WEBVTT - Yellen Testimony, China Stimulus

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<v Speaker 1>Good morning. I'm Brian Curtis.

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<v Speaker 2>And I'm Doug Prisner. Here are the stories we're following today.

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<v Speaker 1>The effort to impeach Homeland Security Secretary Alejandro Majorcis has failed.

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<v Speaker 1>At back to that story and more from San Francisco.

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<v Speaker 3>Yeah, busy day in the House today, Brian, A few

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<v Speaker 3>Republicans joined with Democrats who defeat the GOP drive, arguing

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<v Speaker 3>that discontent with Majorcas did not meet the constitutional threshold

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<v Speaker 3>for removal from office. The vote was closed two hundred

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<v Speaker 3>fourteen to two hundred sixteen. Not enough. Now it all

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<v Speaker 3>needs to be sorted out because they're talking about relooking

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<v Speaker 3>at this possibly as early as tomorrow. And Congressman ken

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<v Speaker 3>Buck said, at first it was tied at two fifteen

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<v Speaker 3>and then Speaker Johnson changed his vote to know and

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<v Speaker 3>it failed. That's not been explained as of yet. The

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<v Speaker 3>House has failed to pass the standalone Israel funding package

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<v Speaker 3>as well. The bill failed on a two hundred and

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<v Speaker 3>fifty to one hundred and eighty vote and needed two

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<v Speaker 3>thirds to pass. So this is intertwined, of course with

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<v Speaker 3>the border and the border bill all but doomed the

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<v Speaker 3>failure tomorrow in the Senate, President Joe Biden is out

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<v Speaker 3>blaming Donald Trump. Biden says it had bipartisan approval until

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<v Speaker 3>Trump stepped in. Says the GOP should just be ashamed

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<v Speaker 3>of itself.

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<v Speaker 4>Just at the moment, we're going to secure the border

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<v Speaker 4>and fund these other programs. Trump and the MAGA Republicans

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<v Speaker 4>said no because they're afraid of Donald Trump.

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<v Speaker 5>Fraid of Donald Trump.

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<v Speaker 3>And he says that there are provisions and the bill

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<v Speaker 3>that make it the most comprehensive border package in US history.

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<v Speaker 4>One hundred cutting edge machines to detect and stop Fenton

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<v Speaker 4>all at the southwest border.

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<v Speaker 3>We have that capacity plus stop the flow of immigrants.

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<v Speaker 4>This will would also give me as president, the emergency

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<v Speaker 4>authority to temporarily shut down the border when it becomes overwhelmed.

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<v Speaker 4>The numbers are talking over five thousand people trying to

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<v Speaker 4>get in one day the bill. If the bill were

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<v Speaker 4>a law today, who would qualified to be shut down

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<v Speaker 4>right now?

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<v Speaker 3>And he says world is watching regarding aid to Ukraine

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<v Speaker 3>and Israel and Taiwan.

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<v Speaker 4>Mistakes on this fight extend well beyond Ukraine. If we

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<v Speaker 4>don't stop Putin's appetite for power and control in Ukraine,

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<v Speaker 4>he won't limit himself to just Ukraine.

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<v Speaker 3>So this did nothing to well quell the pure politics

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<v Speaker 3>the atmosphere. Bloomberg's Rick Davis, I.

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<v Speaker 5>Think he could have avoided.

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<v Speaker 6>I mean, this is almost like the bill's dead and

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<v Speaker 6>I'm going to blame somebody. Not my last chance to

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<v Speaker 6>try and get the bill across the goal line. And

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<v Speaker 6>you wonder why wasn't this done the day the bill

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<v Speaker 6>was announced and give it some cover.

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<v Speaker 3>And the Bloomberg's Ginny Shanzano says, though there are.

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<v Speaker 7>Three things Donald Trump wants to run on border, economy,

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<v Speaker 7>and crime. The economy is getting away from Donald Trump

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<v Speaker 7>because the numbers look very good. So now he's trying

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<v Speaker 7>to take credit of it for it. If he loses

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<v Speaker 7>the border, he can only run on crime. He doesn't

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<v Speaker 7>want that to happen.

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<v Speaker 3>The vote still schedule for tomorrow and TSB reporting today

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<v Speaker 3>the dramatic incident where a panel blew out of the

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<v Speaker 3>Boeing seven thirty seven Max nine jet was missing bolts.

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<v Speaker 3>It hadn't been properly attached. Report says four bolts that

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<v Speaker 3>acted as a failsafe mechanism to hold the panel in

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<v Speaker 3>place weren't even installed. Donald Trump has been denied immunity

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<v Speaker 3>in the DC election interference case, it can be prosecuted,

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<v Speaker 3>and the DOJ is preparing to release a special Council

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<v Speaker 3>report that is critical of how President Biden is age

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<v Speaker 3>mishandled classified documents, but that there's no plan for criminal charges.

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<v Speaker 3>Global News twenty four hours a day and whenever you

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<v Speaker 3>want it with Bloomberg News now in San Francisco. I'm

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<v Speaker 3>Ed Baxter, and this is Bloomberg BC.

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<v Speaker 1>All right, thanks very much.

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<v Speaker 6>Ed.

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<v Speaker 1>It is now six and a half minutes past the hour.

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<v Speaker 1>Brian Curtis, Doug Krisner, and we are looking at the

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<v Speaker 1>top business stories of the hour. Well. As mentioned by

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<v Speaker 1>Doug a few moments ago, Moody's Investors' Service has cut

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<v Speaker 1>New York Community Bank Court's credit raid grade to junk.

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<v Speaker 1>NYCB shares down double digits today for the fourth time

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<v Speaker 1>in five days, the stock now slumping sixty percent. Since

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<v Speaker 1>last week. The route has raised roughly four and a

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<v Speaker 1>half billion dollars from the bank's market capitalization. Today, NYCB

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<v Speaker 1>shares were down twenty two percent. It's the lowest level

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<v Speaker 1>since nineteen ninety seven. Investors have dumped the shares over

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<v Speaker 1>concerns about the bank's exposure to commercial real estate. In

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<v Speaker 1>testimony before the House Financial Services Committee today, US Treasury

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<v Speaker 1>Secretary Jennet Yellen said some firms may face challenges.

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<v Speaker 8>I do have a concern about commercial real estate. I

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<v Speaker 8>believe it's manageable, although there may be some institutions that

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<v Speaker 8>are quite stressed by this problem.

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<v Speaker 1>US Treasury Secretary Jenet Yellen. Yellen also said that US

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<v Speaker 1>regulators are working to ensure that lone loss reserves and

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<v Speaker 1>liquidity levels in the financial system are adequate to cope

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<v Speaker 1>with those real estate losses.

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<v Speaker 2>We go to China next, where investor confidence seems to

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<v Speaker 2>be rising. The hope is for a stronger government action

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<v Speaker 2>to end the route that we have seen in the

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<v Speaker 2>Chinese stock market. We have more from Bloomberg zivon men

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<v Speaker 2>in Hong Kong.

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<v Speaker 9>The anticipation follows the Bloomberg report that regulators are planning

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<v Speaker 9>to brief President's Chijing Ping on the issue. It's seen

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<v Speaker 9>as underscoring the urgency of staving off a further route

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<v Speaker 9>in Chinese assets. Even so, it's not clear if the

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<v Speaker 9>President will see fit to provide additional support, but policymakers

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<v Speaker 9>are hoping to stabilize markets before the Lunar New Year

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<v Speaker 9>holiday to build confidence. It's also unclear if investors will

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<v Speaker 9>buy into the story, given them many previous false dawns,

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<v Speaker 9>but the NASA Golden Dragon Index did gain nearly six

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<v Speaker 9>percent in New York. One other quick point, China's Central

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<v Speaker 9>Quaging Investment has stated it will buy more ETFs in

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<v Speaker 9>Hong Kong. I'm yvon Mann Bloomberg.

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<v Speaker 1>Radio TSMC is planning to build a second chip fabrication

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<v Speaker 1>plant in Japan that says it looks to expand output

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<v Speaker 1>in the country. TSMC said Toyota Motor will also join

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<v Speaker 1>as a new investor of JASM. That's TSMC's manufacturing subsidiary

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<v Speaker 1>in Kumamoto. TSMC will also inject as much as five

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<v Speaker 1>point twenty six billion dollars in JASM. The new plant

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<v Speaker 1>is scheduled to begin operation by the end of twenty

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<v Speaker 1>twenty seven. Bloomberg is also reporting that TSMC is considering

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<v Speaker 1>a third fabrication facility in Japan. Well. Joining US now

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<v Speaker 1>on the program is Hermann Chan, Bloomberg Intelligence senior analyst

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<v Speaker 1>on US regional banks. To take a closer look at

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<v Speaker 1>Jenny Yellen's testimony and the latest on NYCB, so a

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<v Speaker 1>new fallen angel. That's interesting. This cut by Moody's is

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<v Speaker 1>going to make it even more costly for NYCB to

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<v Speaker 1>raise money. And the tricky aspect herman is that even

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<v Speaker 1>if it does raise market funding in relation to deposits,

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<v Speaker 1>then it will likely get cut again by Moody's. So

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<v Speaker 1>it really needs to raise deposits and can it do

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<v Speaker 1>so under these current conditions.

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<v Speaker 5>Yeah, that's going to be the question, and the Mood's

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<v Speaker 5>down grade really underscores the predicament that way CP is

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<v Speaker 5>in currently where they need to here. It's tougher regulatory

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<v Speaker 5>rules now that it cleared one hundred billion dollar asset

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<v Speaker 5>mark with the deal for signatures, assets and deposits last

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<v Speaker 5>year that was working by the f GI. So they

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<v Speaker 5>need their capital, They need to build up their liquidity,

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<v Speaker 5>and the current market unease with the shares really makes

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<v Speaker 5>that difficult to really stabilize their funding base. Just imagine

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<v Speaker 5>that there are some jitty that remove some of their

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<v Speaker 5>deposits from New York community that they don't need to

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<v Speaker 5>staunch that potential outfload.

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<v Speaker 2>So it's going to be the one year anniversary of

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<v Speaker 2>the crisis within a couple of regional banks when we

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<v Speaker 2>get to the month of March, so next month. It's

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<v Speaker 2>hard to believe. And one of the things that I'm

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<v Speaker 2>wondering about now is whether or not it's an isolated

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<v Speaker 2>situation where we're talking about NYCB. I mean, when you

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<v Speaker 2>hear the testimony from Yellen talking about a worry, the

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<v Speaker 2>implication or the suggestion is that there is a mild

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<v Speaker 2>systemic risk going on right now as it relates to

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<v Speaker 2>commercial real estate. Do I have that wrong?

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<v Speaker 5>No, you do have that correct. What's interesting is that

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<v Speaker 5>overall the banking system remains sound, and there are issues

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<v Speaker 5>with commercial real estate, specific office commercial real estate that

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<v Speaker 5>will continue to produce losses. So one of the reasons

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<v Speaker 5>that your community is under the microscope is they had

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<v Speaker 5>to fairly large commercial real estate losses in the fourth quarter,

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<v Speaker 5>which exacerbated the need to shore up the balance sheet

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<v Speaker 5>ahead of the stress tests later this year. That's going

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<v Speaker 5>to be a risk for the system, but it's going

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<v Speaker 5>to be a manageable risk. And looking at the regail

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<v Speaker 5>banks that I cover, it's about two to three percent

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<v Speaker 5>of the total loans, So it's going to be an issue,

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<v Speaker 5>but it's going to be manageable. For the space that

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<v Speaker 5>I cover, But nonetheless there will be lumping us within

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<v Speaker 5>performance this year, and we'd expect higher loan losses for

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<v Speaker 5>the regional banks in twenty twenty four.

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<v Speaker 1>Yeah, as was mentioned, to a certain degree, it's a

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<v Speaker 1>little out of their control for NYCB what's happened in

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<v Speaker 1>the commercial real estate market. But what is in their

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<v Speaker 1>control is their rapid expansion. Is there any sense that

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<v Speaker 1>they expanded too quickly.

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<v Speaker 5>I wouldn't characterize it that way. I would say that

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<v Speaker 5>they were being advantageous at the time last year when

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<v Speaker 5>they were viewed as one of the saviors and one

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<v Speaker 5>of the winners of the banking turmoil when they stepped

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<v Speaker 5>in to acquire signature banks assets and deposits. I do

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<v Speaker 5>think they were dealt a bad hand by the regulators,

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<v Speaker 5>where the regulators really pushed them to accelerate how they

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<v Speaker 5>managed their balance sheet and their businesses to meet some

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<v Speaker 5>of the acquirements of one hundred billion dollar asset type

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<v Speaker 5>financial institution, and it didn't give them a lot of

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<v Speaker 5>time to really grow into that. And now the repercussions

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<v Speaker 5>of that is just this market uncertainty that we've seen

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<v Speaker 5>over the past few days.

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<v Speaker 2>One of the things that I'm wondering about. Also, is

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<v Speaker 2>I'm listening to you and putting what you're saying in

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<v Speaker 2>the context of what we heard today from a couple

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<v Speaker 2>of FED officials. They're very cautious right now on kind

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<v Speaker 2>of beginning the process of making credit or less expensive

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<v Speaker 2>visa v lower interest rates. And I'm wondering whether or

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<v Speaker 2>not the FED sees potential stress building and they are

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<v Speaker 2>going to leap at the first opportunity if they feel

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<v Speaker 2>confident that inflation is under control, that they're not going

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<v Speaker 2>to waste time in trying to trace or take some

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<v Speaker 2>of the stress out of credit markets through a cut

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<v Speaker 2>in interest rates. Is that fair?

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<v Speaker 5>Yeah, I think that's fair. I think the banks would

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<v Speaker 5>welcome cut in interest rates for two reasons. One, it

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<v Speaker 5>would reduce their funding costs and really shore up their

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<v Speaker 5>edgender margins that seem and some deterioration with rates as

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<v Speaker 5>elevated as they are. And number two, it'll just help

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<v Speaker 5>with refinancing risk. A lower rates will, you know, shure

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<v Speaker 5>up some of the potential hurdles with real estate refinancing,

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<v Speaker 5>and lower rates will help them being able to deal

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<v Speaker 5>with lower credit. Lower interest rate costs would be would

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<v Speaker 5>be helpful for a lot of the commercial real estate

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<v Speaker 5>borrowers that are facing maturing loans this year in the

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<v Speaker 5>next few years ahead.

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<v Speaker 1>Herman, what's your sense of who's the most vulnerable here?

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<v Speaker 1>The regional banks, the mall operators, the reats, what corner

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<v Speaker 1>of the marketplace is really exposed.

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<v Speaker 5>Yeah, that's a really good question for the banking system. Really,

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<v Speaker 5>the smaller in size you get typically the higher exposure

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<v Speaker 5>to commercial real estate. So you can think, for example,

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<v Speaker 5>the biggest regionals that I cover, like A P and

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<v Speaker 5>C or a US bank, have much smaller commercial real

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<v Speaker 5>estate exposure to smaller regional community banks because that's really

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<v Speaker 5>their bread and butter business, And banks like JAPM Morgan

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<v Speaker 5>have a much diversified operation, so any sort of charge

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<v Speaker 5>offs and loan losses in commercial real estate could be

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<v Speaker 5>readily absorbed. And then it's just going to be the

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<v Speaker 5>reads will have some exposure, commercial cnbs, We'll have some losses,

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<v Speaker 5>so it's going to be spread out across the financial system,

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<v Speaker 5>but it remains to be seeing who's really going to

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<v Speaker 5>be holding the bag.

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<v Speaker 2>Yeah, last March you'll remember, well, I mean with the

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<v Speaker 2>stress that we had from signature and a couple of

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<v Speaker 2>the other characters at the time. I mean it created

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<v Speaker 2>an opportunity, there was a bit of consolidation. Do you

0:13:26.240 --> 0:13:29.400
<v Speaker 2>think that we could be looking at another phase where

0:13:29.880 --> 0:13:33.080
<v Speaker 2>stronger banks acquire weaker ones. I mean there might there

0:13:33.160 --> 0:13:37.040
<v Speaker 2>be a little bit more consolidation happening within maybe just

0:13:37.120 --> 0:13:41.000
<v Speaker 2>the regional bank arena, or where larger money center banks

0:13:41.080 --> 0:13:43.840
<v Speaker 2>kind of take a look at some of the regional

0:13:43.880 --> 0:13:44.640
<v Speaker 2>players as well.

0:13:46.120 --> 0:13:48.679
<v Speaker 5>Yeah, that's a very good question, and I think it's

0:13:48.720 --> 0:13:52.040
<v Speaker 5>an app when given where we are today, it's still

0:13:52.080 --> 0:13:55.960
<v Speaker 5>early to say. What's interesting, what the market is telling

0:13:56.040 --> 0:14:01.200
<v Speaker 5>us is that some of the more neat niche commercial

0:14:01.480 --> 0:14:05.600
<v Speaker 5>regional banks that were operating just a few years ago

0:14:05.600 --> 0:14:10.640
<v Speaker 5>are not no longer and I are no longer in

0:14:10.679 --> 0:14:15.319
<v Speaker 5>play anymore. Banks like SVB and First Republic and Signature

0:14:15.320 --> 0:14:20.320
<v Speaker 5>Bank had very narrow business operations. For example, SVB was

0:14:20.360 --> 0:14:23.760
<v Speaker 5>focused on Silk and Valley and lending the startups and

0:14:24.120 --> 0:14:29.200
<v Speaker 5>private equave venture capital. Signature was focused on commercial real

0:14:29.280 --> 0:14:32.640
<v Speaker 5>estate and crypto, and First Republic was focused on high

0:14:32.720 --> 0:14:36.080
<v Speaker 5>net worth and if you throw New York Community in there,

0:14:36.280 --> 0:14:41.560
<v Speaker 5>it's focused on regulated apartments in New York City. That's

0:14:41.600 --> 0:14:44.960
<v Speaker 5>the bread and butter business. So what the market thing

0:14:45.200 --> 0:14:49.560
<v Speaker 5>is telling us is that banks in the current backjob

0:14:49.680 --> 0:14:53.200
<v Speaker 5>need to be much more diversified businesses, so any sort

0:14:53.240 --> 0:14:56.760
<v Speaker 5>of losses in certain areas should be absorbed.

0:14:58.200 --> 0:15:01.080
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