040 not be that bad. Is the FED going to want 0:15:23.040 --> 0:15:26.480 to send some kind of similar message. Well, I think 0:15:26.480 --> 0:15:29.280 they do, and that is that they're still an inflation 0:15:29.440 --> 0:15:32.160 fighting mode, right, And even if they do pause, I 0:15:32.200 --> 0:15:34.800 think what one of the things that they'll say is 0:15:34.920 --> 0:15:37.520 that they're not going to be cutting interest rates early, right, 0:15:37.560 --> 0:15:40.040 And I think that that's you know, we went from 0:15:40.040 --> 0:15:43.160 pricing pricing cuts this year to pricing no cuts, and 0:15:43.160 --> 0:15:45.640 now we're back to pricing a significant amount of cuts 0:15:45.640 --> 0:15:48.720 before year end. And I think if the Federal Reserve says, 0:15:49.400 --> 0:15:51.160 and I think this is something quite frankly, the FED 0:15:51.240 --> 0:15:53.920 probably needed to do over the last two meetings and 0:15:54.040 --> 0:15:57.040 say these are the circumstances. These are the necessary but 0:15:57.080 --> 0:15:59.800 not sufficient conditions for what would make us cut interest rates. 0:16:00.080 --> 0:16:02.640 Number one is inflation is at you know this level. 0:16:03.000 --> 0:16:05.920 Number two is that um, you know, the unemployment rate 0:16:05.960 --> 0:16:09.240 starts to go up, right, and those are that's their mandates, right, 0:16:09.280 --> 0:16:12.960 and so you would need to have, um, you know, 0:16:13.040 --> 0:16:15.400 those necessary conditions in order for them to cut Now 0:16:15.400 --> 0:16:17.880 we kind of know that, but the set hasn't explicitly 0:16:17.920 --> 0:16:20.520 set it. So until they do, they won't um going 0:16:20.560 --> 0:16:22.240 back to the funding programs. And I think this is 0:16:22.240 --> 0:16:24.600 the important thing, right, the central banks with the lender 0:16:24.640 --> 0:16:29.440 of last resort, not necessarily um you know, the the 0:16:29.560 --> 0:16:32.880 arbiters of which institutions are supposed to survive. Right. So 0:16:32.960 --> 0:16:35.360 the so the thing is when when you have an 0:16:35.440 --> 0:16:37.920 issue where there's a bank with good assets, right, and 0:16:37.960 --> 0:16:39.680 this is this is the point here. If you have 0:16:39.720 --> 0:16:42.840 a bank with good assets, we're just going to leave 0:16:42.840 --> 0:16:44.640 it there because we have to. But I get what 0:16:44.680 --> 0:16:47.840 you were saying to Yeah, you're listening to the Take 0:16:48.080 --> 0:16:51.480 Cancer our Live program Bloomberg Markets weekdays at ten am 0:16:51.480 --> 0:16:55.280 Eastern on Bloomberg Radio, the tune in app, Bloomberg dot Com, 0:16:55.320 --> 0:16:58.040 and the Bloomberg Business app. You can also listen live 0:16:58.160 --> 0:17:01.200 on Amazon Alexa from our pledge New York station. Just 0:17:01.360 --> 0:17:05.960 say Alexa play Bloomberg eleven thirty. I want to get 0:17:06.000 --> 0:17:09.159 right to our next guest, David Dindy, CEO and co 0:17:09.359 --> 0:17:13.399 founder of Atomic Invest. Right, here's the dude. He gets 0:17:13.400 --> 0:17:16.159 his bachelor's and chemical engineering from Stanford, all right, so 0:17:16.200 --> 0:17:18.639 that he's a geek in my mind immediately. Then he 0:17:18.680 --> 0:17:21.720 gets a masters in chemical in computational and engineering. So 0:17:21.760 --> 0:17:24.440 this is a smart fella here. David, thanks so much 0:17:24.480 --> 0:17:26.800 for joining us. Can you first, David? Paul means that, 0:17:26.920 --> 0:17:29.520 by the way, in the best, in the best possible. 0:17:31.280 --> 0:17:33.400 I try to stay away from the numbers. David, talk 0:17:33.440 --> 0:17:36.400 to us about Atomic invest. What are you guys doing there. 0:17:37.800 --> 0:17:42.880 We provide wide labeled walt management and treasury services to bangs, 0:17:42.960 --> 0:17:45.640 fintex and credit unions. So, for instance, if you have 0:17:45.840 --> 0:17:48.199 a fintech app that you work from or that you 0:17:48.280 --> 0:17:51.879 work with that is launching investing, we are on the 0:17:51.920 --> 0:17:55.040 background serving as the infrastructure partner as well as the 0:17:55.200 --> 0:17:58.320 regulated entity for them, so that leads me, David to 0:17:59.280 --> 0:18:03.040 the big question. And if I am a startup that's 0:18:03.080 --> 0:18:05.919 just gotten a boatload of money from a VC and 0:18:06.000 --> 0:18:09.600 I put it all in a bank in Silicon Valley, 0:18:10.520 --> 0:18:13.199 Suddenly last week I wanted to move it quickly to 0:18:13.280 --> 0:18:15.320 one of the big four Wall Street banks. Do you 0:18:15.359 --> 0:18:18.760 help me with that sort of thing? Yes, And actually 0:18:18.840 --> 0:18:22.080 we helped hundreds of companies over the last six days 0:18:22.280 --> 0:18:26.000 do exactly that. Wow, just share more context. You know. 0:18:26.080 --> 0:18:29.320 Part of our infrastructure also includes treasury management and the 0:18:29.320 --> 0:18:32.720 ability to open cash management and accounts with banks and 0:18:32.760 --> 0:18:35.560 custodians like Banking New York Melind who has entered into 0:18:35.600 --> 0:18:40.000 a strategic partnership with Atomic and so we saw hundreds 0:18:40.040 --> 0:18:43.359 of such companies looking to open accounts with US and 0:18:43.480 --> 0:18:48.359 to transfer their assets into a place that they feels safer. Hey, David, 0:18:48.400 --> 0:18:50.440 you know here just in Wall Street in New York, 0:18:50.440 --> 0:18:52.760 we're all trying to get a sense of is this 0:18:52.920 --> 0:18:55.399 systemic in the banking community or is it specific to 0:18:55.440 --> 0:18:59.680 the Bay Area maybe some of those depositors and so on. 0:19:00.440 --> 0:19:03.960 What's the feeling out there in the Bay Area about 0:19:04.080 --> 0:19:07.200 how bad this is, how bad it could get. What's 0:19:07.200 --> 0:19:10.000 a feeling on the ground. The feeling on the ground 0:19:10.119 --> 0:19:12.760 right now is that the rist and collapse of SVB, 0:19:13.119 --> 0:19:17.960 Sulfurgate and First Republics percarious situation has emphasized the need 0:19:18.040 --> 0:19:22.840 for quality, resilience, stability, and corporate cash management. We've also 0:19:22.880 --> 0:19:25.960 seen that our companies are now elevated corporate treasury management 0:19:26.240 --> 0:19:29.680 as something that needs to be a key, key competency 0:19:29.760 --> 0:19:32.400 that needs to be prioritized. And so I think many 0:19:32.400 --> 0:19:34.720 people right now. You know, initially the first couple of 0:19:34.800 --> 0:19:37.840 days where a couple of days of panic, but over 0:19:37.880 --> 0:19:40.280 the last two or three days, people have been thinking 0:19:40.320 --> 0:19:42.879 more strategically in terms of how can they have an 0:19:42.880 --> 0:19:46.919 automated cash management solution that allows them to diversify, strategic 0:19:47.119 --> 0:19:51.000 to allocate their assets into treasury builds as well as 0:19:51.040 --> 0:19:55.239 institutions that they feel are safe, like Atomic, So you 0:19:55.240 --> 0:19:58.679 can help them manage their cash in ways that also 0:19:58.720 --> 0:20:04.439 provides returns. Right now, obviously, because rates are up, what 0:20:04.560 --> 0:20:09.719 about other kinds of problems, David? For example, you know 0:20:09.760 --> 0:20:14.000 the official limit on insurance is two hundred fifty thousand dollars, 0:20:14.000 --> 0:20:16.080 but I'm sure that most of the companies you deal 0:20:16.119 --> 0:20:19.479 with need to have more cash on deposit than that 0:20:19.720 --> 0:20:23.080 just to operate simple things like payroll. How do you 0:20:23.119 --> 0:20:26.760 deal with that? Yes, so most of the companies we 0:20:26.800 --> 0:20:29.760 deal with have tens of millions, if not hundreds of 0:20:29.760 --> 0:20:33.120 millions of dollars in deposits, and so the typical FDIC 0:20:33.240 --> 0:20:35.679 insurance limit of two hundred and fifty just doesn't make 0:20:35.720 --> 0:20:38.200 sense for them. And so for those companies, we sweep 0:20:38.240 --> 0:20:40.800 them into a money market sweep that offers up to 0:20:40.800 --> 0:20:44.560 two point five million dollars of FDIC insurance through a 0:20:44.640 --> 0:20:49.040 multi bank program. At the same time, we look to 0:20:49.160 --> 0:20:52.480 see what their liquidity needs are as well as how 0:20:52.560 --> 0:20:55.920 much cash they have on hand and structure custom ladders 0:20:55.960 --> 0:20:58.720 that allow them to put the cash that that might 0:20:58.760 --> 0:21:01.720 not need in the next month or too into treasuries, which, 0:21:01.960 --> 0:21:03.959 as we all understand or full you backed by the 0:21:04.080 --> 0:21:07.080 US government. That way, if a company has fifty million 0:21:07.119 --> 0:21:09.920 dollars or one hundred million dollars, they can rest assured 0:21:10.040 --> 0:21:13.360 that they're cash is either in these FDAC in short sweeps, 0:21:13.520 --> 0:21:15.560 or is it a security that is backed by the 0:21:15.640 --> 0:21:20.480 US government in whole. Davids, as founder and CEO of 0:21:20.560 --> 0:21:24.880 Atomic invest, what have you done with your firms cash? 0:21:25.200 --> 0:21:28.800 We actually moved our firms cash into our own platform. 0:21:28.840 --> 0:21:32.080 Prior to these events, we did have a relationship with SVB, 0:21:32.440 --> 0:21:35.520 and it's sad to see how things have unfolded. But 0:21:35.640 --> 0:21:38.520 right now we manage our own cash on our own platform, 0:21:39.080 --> 0:21:42.320 custodied with a Bank of New York Melon Pershing, and 0:21:42.400 --> 0:21:47.320 we also now go ahead, please, we also have our 0:21:47.359 --> 0:21:50.080 own ladder where we keep a small amount of working 0:21:50.160 --> 0:21:53.000 capital and cash and the rest of it is in 0:21:53.200 --> 0:21:56.800 treasury builds and money market funds. So, David, as I 0:21:56.880 --> 0:21:59.680 understand it, one of the reasons that Silicon Valley Bank 0:21:59.760 --> 0:22:03.760 was created several decades ago was because small startup companies 0:22:03.880 --> 0:22:08.960 coming out of the valley the big banks, the existing 0:22:08.960 --> 0:22:12.120 banks would not bank them. Has that changed at all? 0:22:12.119 --> 0:22:13.560 I mean, if I take my money out a Silicon 0:22:13.600 --> 0:22:15.200