Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Tom Keane, along
Speaker 1: with Jonathan Faroe and Lisa Abramowitz. Join us each day
Speaker 1: for insight from the best and economics, geopolitics, finance and investment.
Speaker 1: Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and
Speaker 1: anywhere you get your podcasts, and always I'm Bloomberg dot Com,
Speaker 1: the Bloomberg Terminal, and the Bloomberg Business App. It was
Speaker 1: Friday or early morning Sunday. As we worked through the weekend,
Speaker 1: I said, get me. Showed he is with KBW, who
Speaker 1: have been attached to small banking and securities analysis of
Speaker 1: banking through my entire career. Thomas showed a CEO of
Speaker 1: KBWO stephel company. We're thrilled he could join us from
Speaker 1: California this morning at tim, I don't know where to
Speaker 1: begin with eight themes, but to cut to the chase,
Speaker 1: you've lived this, what should your own Powell do? And
Speaker 1: the hours and days? I think this is still a
Speaker 1: moment about confidence. It's confidence for depositors to know that
Speaker 1: the money in their bank is safe. It's also confidence
Speaker 1: among investors. You've got an SMP five hundred company who
Speaker 1: stock just went to zero pretty quickly, and so investors
Speaker 1: want to know that the confidence want to have confidence
Speaker 1: in the system as well, and so we need orderliness.
Speaker 1: And that's what I think is necessary at the moment.
Speaker 1: And the agency took action last night, and we're going
Speaker 1: to find out if it's enough for if more is needed.
Speaker 1: I'm very simply here. My theme for the year, not
Speaker 1: seeing any of this coming is a great zombie roll up.
Speaker 1: Keith Briant and Woods is expert engaging the zombies out
Speaker 1: there among thousands of banks. How troubled is our banking system?
Speaker 1: How many is bombies are out there? For twenty twenty
Speaker 1: three great zombie roll up. So I'll tell you the
Speaker 1: bank that fell last week, Silicon Valley, on all the measures,
Speaker 1: was probably one of the biggest risk takers in terms
Speaker 1: of interest rates with their bond portfolio. They were an outlier.
Speaker 1: My conversations with many banks CEOs is that the deposit
Speaker 1: outflow contagion had not spread throughout the industry. However, I
Speaker 1: know that concern was raising and rising and you could
Speaker 1: see I think if this continues, you could see it
Speaker 1: to start to affect banks that had very prudently managed
Speaker 1: themselves and that's what happens when consumer behavior or commercial
Speaker 1: behavior for deposits changes quickly. That's why I think we
Speaker 1: need a government support mechanism to make things orderly. We
Speaker 1: got some of that last night. If it's not enough,
Speaker 1: I think they got to do They should do more.
Speaker 1: But you know what's really interesting, Thomas, this is all
Speaker 1: about the unwinding of COVID relief. There are two things
Speaker 1: that happened that dramatically impacted the banking industry. One is
Speaker 1: we've had rate increases at the fastest pace of my career.
Speaker 1: It's been fast, and it's been significant in terms of
Speaker 1: its measure. Number two is that the system during COVID
Speaker 1: was flooded the banking system with deposits. There's a purposeful
Speaker 1: effort right now to drain liquidity and drain those deposits.
Speaker 1: It's happening at a pace that I don't think any
Speaker 1: management team in banking has ever seen before. So while
Speaker 1: that's happening, you have a crisis of confidence, which is
Speaker 1: compounding the issue. And that's why I think we need
Speaker 1: this broader support. If I were to show you the
Speaker 1: market the metrics of a typical bank, they're actually outstanding
Speaker 1: credit quality, is of no concern at the moment. You've
Speaker 1: got companies that had stable capital, but they weren't necessarily
Speaker 1: built to have this type of stress put on deposits overnight.
Speaker 1: And that's why I think we need a calming influence
Speaker 1: barring some sort of further intervention from the federal government. Tom,
Speaker 1: what are you doing at KBW to attract deposits and
Speaker 1: to keep the ones you have? Well, my firm at KBW,
Speaker 1: we're a securities firm, but I think that I think
Speaker 1: that so we don't We don't attract deposits at KBW,
Speaker 1: so to speak. But I think what I in talking
Speaker 1: to most banks in the industry, they have the liquidity.
Speaker 1: There are plenty of ability penny of lines and avenues
Speaker 1: that a bank can go down to augment their liquidity.
Speaker 1: So my sense is that depositors demands will be met,
Speaker 1: and I think other banks are. Some banks are seeing
Speaker 1: tremendous inflows from some of these other banks, so it's
Speaker 1: not equal everywhere in the industry. So I think things
Speaker 1: are steady enough as long as they don't get worse.
Speaker 1: That's my point. Well, Tom, do you expect a smaller
Speaker 1: and regional banks to have to pay more to attract
Speaker 1: just regular depositors who think, well, why shouldn't we just
Speaker 1: put our bank at the big money centers that are
Speaker 1: too big to fail? Well, yes, I think, I think that.
Speaker 1: I think in the third quarter of last year is
Speaker 1: where the light switch went on, so to speak, in
Speaker 1: terms of deposit competition. And that happened because of the
Speaker 1: speed at which FDIC deposits have been shrinking because of
Speaker 1: monetary policy. So we saw that competition sort of green
Speaker 1: light happen in the third quarter, so I think. And
Speaker 1: it's not just the banking industry competing with itself, it's
Speaker 1: market rates. Treasuries were offering a compelling alternative to deposits,
Speaker 1: so that competition was building and that's how fun to
Speaker 1: have been draining out of the system. So I tell ye,
Speaker 1: got to run up. Just got a headline. I need
Speaker 1: to get to. Thanks for being with us this morning.
Speaker 1: Tom shank of KPWA sobridar Rajapa joins us right now
Speaker 1: on this historic day with society in general. So brodri,
Speaker 1: I want to speak I think towards what the President
Speaker 1: will comment on here. What can we glean from the
Speaker 1: fixed income markets that can help politicians gauge the moment.
Speaker 1: What should they be watching in fixed income? Well, they're
Speaker 1: not watching anything specifically in the fixed income market per se.
Speaker 1: But what I think we should be encouraged by is
Speaker 1: the fact that financial conditions are still relatively easy. You're
Speaker 1: not seeing a meltdown in the in the equity market.
Speaker 1: You're not really seeing other risks of a contagion in
Speaker 1: all markets. This seems to be very localized, if you will.
Speaker 1: In the bond market, you're seeing a pretty dramatic decline
Speaker 1: in yields as the market starts to price out rate
Speaker 1: hikes for this year. So for the most part, at
Speaker 1: least thus far, it seems to be localized to the
Speaker 1: price action, i should say, in the bond market, and
Speaker 1: we're not really seeing a big risk of a contagion.
Speaker 1: Two things to Patrick. One, you called for lower yields.
Speaker 1: You're getting them in a mimictive way this morning. We'll
Speaker 1: come back on that call in just a moment. The
Speaker 1: second thing, there's two clear camps emerging. We've been discussing
Speaker 1: them in the last hour or so. One is that
Speaker 1: the market is right, this Federal Reserve is done. The
Speaker 1: second camp is ultimately the feeders shown. It has the
Speaker 1: toast to deal with deal with feut banks and can
Speaker 1: focus on tactic inflation, which camp you in it's going
Speaker 1: to have to be the ladder. I think it's very
Speaker 1: soon to make a call on the FED being done.
Speaker 1: Like you guys have discussing over the last couple of minutes.
Speaker 1: If you look at inflation, it's running very hot. You
Speaker 1: have a very strong labor market, and most importantly, financial
Speaker 1: conditions are easy. The financial stability risks seem to be
Speaker 1: somewhat ring fenced and isolated with a couple of banks.
Speaker 1: The question really becomes one of does the FED have
Speaker 1: all the tools it needs to be able to contain
Speaker 1: this problem? And again, you know you guys did a
Speaker 1: good job of outlining what happened in the UK. I
Speaker 1: think the parallels there are are very impression for this
Speaker 1: particular moment where the Fed can kind of threaten needle
Speaker 1: on two separate issues and continue to raise rates in
Speaker 1: the March media and even beyond if we can kind
Speaker 1: of deal with the problem at hand. So I want
Speaker 1: to just talk about the mechanics of the bond market
Speaker 1: at a time when you're seeing a fifty basis point
Speaker 1: move in the two year at a time when so
Speaker 1: many people had parked their cash in this debt. How
Speaker 1: much is it kind of creating fertilities in and of
Speaker 1: itself that there is such incredible volatility in the benchmark
Speaker 1: basic instruments that people use as tools of safety. So
Speaker 1: if it is a tool of safety, you want to
Speaker 1: be along the bond And we've been kind of talking
Speaker 1: about that, you know, pretty much since the beginning of
Speaker 1: the year, even when yields started a rise. Is that
Speaker 1: this is typically the sort of price action you tend
Speaker 1: to see in the bond market towards the end of
Speaker 1: the cycle, where the market gets a little bit very
Speaker 1: skittish on the potential turn and policy. So, especially given
Speaker 1: the fact that yields have risen so dramatically, our view
Speaker 1: has consistently been that the risk to yields are a
Speaker 1: specially due towards the downside, and that's exactly what you're
Speaker 1: you're seeing in the price action. Yes, the moves look
Speaker 1: very dramatic, and that's because the absolute level of the
Speaker 1: two year was at about five percent, you know, just
Speaker 1: a week ago, so a lot of that repricing is
Speaker 1: going to happen in the very front end. So that
Speaker 1: doesn't surprise me at all, um, But what you know,
Speaker 1: what we have to see going forward is not really
Speaker 1: read too much into the price action year. This could
Speaker 1: be partly driven by position unblinds, given the fact that
Speaker 1: the market was extraordinarily short heading into the into the
Speaker 1: March fo MC meeting. But I think kula heads will
Speaker 1: prevail when you have more information on how this route
Speaker 1: is going to play out. Brownie speaking, how are you
Speaker 1: going to play this about her? Are you going to
Speaker 1: lean into the long end? Are you going to basically
Speaker 1: cash in on some of the short positions you've had
Speaker 1: the short short end of the curve, We really didn't
Speaker 1: have any any shorts. I think we've been kind of
Speaker 1: leaning long in bonds for a good portion rule of
Speaker 1: this year, given the fact that you know, it's really
Speaker 1: hard to call the pivot on policy, so it's it's
Speaker 1: kind of you know, especially given the fact that you
Speaker 1: get such good returns and bonds. Our bias was perhaps
Speaker 1: to play from from the long end, because yes, we
Speaker 1: might lose the last twenty five basis points of rate
Speaker 1: hikes or not be able to know where the term
Speaker 1: a FED funds raiders. But broadly speaking, the market's going
Speaker 1: to look towards the trajectory of lower yields over the
Speaker 1: next year or two. So in that sort of context,
Speaker 1: I think that long play made sense. That said, with
Speaker 1: me moved quite significantly lower here, So I think we
Speaker 1: probably take a pause look at how things evolved. I
Speaker 1: wouldn't be surprised if we see another leg higher in yields,
Speaker 1: if we start to price in more hikes as the
Speaker 1: time progress is given the fact that we're not anywhere
Speaker 1: near achieving the goal on inflation. So Patri, your bonco
Speaker 1: is looking pretty good this monic and after the last
Speaker 1: couple of days, that's for sure. So Patra Jafford suck
Speaker 1: gens at, Patra, thank you. What you need to do
Speaker 1: on technology is people get chosen. There was a woman
Speaker 1: out of Minnesota who was exceptionally astute and operational research
Speaker 1: at Stanford, and she was annointed I remember the day
Speaker 1: as clear as I can, Marissa who was annointed as
Speaker 1: the leader of YAH, who many would say she at
Speaker 1: least stabilize a company and moved it along in its
Speaker 1: eventual pain. The gentleman that found her was Michael J. Wolfe.
Speaker 1: He's co founder and CEO of Activate. Is a unique
Speaker 1: voice for technology in this country. Hes worked with MTV,
Speaker 1: but far more with consulting with McKenzie and he is
Speaker 1: a voice that when he gets it's a lot, it's
Speaker 1: Michael Wolf online too. The answer the phone. What did
Speaker 1: you do this weekend? Were you glued to the phone
Speaker 1: this weekend? Well, it was a dark weekend for startups
Speaker 1: and for venture capital firms and either on Twitter, either
Speaker 1: on message boards and really blowing up my tax over
Speaker 1: the weekend because where people were afraid. Startups and vcs
Speaker 1: were concerned that they wouldn't make payroll this coming week
Speaker 1: and they were concerned that come Monday they'd have to
Speaker 1: start letting people go. I want you to address the
Speaker 1: behavioral construct that was beautifully described by the Wall Street
Speaker 1: Journal anecdote after anecdote, and I'm not going to mince words, Michael.
Speaker 1: It was fancy tech guys with fancy educations on fancy
Speaker 1: golf streams from Big Sky in Montana, flying back quickly
Speaker 1: to northern California to salvage the mess that is the
Speaker 1: image that America has of your world. Is it accurate?
Speaker 1: What's ironic is that in a lot of ways, the
Speaker 1: venture capitalists started that, and so it's the immediacy of
Speaker 1: social media. So starting on Wednesday, they already started advising
Speaker 1: their startups to take money out, and by Thursday, over
Speaker 1: forty billion dollars had already left Silicon Valley Bank. And
Speaker 1: so in a lot of ways, this was self imposed.
Speaker 1: And what's different about this versus two thousand and eight
Speaker 1: was you had at that time, you had Twitter that
Speaker 1: had two hundred thousand daily users. Today, all of the
Speaker 1: communication is happening through social media, and so it's not
Speaker 1: surprising you had a run on the bank. And what
Speaker 1: was so important in the quality threads this week and
Speaker 1: the people that weren't hysterical was bred sets are wonderful
Speaker 1: at Harvard, an actor and at the end of his thread, Lisa,
Speaker 1: he was scathing about the lack of humility among tech types.
Speaker 1: Gary Gensler out with this statement from the SEC that
Speaker 1: they are investigating and bring enforcement actions if we find
Speaker 1: violations of the federal securities laws. This raises questions of
Speaker 1: what potential conflicts some of these individuals had. Was that
Speaker 1: one of the discussions that people were having over the weekend,
Speaker 1: the main thing was this concern about what this meant
Speaker 1: for startups themselves, and this concern overall for people outside
Speaker 1: the technology business about what would this do to the
Speaker 1: innovation that's been taking place. I mean, these were not
Speaker 1: big companies. These were companies thousands of small companies who
Speaker 1: have yes taken in venture capital money. But there's concern
Speaker 1: that this would shut down innovation, that vcs would not
Speaker 1: be able to finance companies come this week or these
Speaker 1: coming months. Michael Showell was on earlier and he was
Speaker 1: saying that regardless of what happens and what the is
Speaker 1: trying to do in the treasure departments to offset some
Speaker 1: of the concerns about a failure to be able to
Speaker 1: withdraw it deposits, that lending conditions would tighten materially and
Speaker 1: that some of these smaller companies would face much higher
Speaker 1: standards to borrow a much higher rates. Is that in
Speaker 1: the conversations that you're having with some of these startups. Absolutely,
Speaker 1: I think they're worried about what happens. Even though the
Speaker 1: FED is going to backstop the bank and their funds
Speaker 1: are going to be available. I think their concern is
Speaker 1: will this have a chilling effect on venture capital funding?
Speaker 1: And will this have a chilling effect on the places
Speaker 1: where they can borrow money and in a lot of cases,
Speaker 1: though there are many of them are expecting to keep
Speaker 1: their money at Silicon Valley Bank. Over the weekend, a
Speaker 1: group of venture capitalists Kleiner Perkins and others in general catalysts.
Speaker 1: They put out a statement that said, no matter what happens,
Speaker 1: that they'll back Silicon Valley Bank. Now, there's also if
Speaker 1: you look at some of the anecdotes, companies weren't even
Speaker 1: set up to take money into other places. Of the
Speaker 1: founders were putting money into their personal accounts as they
Speaker 1: were able to transfer it out. Is there a discussion
Speaker 1: about some of these venture capital firms helping some of
Speaker 1: their portfolio companies to actually meet payroll to deal with
Speaker 1: some of their concerns on their imminent funding requirements. They're
Speaker 1: really based on the conversations I was involved in, there
Speaker 1: really weren't. That was not an option on the table.
Speaker 1: I think that everybody was looking at this, and in
Speaker 1: fact they were concerned about the laws in California in
Speaker 1: terms of what happens with missing payroll. Michael Wolfe one
Speaker 1: of the same voices this weekend. He was cryptic, but
Speaker 1: nevertheless saying was a guy named Dan Loebe there were
Speaker 1: others that were a little more hysterical all caps in
Speaker 1: that mouthing off in a time of true financial crisis,
Speaker 1: How do we get a behavior change in your world
Speaker 1: that affects a humility towards the entirety of America away
Speaker 1: from hyper educated finance and technology elite. Yeah. I think that.
Speaker 1: What's happening, though, is the world is moving away. The
Speaker 1: innovation world is already moving away from Silicon Valley. It
Speaker 1: used to be you started a company, you could only
Speaker 1: be located one place, and that was the Bay Area.
Speaker 1: Some came cases let on that. Let's be clear, the
Speaker 1: guy from AOL, Steve Case is really let on that. Absolutely.
Speaker 1: But when we move into new technologies like generative AI
Speaker 1: and self driving cars and even the metaverse, it's in
Speaker 1: other places, and I think that that Silicon Valley mafia
Speaker 1: will change. I didn't hear Dan Loebe this weekend talking
Speaker 1: about the metaverse, and most of the people watching the show,
Speaker 1: We're going, Michael, what the hell is it? We won't
Speaker 1: know it for five years. How do we reconnect Massachusetts
Speaker 1: Institute of Technology, Stanford, Caltech and other allegiance Georgia Tech Perdue.
Speaker 1: That's my pick in the NC double A. How do
Speaker 1: we connect technology engineering back with an America where the
Speaker 1: stereotype is they're flat on their back, right. I think
Speaker 1: that some of it's going to come down to innovation hubs,
Speaker 1: so Boston in a lot of ways, in Cambridge, those
Speaker 1: are gonna places and other places around Austin and others
Speaker 1: where you've got people. And it's also opening up the world.
Speaker 1: I mean a lot of these tech jobs have gone away.
Speaker 1: Those people are all going to find work, but they're
Speaker 1: not going to necessarily find work in Silicon Valley. They're
Speaker 1: going to find it in other companies and mainstream businesses.
Speaker 1: We've been talking about the potential fallout and the interconnectedness
Speaker 1: of markets that previously had been somewhat separate, and I
Speaker 1: wonder about stable coins, for example, the sort of crypto
Speaker 1: asset that is pegged two assets that for example, I'm
Speaker 1: thinking of the USD coin that had a lot of
Speaker 1: its assets parked at the Silicon Valley bank and suddenly
Speaker 1: it broke the buck, right, it went beyond one dollar,
Speaker 1: which was sort of the backing of its assets. I mean,
Speaker 1: how do you view that in terms of casting a
Speaker 1: real pall that has a permanence to it over asset
Speaker 1: classes that previously were heralded as the winners of the
Speaker 1: crypto winter. Yeah. I mean there by the way is
Speaker 1: the real arrogance, which is this idea that this wouldn't
Speaker 1: have happened if we had descend toalize finance and blockchain. Yes,
Speaker 1: USD USD coin um it's supposed to be it's a
Speaker 1: stable coin. It's supposed to always be stable at a dollar.
Speaker 1: It dropped down to eighty seven cents over the weekend
Speaker 1: and um USD had three billion dollars on deposit. So
Speaker 1: it is going to have a chilling effect on on crypto.
Speaker 1: It is going to make people wonder is this a
Speaker 1: viable place as it's safe? John from England emails in.
Speaker 1: John says, can you ask him if it was a bailout?
Speaker 1: Was this a bailout for younger Michael of Turks from
Speaker 1: another time and place? Well, I mean this, what's this
Speaker 1: is very different. It's a bailout, but it's very different
Speaker 1: than two thousand. But was a bailout? No? I think
Speaker 1: this is this was about about liquidity. It wasn't the
Speaker 1: This is not a bank that made that made risky
Speaker 1: investments in mortgage backed securities. This is a bank that
Speaker 1: had a liquidity problem. They made bad mistakes in terms
Speaker 1: of their investments, and ultimately, UM a lot of that
Speaker 1: money will come back. If you see. I don't mean
Speaker 1: to interrupt. Running out of time, and this is too important.
Speaker 1: If you were asked to serve on the board of
Speaker 1: the new SVB Bridge, what would be your advice. I
Speaker 1: think that that you better be an expert in finance
Speaker 1: and you better have really understand the kinds of credit
Speaker 1: risk officers and other people that are in place. Michael,
Speaker 1: we got to go because the news is just rip
Speaker 1: roaring here as or thirty minutes away from the President
Speaker 1: of the United States, Michael on short notice. Thank you
Speaker 1: for coming into that. Michael Wolfe at which barely describes
Speaker 1: his history with McKenzie, Yahoo and others. We begin this
Speaker 1: discussion this morning on your future in banking with Myra
Speaker 1: Rodriguez Valadario's managing principal at MRV Associates. You may not
Speaker 1: know her, but what you need to know she is
Speaker 1: steeped in the banking discussion of Washington. Myra, thank you
Speaker 1: so much for joining us in the six o'clock hour.
Speaker 1: I'm going to cut to the chase the Republicans, led
Speaker 1: by President Trump, are highly suspect of bank concentration. It's
Speaker 1: Donald Trump channeling is inner Andrew Jackson, I get it.
Speaker 1: Did that all go by the way, say side yesterday?
Speaker 1: And will the Republicans have to find common ground with
Speaker 1: the Democrats to make us a one banking system. Well,
Speaker 1: it's good to see you again, and thank you so
Speaker 1: much for having me here. Look, most unfortunately what's just
Speaker 1: happened this weekend is that venture capital and those kinds
Speaker 1: of companies have been bailed out. And this never should
Speaker 1: have happened. The Republicans primarily, although unfortunately some Democrats back
Speaker 1: in twenty eighteen voted for the e g R CCPA. Yes,
Speaker 1: one more alphabet soup of American regulations and laws. But
Speaker 1: once that vote came in, it revoked important liquidity and
Speaker 1: testing requirements for those banks exactly around the size of
Speaker 1: what Silicon Valley Bank is. So yes, Republicans should be
Speaker 1: finding common ground with Democrats now to evoke that useless
Speaker 1: piece of legislation which ended up being incredibly damaging yet
Speaker 1: again to unsuspecting ordinary Americans. Can we expand too big
Speaker 1: defail constructively across the regionals the superregionals, even some of
Speaker 1: the larger institution state by state, or do we need
Speaker 1: to expand it for each and every community bank. Yeah,
Speaker 1: excellent question, Tom Noe. We really need to go back
Speaker 1: to Title one dot frank that was signed back in
Speaker 1: twenty ten. At that time, those institutions that are fifty
Speaker 1: billion dollars and over work considered systemically important. And yes,
Speaker 1: you can have domestically systemically important banks. You can have
Speaker 1: the regional ones. Of course, you have the ones the
Speaker 1: size of JP Morgan, which are globally systemically important bank.
Speaker 1: And even these so called smaller banks, I don't call
Speaker 1: it two hundred and some ud billion dollar institutions like
Speaker 1: Silicon Valley Bank, small, even those kinds of institutions. We
Speaker 1: just saw this weekend how much instability and chaos they
Speaker 1: can cause to ordinary Americans and didn't even know that
Speaker 1: all of this was going on. And so those institutions
Speaker 1: should never have been changed. In other words, their designation
Speaker 1: never should have been changed. Wellmar whether they like it
Speaker 1: or not, has in Washington, DC acknowledged that you're right
Speaker 1: overnight by using the systemic risk exception for smaller banks,
Speaker 1: right exactly. Unfortunately, and I really hate to be right
Speaker 1: on this one. Quite a number of consumer advocates and
Speaker 1: myself for decades have been arguing that it is important
Speaker 1: to pay close attention to those regional banks. By definition,
Speaker 1: they are concentrated in their assets and in their liabilities.
Speaker 1: The fact that Silicon Valley was not properly analyzing how
Speaker 1: concentrated it was in its deposits, and some of those,
Speaker 1: as some of you have mentioned in the previous program,
Speaker 1: were enormous. All it takes us one or two of
Speaker 1: those tech companies to withdraw their deposits, to get on
Speaker 1: their phones with their friends telling them, Hey, I think
Speaker 1: there's a problem at a particular bank, and next thing
Speaker 1: you know, we had a just old fashioned run on
Speaker 1: the bank. You also had up people on Twitter who
Speaker 1: should have really known better, billionaire hedge fund managers, really
Speaker 1: fearmongering and none none of that was necessary. But at
Speaker 1: the end of the day, this is the fault of
Speaker 1: the executives at SVB, and the SEC needs to investigate.
Speaker 1: Why is it that they were selling thousands and thousands
Speaker 1: of their own shares just a couple of weeks ago,
Speaker 1: and why weren't they at least doing minimal interest rate
Speaker 1: risk management? And liability risk measurements. Well, a lot of
Speaker 1: people are trying to say this is highly idiosyncratic for
Speaker 1: all the reasons that you just said. First Bank in California,
Speaker 1: those shares down almost sixty percent. Comerica shares down almost
Speaker 1: seven and a half percent in pre market trading. This
Speaker 1: is following some of the moves that we saw last week.
Speaker 1: Fifth third, I mean a number of the bigger of
Speaker 1: small banks, regional banks are really struggling. So how idiosyncratic
Speaker 1: is this or is there a larger problem that we're
Speaker 1: going to see come to the four in the days ahead.
Speaker 1: The problem is yes, a couple of days ago we
Speaker 1: could say it's idiosyncratic. A problem is that nobody wants
Speaker 1: to be the last one in a room turning off
Speaker 1: the light. In other words, as soon as there's a
Speaker 1: problem with one bank, fear is real. Immediately everybody starts
Speaker 1: to say, wait a minute, should I also have my
Speaker 1: deposits at bank ABCD, etc. So immediately investors move. You
Speaker 1: see other banks, bond deals go up, which signal to
Speaker 1: the rest of the market that there's an increasing probability
Speaker 1: of default and laws severity. Even if the bank is
Speaker 1: well capitalized, they keep hearing that banks are well capitalized. Yes,
Speaker 1: the problem is they can quickly go They can quickly
Speaker 1: become a liquid, which is really what matters right now.
Speaker 1: Lehman was single a it was well capitalized, it was
Speaker 1: a liquid, it was insolvent, and these things can happen
Speaker 1: incredibly quickly. That's why there is no way the Silicon
Speaker 1: Valley Bank and other banks like that should have been
Speaker 1: allowed to grow that fast back in twenty fifteen, when
Speaker 1: Greg Becker was actively advocating for lighter regulations. In twenty fifteen,
Speaker 1: that bank was forty billion dollars in assets. When it
Speaker 1: was closed down, it had grown by over four hundred
Speaker 1: percent to somewhere in the range of two hundred and
Speaker 1: ten billion dollars. So, yes, you are going to see
Speaker 1: a lot of gyrations in the market because investors are
Speaker 1: drums Mara, Thanks for the end of this. Just fantastic
Speaker 1: thoughts on the regulars you front and why are we're
Speaker 1: going to go forward from here? Subscribe to the Bloomberg
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