Speaker 1: Good morning. I'm Brian Curtis.
Speaker 2: And I'm Doug Prisner. Here are the stories we're following today.
Speaker 1: The effort to impeach Homeland Security Secretary Alejandro Majorcis has failed.
Speaker 1: At back to that story and more from San Francisco.
Speaker 3: Yeah, busy day in the House today, Brian, A few
Speaker 3: Republicans joined with Democrats who defeat the GOP drive, arguing
Speaker 3: that discontent with Majorcas did not meet the constitutional threshold
Speaker 3: for removal from office. The vote was closed two hundred
Speaker 3: fourteen to two hundred sixteen. Not enough. Now it all
Speaker 3: needs to be sorted out because they're talking about relooking
Speaker 3: at this possibly as early as tomorrow. And Congressman ken
Speaker 3: Buck said, at first it was tied at two fifteen
Speaker 3: and then Speaker Johnson changed his vote to know and
Speaker 3: it failed. That's not been explained as of yet. The
Speaker 3: House has failed to pass the standalone Israel funding package
Speaker 3: as well. The bill failed on a two hundred and
Speaker 3: fifty to one hundred and eighty vote and needed two
Speaker 3: thirds to pass. So this is intertwined, of course with
Speaker 3: the border and the border bill all but doomed the
Speaker 3: failure tomorrow in the Senate, President Joe Biden is out
Speaker 3: blaming Donald Trump. Biden says it had bipartisan approval until
Speaker 3: Trump stepped in. Says the GOP should just be ashamed
Speaker 3: of itself.
Speaker 4: Just at the moment, we're going to secure the border
Speaker 4: and fund these other programs. Trump and the MAGA Republicans
Speaker 4: said no because they're afraid of Donald Trump.
Speaker 5: Fraid of Donald Trump.
Speaker 3: And he says that there are provisions and the bill
Speaker 3: that make it the most comprehensive border package in US history.
Speaker 4: One hundred cutting edge machines to detect and stop Fenton
Speaker 4: all at the southwest border.
Speaker 3: We have that capacity plus stop the flow of immigrants.
Speaker 4: This will would also give me as president, the emergency
Speaker 4: authority to temporarily shut down the border when it becomes overwhelmed.
Speaker 4: The numbers are talking over five thousand people trying to
Speaker 4: get in one day the bill. If the bill were
Speaker 4: a law today, who would qualified to be shut down
Speaker 4: right now?
Speaker 3: And he says world is watching regarding aid to Ukraine
Speaker 3: and Israel and Taiwan.
Speaker 4: Mistakes on this fight extend well beyond Ukraine. If we
Speaker 4: don't stop Putin's appetite for power and control in Ukraine,
Speaker 4: he won't limit himself to just Ukraine.
Speaker 3: So this did nothing to well quell the pure politics
Speaker 3: the atmosphere. Bloomberg's Rick Davis, I.
Speaker 5: Think he could have avoided.
Speaker 6: I mean, this is almost like the bill's dead and
Speaker 6: I'm going to blame somebody. Not my last chance to
Speaker 6: try and get the bill across the goal line. And
Speaker 6: you wonder why wasn't this done the day the bill
Speaker 6: was announced and give it some cover.
Speaker 3: And the Bloomberg's Ginny Shanzano says, though there are.
Speaker 7: Three things Donald Trump wants to run on border, economy,
Speaker 7: and crime. The economy is getting away from Donald Trump
Speaker 7: because the numbers look very good. So now he's trying
Speaker 7: to take credit of it for it. If he loses
Speaker 7: the border, he can only run on crime. He doesn't
Speaker 7: want that to happen.
Speaker 3: The vote still schedule for tomorrow and TSB reporting today
Speaker 3: the dramatic incident where a panel blew out of the
Speaker 3: Boeing seven thirty seven Max nine jet was missing bolts.
Speaker 3: It hadn't been properly attached. Report says four bolts that
Speaker 3: acted as a failsafe mechanism to hold the panel in
Speaker 3: place weren't even installed. Donald Trump has been denied immunity
Speaker 3: in the DC election interference case, it can be prosecuted,
Speaker 3: and the DOJ is preparing to release a special Council
Speaker 3: report that is critical of how President Biden is age
Speaker 3: mishandled classified documents, but that there's no plan for criminal charges.
Speaker 3: Global News twenty four hours a day and whenever you
Speaker 3: want it with Bloomberg News now in San Francisco. I'm
Speaker 3: Ed Baxter, and this is Bloomberg BC.
Speaker 1: All right, thanks very much.
Speaker 6: Ed.
Speaker 1: It is now six and a half minutes past the hour.
Speaker 1: Brian Curtis, Doug Krisner, and we are looking at the
Speaker 1: top business stories of the hour. Well. As mentioned by
Speaker 1: Doug a few moments ago, Moody's Investors' Service has cut
Speaker 1: New York Community Bank Court's credit raid grade to junk.
Speaker 1: NYCB shares down double digits today for the fourth time
Speaker 1: in five days, the stock now slumping sixty percent. Since
Speaker 1: last week. The route has raised roughly four and a
Speaker 1: half billion dollars from the bank's market capitalization. Today, NYCB
Speaker 1: shares were down twenty two percent. It's the lowest level
Speaker 1: since nineteen ninety seven. Investors have dumped the shares over
Speaker 1: concerns about the bank's exposure to commercial real estate. In
Speaker 1: testimony before the House Financial Services Committee today, US Treasury
Speaker 1: Secretary Jennet Yellen said some firms may face challenges.
Speaker 8: I do have a concern about commercial real estate. I
Speaker 8: believe it's manageable, although there may be some institutions that
Speaker 8: are quite stressed by this problem.
Speaker 1: US Treasury Secretary Jenet Yellen. Yellen also said that US
Speaker 1: regulators are working to ensure that lone loss reserves and
Speaker 1: liquidity levels in the financial system are adequate to cope
Speaker 1: with those real estate losses.
Speaker 2: We go to China next, where investor confidence seems to
Speaker 2: be rising. The hope is for a stronger government action
Speaker 2: to end the route that we have seen in the
Speaker 2: Chinese stock market. We have more from Bloomberg zivon men
Speaker 2: in Hong Kong.
Speaker 9: The anticipation follows the Bloomberg report that regulators are planning
Speaker 9: to brief President's Chijing Ping on the issue. It's seen
Speaker 9: as underscoring the urgency of staving off a further route
Speaker 9: in Chinese assets. Even so, it's not clear if the
Speaker 9: President will see fit to provide additional support, but policymakers
Speaker 9: are hoping to stabilize markets before the Lunar New Year
Speaker 9: holiday to build confidence. It's also unclear if investors will
Speaker 9: buy into the story, given them many previous false dawns,
Speaker 9: but the NASA Golden Dragon Index did gain nearly six
Speaker 9: percent in New York. One other quick point, China's Central
Speaker 9: Quaging Investment has stated it will buy more ETFs in
Speaker 9: Hong Kong. I'm yvon Mann Bloomberg.
Speaker 1: Radio TSMC is planning to build a second chip fabrication
Speaker 1: plant in Japan that says it looks to expand output
Speaker 1: in the country. TSMC said Toyota Motor will also join
Speaker 1: as a new investor of JASM. That's TSMC's manufacturing subsidiary
Speaker 1: in Kumamoto. TSMC will also inject as much as five
Speaker 1: point twenty six billion dollars in JASM. The new plant
Speaker 1: is scheduled to begin operation by the end of twenty
Speaker 1: twenty seven. Bloomberg is also reporting that TSMC is considering
Speaker 1: a third fabrication facility in Japan. Well. Joining US now
Speaker 1: on the program is Hermann Chan, Bloomberg Intelligence senior analyst
Speaker 1: on US regional banks. To take a closer look at
Speaker 1: Jenny Yellen's testimony and the latest on NYCB, so a
Speaker 1: new fallen angel. That's interesting. This cut by Moody's is
Speaker 1: going to make it even more costly for NYCB to
Speaker 1: raise money. And the tricky aspect herman is that even
Speaker 1: if it does raise market funding in relation to deposits,
Speaker 1: then it will likely get cut again by Moody's. So
Speaker 1: it really needs to raise deposits and can it do
Speaker 1: so under these current conditions.
Speaker 5: Yeah, that's going to be the question, and the Mood's
Speaker 5: down grade really underscores the predicament that way CP is
Speaker 5: in currently where they need to here. It's tougher regulatory
Speaker 5: rules now that it cleared one hundred billion dollar asset
Speaker 5: mark with the deal for signatures, assets and deposits last
Speaker 5: year that was working by the f GI. So they
Speaker 5: need their capital, They need to build up their liquidity,
Speaker 5: and the current market unease with the shares really makes
Speaker 5: that difficult to really stabilize their funding base. Just imagine
Speaker 5: that there are some jitty that remove some of their
Speaker 5: deposits from New York community that they don't need to
Speaker 5: staunch that potential outfload.
Speaker 2: So it's going to be the one year anniversary of
Speaker 2: the crisis within a couple of regional banks when we
Speaker 2: get to the month of March, so next month. It's
Speaker 2: hard to believe. And one of the things that I'm
Speaker 2: wondering about now is whether or not it's an isolated
Speaker 2: situation where we're talking about NYCB. I mean, when you
Speaker 2: hear the testimony from Yellen talking about a worry, the
Speaker 2: implication or the suggestion is that there is a mild
Speaker 2: systemic risk going on right now as it relates to
Speaker 2: commercial real estate. Do I have that wrong?
Speaker 5: No, you do have that correct. What's interesting is that
Speaker 5: overall the banking system remains sound, and there are issues
Speaker 5: with commercial real estate, specific office commercial real estate that
Speaker 5: will continue to produce losses. So one of the reasons
Speaker 5: that your community is under the microscope is they had
Speaker 5: to fairly large commercial real estate losses in the fourth quarter,
Speaker 5: which exacerbated the need to shore up the balance sheet
Speaker 5: ahead of the stress tests later this year. That's going
Speaker 5: to be a risk for the system, but it's going
Speaker 5: to be a manageable risk. And looking at the regail
Speaker 5: banks that I cover, it's about two to three percent
Speaker 5: of the total loans, So it's going to be an issue,
Speaker 5: but it's going to be manageable. For the space that
Speaker 5: I cover, But nonetheless there will be lumping us within
Speaker 5: performance this year, and we'd expect higher loan losses for
Speaker 5: the regional banks in twenty twenty four.
Speaker 1: Yeah, as was mentioned, to a certain degree, it's a
Speaker 1: little out of their control for NYCB what's happened in
Speaker 1: the commercial real estate market. But what is in their
Speaker 1: control is their rapid expansion. Is there any sense that
Speaker 1: they expanded too quickly.
Speaker 5: I wouldn't characterize it that way. I would say that
Speaker 5: they were being advantageous at the time last year when
Speaker 5: they were viewed as one of the saviors and one
Speaker 5: of the winners of the banking turmoil when they stepped
Speaker 5: in to acquire signature banks assets and deposits. I do
Speaker 5: think they were dealt a bad hand by the regulators,
Speaker 5: where the regulators really pushed them to accelerate how they
Speaker 5: managed their balance sheet and their businesses to meet some
Speaker 5: of the acquirements of one hundred billion dollar asset type
Speaker 5: financial institution, and it didn't give them a lot of
Speaker 5: time to really grow into that. And now the repercussions
Speaker 5: of that is just this market uncertainty that we've seen
Speaker 5: over the past few days.
Speaker 2: One of the things that I'm wondering about. Also, is
Speaker 2: I'm listening to you and putting what you're saying in
Speaker 2: the context of what we heard today from a couple
Speaker 2: of FED officials. They're very cautious right now on kind
Speaker 2: of beginning the process of making credit or less expensive
Speaker 2: visa v lower interest rates. And I'm wondering whether or
Speaker 2: not the FED sees potential stress building and they are
Speaker 2: going to leap at the first opportunity if they feel
Speaker 2: confident that inflation is under control, that they're not going
Speaker 2: to waste time in trying to trace or take some
Speaker 2: of the stress out of credit markets through a cut
Speaker 2: in interest rates. Is that fair?
Speaker 5: Yeah, I think that's fair. I think the banks would
Speaker 5: welcome cut in interest rates for two reasons. One, it
Speaker 5: would reduce their funding costs and really shore up their
Speaker 5: edgender margins that seem and some deterioration with rates as
Speaker 5: elevated as they are. And number two, it'll just help
Speaker 5: with refinancing risk. A lower rates will, you know, shure
Speaker 5: up some of the potential hurdles with real estate refinancing,
Speaker 5: and lower rates will help them being able to deal
Speaker 5: with lower credit. Lower interest rate costs would be would
Speaker 5: be helpful for a lot of the commercial real estate
Speaker 5: borrowers that are facing maturing loans this year in the
Speaker 5: next few years ahead.
Speaker 1: Herman, what's your sense of who's the most vulnerable here?
Speaker 1: The regional banks, the mall operators, the reats, what corner
Speaker 1: of the marketplace is really exposed.
Speaker 5: Yeah, that's a really good question for the banking system. Really,
Speaker 5: the smaller in size you get typically the higher exposure
Speaker 5: to commercial real estate. So you can think, for example,
Speaker 5: the biggest regionals that I cover, like A P and
Speaker 5: C or a US bank, have much smaller commercial real
Speaker 5: estate exposure to smaller regional community banks because that's really
Speaker 5: their bread and butter business, And banks like JAPM Morgan
Speaker 5: have a much diversified operation, so any sort of charge
Speaker 5: offs and loan losses in commercial real estate could be
Speaker 5: readily absorbed. And then it's just going to be the
Speaker 5: reads will have some exposure, commercial cnbs, We'll have some losses,
Speaker 5: so it's going to be spread out across the financial system,
Speaker 5: but it remains to be seeing who's really going to
Speaker 5: be holding the bag.
Speaker 2: Yeah, last March you'll remember, well, I mean with the
Speaker 2: stress that we had from signature and a couple of
Speaker 2: the other characters at the time. I mean it created
Speaker 2: an opportunity, there was a bit of consolidation. Do you
Speaker 2: think that we could be looking at another phase where
Speaker 2: stronger banks acquire weaker ones. I mean there might there
Speaker 2: be a little bit more consolidation happening within maybe just
Speaker 2: the regional bank arena, or where larger money center banks
Speaker 2: kind of take a look at some of the regional
Speaker 2: players as well.
Speaker 5: Yeah, that's a very good question, and I think it's
Speaker 5: an app when given where we are today, it's still
Speaker 5: early to say. What's interesting, what the market is telling
Speaker 5: us is that some of the more neat niche commercial
Speaker 5: regional banks that were operating just a few years ago
Speaker 5: are not no longer and I are no longer in
Speaker 5: play anymore. Banks like SVB and First Republic and Signature
Speaker 5: Bank had very narrow business operations. For example, SVB was
Speaker 5: focused on Silk and Valley and lending the startups and
Speaker 5: private equave venture capital. Signature was focused on commercial real
Speaker 5: estate and crypto, and First Republic was focused on high
Speaker 5: net worth and if you throw New York Community in there,
Speaker 5: it's focused on regulated apartments in New York City. That's
Speaker 5: the bread and butter business. So what the market thing
Speaker 5: is telling us is that banks in the current backjob
Speaker 5: need to be much more diversified businesses, so any sort
Speaker 5: of losses in certain areas should be absorbed.
Speaker 1: This is Bloomberg gate Breakage, your morning brief on the
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