Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: Hello and welcome to another episode of the ad Blots podcast.
Speaker 2: I'm Tracy Alloway.
Speaker 3: And I'm Joe.
Speaker 4: Why isn't thal Joe?
Speaker 2: Do you remember what we were doing this time last year?
Speaker 5: Uh?
Speaker 4: Nope, not really.
Speaker 2: I should say around this time last year. But yes,
Speaker 2: I can't really even remember last week at this point.
Speaker 2: But in the middle of January we recorded an episode
Speaker 2: on the discount Yeah.
Speaker 5: Oh, on the discount window, Yes, I do. Why were
Speaker 5: we talking about the discount window?
Speaker 2: No, because borrowing was going up, right, Yes? Yeah?
Speaker 6: Right?
Speaker 5: Yes, okay, yes, so in like February or Sunday or
Speaker 5: maybe early January of last year. No, no, February March
Speaker 5: of last year. Like, we did that episode about like
Speaker 5: deposit rates, and then that turned out to be very relevant.
Speaker 5: But even before that, you started writing about the rise
Speaker 5: in discount window borrowing.
Speaker 2: Yes, that's right. I think I wrote something in December.
Speaker 2: I think the headline was like billions in discount window
Speaker 2: borrowing suggests all is not well with banks, which turned
Speaker 2: out to be fairly true come March because we did
Speaker 2: see a mini banking crisis, banking drama, whatever you want
Speaker 2: to call it the collapse of three banks, including Silicon
Speaker 2: Valley Bank. But since then there has been this massive
Speaker 2: discussion about how to tweak all these emergency financing programs
Speaker 2: for banks, what they should actually look like, how do
Speaker 2: we want the lender of last resort system to operate,
Speaker 2: and what does it mean for banks? You know, if
Speaker 2: they have to hold back additional collateral in order to
Speaker 2: access these programs, then what does it mean for them
Speaker 2: from you know, a capital or a revenue to point.
Speaker 2: So many things going on in the space right now.
Speaker 2: It's a little bit under the radar, but I think
Speaker 2: we should talk about it totally.
Speaker 5: It always is like there's like this inherent challenge, right
Speaker 5: and even with Silicon Valley Bank, even setting aside like
Speaker 5: emergency borrowing. You know, the thing I guess like that
Speaker 5: people get anxious about is as soon as any financial
Speaker 5: institution makes moves to shore up liquidity, show up finances,
Speaker 5: et cetera, that becomes a signal right to investors or
Speaker 5: depositors whoever, it's like, Okay, why do they feel the
Speaker 5: need to shore up their finances? And then you become
Speaker 5: a target and you start worry about the share price
Speaker 5: and equity et cetera. And it feels like this is
Speaker 5: like an inherent challenge for regulators, which is, of course,
Speaker 5: you want banks to be proactive, you want banks to
Speaker 5: have plenty of liquidity, you want them to have equity cushions.
Speaker 5: But if the act of doing so invites suspicions, then
Speaker 5: how do you get.
Speaker 4: Out of that puzzle?
Speaker 2: Well, exactly, And I think this is most apparent with
Speaker 2: the discount window, where people talk about the stigma of
Speaker 2: accessing the discunt window, and you know, when you access it,
Speaker 2: it's supposed to be anonymous. The FED doesn't publish who's
Speaker 2: actually tapping it until I think two years later. But
Speaker 2: you start to see rumors swirl. In the case of
Speaker 2: last year, when we saw the discount window borrowing start
Speaker 2: to go up in December, I think that was the
Speaker 2: proximate time when people started to ask questions about like, well,
Speaker 2: wait a second, what's going on with Signature, what's going
Speaker 2: on with Silicon Valley Bank. That might have contributed to
Speaker 2: some of the deposit withdrawals that we eventually saw. So
Speaker 2: the super interesting thing now is that people are talking
Speaker 2: about reforming the discount window as well as some other facilities.
Speaker 2: We saw the acting Comptroller of the Currency Michael Sue,
Speaker 2: also a former All Blots guest, talk about the idea
Speaker 2: of like, well, maybe we're going to require banks to
Speaker 2: tap the discount window every once in a while, just
Speaker 2: so the stigma maybe reduces, but also they have the
Speaker 2: operational readiness to do it when they really need to.
Speaker 5: Can I say it's almost inappropriate? For no, it's it's
Speaker 5: it's borderline.
Speaker 2: Are you gonna make the discount window inappropriate? I'm curious?
Speaker 5: So you know what I think whenever, like I hear
Speaker 5: this idea of like, well, if you just get everyone
Speaker 5: to do it, there's no there's no stock.
Speaker 2: Oh, I know exactly what you're gonna say.
Speaker 4: I tweeted this one.
Speaker 5: I always think about the scene in the movie Billy
Speaker 5: Madison where like the kid is really embarrassed because everyone
Speaker 5: can see that he pat his pants and so wait,
Speaker 5: who's that actor who's in it?
Speaker 4: That fit the comedian Adam Sandler.
Speaker 5: Adam Sandler's like, oh, he like splashes a bunch of
Speaker 5: water on his own pants, and so he's like, oh,
Speaker 5: everyone and everyone around has water on their own pants.
Speaker 5: There's nothing embarrassing about it. And in my mind that's
Speaker 5: I'm Sorry, maybe I have a juvenile humor. That's always
Speaker 5: where my mind goes. If you have everyone do it,
Speaker 5: no one can be embarrassed about doing it.
Speaker 2: Okay, Well, on today's episode, why requiring banks to tap
Speaker 2: the discount window is the equivalent of splashing your pants
Speaker 2: with water?
Speaker 4: That's gonna be the title of this episode.
Speaker 2: Excellent. We really do have the perfect guest. It's someone
Speaker 2: we've wanted to get on the podcast for a long time,
Speaker 2: and I don't think he's been on before.
Speaker 3: Though.
Speaker 2: We're going to be speaking with Stephen Kelly, Associate director
Speaker 2: of Research at the Yale Program on Financial Stability. So, Steven,
Speaker 2: thank you so much for coming on all.
Speaker 6: Thoughts, happy to be here and talk about Billy Madison.
Speaker 2: So how much did the banking drama of last year
Speaker 2: change attitudes towards emergency lending facilities? I guess another way
Speaker 2: of asking the question is do we think that all
Speaker 2: these lender of last resort type things actually stood up
Speaker 2: to the test last year?
Speaker 6: Yeah? So it's a tricky question because obviously what comes
Speaker 6: after these crises is you go, why didn't it work? Right?
Speaker 6: It's there, the Fed can mint money. Why doesn't it work?
Speaker 6: You know? Why didn't SVB just post everything at the window.
Speaker 6: And we can get into the various reasons about that,
Speaker 6: but basically it's hopeless to say, oh, the discount window
Speaker 6: is going to work once you have name that's in
Speaker 6: the headlines, and that's sort of the pressure we put
Speaker 6: on it. Sometimes what the discount window is great for
Speaker 6: is sort of a macro story. It's great for contagion.
Speaker 6: It's great for maybe a community bank that it isn't
Speaker 6: facing the same kind of headline risks. It's never gonna
Speaker 6: save that bank that's in the headlines, and we can
Speaker 6: go into all the reasons about why, but so much
Speaker 6: of the franchise value just gets destroyed so fast. And
Speaker 6: when you're talking about replacing all your depositors, well, what
Speaker 6: is a bank but you know a collection of its depositors.
Speaker 6: So you know, you can put all the money you
Speaker 6: want in the window, but it's never gonna save that bank.
Speaker 6: And that's just too much pressure on the window.
Speaker 5: Can good banks fail by taking on these counter signals
Speaker 5: to the market, So, whether it's going to the FED
Speaker 5: and trying to get additional liquidity, whether it's doing an
Speaker 5: equity sale at some point just to create that greater
Speaker 5: equity cushion. If the bank is fundamentally sound, can simply
Speaker 5: expressing consarn be enough to bring it down because it
Speaker 5: does seem like, you know, people don't want to send
Speaker 5: that signals. Or ultimately, if the bank is good, then
Speaker 5: these are good moves to take and they'll survive it.
Speaker 6: Yeah. The biggest thing is if you can't get capital.
Speaker 6: I mean capital is what protects the deposit layer of
Speaker 6: the balance sheet. So if you can't get capital as
Speaker 6: a bank, you're out of business. So SVB comes out
Speaker 6: March eighth last year with an eight K that says, oh,
Speaker 6: you know, we were kind of looking at raising two
Speaker 6: point twenty five billion. We have five hundred million of commitment.
Speaker 6: Like that was enough to say, Okay, they gave an
Speaker 6: inside look at the balance sheet and nobody wanted it.
Speaker 5: So it wasn't that they were raising capital. It was
Speaker 5: that they announced that there was this gap.
Speaker 6: Yeah, if they had come out on March eight and
Speaker 6: said Warren Buffett is investing two point five billion, we
Speaker 6: would still have SVB today, got it.
Speaker 2: Maybe this is a good place to sort of back
Speaker 2: up and dive into what exactly happened with SVB. So
Speaker 2: there seems to have been a reluctance or an inability
Speaker 2: to tap the discount window soon enough. But we also
Speaker 2: know in retrospect, with the benefit of hindsight, that they
Speaker 2: were tapping another emergency. Well, oh, I should be careful here.
Speaker 2: It's not really supposed to be an emergency lending facility.
Speaker 2: I'm talking about the fhlb's, the Federal Home Loan banks.
Speaker 2: We used to call these, by the way, we used
Speaker 2: to joke in like two thousand and nine that fhlb
Speaker 2: stood for free Hubris loans for banks or find huge
Speaker 2: lumps of bucks.
Speaker 4: Like I love to find huge lumps of bucks.
Speaker 2: But anyway, I mean, this is a facility. It was
Speaker 2: supposed to facilitate home ownership and help banks do mortgages
Speaker 2: for people, but it sort of transformed to become an
Speaker 2: alternate emergency lending facility, and we should definitely talk about why.
Speaker 2: But SVB was basically tapping that instead of the discount window.
Speaker 2: So walk us through like what we saw from that
Speaker 2: particular bank in terms of the choices they made to
Speaker 2: access different types of liquidity.
Speaker 6: Yeah, so we call the fhlb's the flubs, which they
Speaker 6: don't love, but we'll deal it anyways, So I think
Speaker 6: it's not unique to SVB that they sort of relied
Speaker 6: on the fhlbs. You know, there was an SNL sketch
Speaker 6: after two thousand and eight during the original stress test
Speaker 6: where they they sort of did a bit like the
Speaker 6: stress test was an actual exam that banks had to take,
Speaker 6: and you know, City Group kept answering government bailout to
Speaker 6: all the questions and that's never saw that. That's sort
Speaker 6: of what happened with the fhlbs, particularly prior to March
Speaker 6: and prior to you know, the supervisory pressure we've seen
Speaker 6: since where if you asked the bank, hey, what do
Speaker 6: you do if you really get pinched to go, well,
Speaker 6: we'll go to the FLUB. You know, we have a
Speaker 6: great relationship with the fhlbs. I mean that's another piece
Speaker 6: is that these fhlbs are a lot more commercial in
Speaker 6: nature than the FED. But so that was sort of
Speaker 6: the contingency funding plan written large across the system, and
Speaker 6: you know, it sort of works if you need a
Speaker 6: billion or five billion if you're SVB. It doesn't work
Speaker 6: if you need forty billion because the fhlb's they take
Speaker 6: government collateral, they take mortgage collateral. If you need to
Speaker 6: start posting, you know, commercial and industrial loans, something like
Speaker 6: corporate bonds. You got to go to the FED. And
Speaker 6: if you're not set up at the FED, because it's
Speaker 6: annoying to do that, it's too expensive, you don't want
Speaker 6: to leave collateral there, whatever the reason, you run out
Speaker 6: of time.
Speaker 5: So some things just aren't set up with the FED,
Speaker 5: like it's too annoying.
Speaker 2: Exactly what if that's the operational readiness argument for making
Speaker 2: them splash water on their pants, slash go to the
Speaker 2: discount window.
Speaker 6: Right, So SPB literally couldn't get collateral to the FED
Speaker 6: in time before the run is out. Again, the SVB
Speaker 6: story was over, so it didn't matter. But it's useful
Speaker 6: to be ready to go at the FED because they
Speaker 6: can take effectively your whole balance sheet. Basically any asset
Speaker 6: a bank will have you can put to the window.
Speaker 6: I mean, that's why it exists. And the FHLBS, you know,
Speaker 6: because of this sort of housing origin and whatever other reasons,
Speaker 6: they just don't have that range.
Speaker 2: The same thing happened at Signature, by the way, and
Speaker 2: I think there was a really good speech by a
Speaker 2: FED official. I can't remember who it was, but they
Speaker 2: were talking about how it had basically been five years
Speaker 2: since Signature tapped the discount window, and when it came
Speaker 2: time to tap again, you know, things are blowing up.
Speaker 2: You need to access emergency liquidity. The Signature staff didn't
Speaker 2: really understand the rules around collateral eligibility and what they
Speaker 2: had to do in order to actually go to the
Speaker 2: window and borrow money. So I can see the argument
Speaker 2: for why you would want people to like practice it.
Speaker 5: Hey, what happened to Signature who took over their assets again? Well,
Speaker 5: I'm making a bit of a joke there that I'm
Speaker 5: aware that.
Speaker 6: I'll have to check my Bloomberg. I think there's some
Speaker 6: sleepy bank. No one's ever heard of it.
Speaker 5: Yeah, and why c b Okay, So no, this really,
Speaker 5: I mean that sort of blew my mind at the time,
Speaker 5: that like, here are these institutions, and I guess that weekend, obviously,
Speaker 5: I guess the Fed or the Treasury determined that there
Speaker 5: was some sort of emergency aspect of it. And we
Speaker 5: all know that, like there was the sort of rescue
Speaker 5: and they opened up this new program, the BTFP, which
Speaker 5: we'll talk about. But it sort of blew my mind
Speaker 5: that you could have this crisis and part of it
Speaker 5: is like, well, what time is it? What time is
Speaker 5: like the window actually open? Can we reopen the window?
Speaker 5: Like that sort of blew my mind. So what happened
Speaker 5: immediately or maybe not immediately, but in the wake of
Speaker 5: all of this. So we've sort of talked about the
Speaker 5: run up and how they're like, what changes did we
Speaker 5: see regulatory wise in the wake of the SVB and
Speaker 5: signature disaster.
Speaker 6: So the biggest change, which is long overdue, is you
Speaker 6: got to post more collateral at the window. It's this
Speaker 6: term prepositioning that we're starting to hear more and more of.
Speaker 6: And you know, you got to practice, and we're hearing
Speaker 6: more from regulators that they would like a little more
Speaker 6: practice than this, you know, and this is probably the
Speaker 6: direction that supervision needs to go of, like, Hey, if
Speaker 6: you're not practicing, we're gonna we're gonna docu. If you
Speaker 6: can't show that you can show up at the window
Speaker 6: and get liquidity when you need it, we're going to
Speaker 6: docu from a supervisory perspective. But really, it's been a
Speaker 6: lot of pressure to send more collateral to the FED.
Speaker 6: There is something like three trillion dollars of collateral at
Speaker 6: the FED. We don't get like daily updates on this,
Speaker 6: but it's in that vicinity and we know what's been growing.
Speaker 6: And we're also hearing from regulators that there's maybe some
Speaker 6: reforms to be had and some new liquidity measures to take.
Speaker 2: Is pre positioning a synonym basically for encumbrance. So the
Speaker 2: idea that I have a certain number of assets on
Speaker 2: my balance sheet, I'm going to have to use more
Speaker 2: of those or set more of those aside at the
Speaker 2: Central Bank in order to satisfy these new requirements, and
Speaker 2: therefore they're going to be less available to me to
Speaker 2: do stuff, do you know, creative and hopefully revenue generating
Speaker 2: things with them, like repo them out or something like that.
Speaker 6: So yes, that's that's part of the story. And the
Speaker 6: other thing I think about is like banks have a
Speaker 6: lot of loans, so those are just sitting there, goes
Speaker 6: to the FED. You get over the hurdles of moving up,
Speaker 6: Like it's not like you're repolling out your loans necessarily
Speaker 6: as a community bank. Just house them at the FED,
Speaker 6: don't leave them at the fhlb's send them to the FED.
Speaker 6: And so that's gonna be a piece of it. The
Speaker 6: other thing that may come here is some sort of
Speaker 6: carrot with that stick. So the hardest thing about the
Speaker 6: discount window is that it really can't be any cheaper.
Speaker 6: And that's the stigma, is that it's really expensive. So
Speaker 6: if you have a deposit which is yielding zero and
Speaker 6: you've got to go to the window, the Fed can say, oh,
Speaker 6: look it's just the top of the Fed funds rate,
Speaker 6: but that's still you know, right now, it's five hundred
Speaker 6: BIPs more than more than deposit.
Speaker 4: I see.
Speaker 5: So even if it's just like it's just you're just borrowing,
Speaker 5: even if it's just at the Fed funds raids, yeah,
Speaker 5: like really banks are borrowing from their deposits. That's way
Speaker 5: more or you know, whatever it is now it's not
Speaker 5: zero anymore, but whatever the typical deposit is.
Speaker 6: Right, So it's it's incredibly expensive. It would be great
Speaker 6: if you were Coca Cola and you could go to
Speaker 6: the discount window, but you can't. So the way to
Speaker 6: destigmatize is to offer some sort of caret and if
Speaker 6: you can say, hey, if you preposition collateral, we'll give
Speaker 6: you some credit towards your LCR, or we'll give you
Speaker 6: some credit towards these other things. So you can self
Speaker 6: ensure less and do more profitable things with your balance sheet.
Speaker 6: That's maybe a viable route, and that's why preposition is
Speaker 6: sort of coming in vogue.
Speaker 2: Wait, can you talk a little bit more about the
Speaker 2: rates available at I guess specifically the discount window versus
Speaker 2: the Fhlb's ye, because this is something I never like
Speaker 2: quite understood. So if you go to the FHLB the FLUB,
Speaker 2: I think they actually like they do something where they
Speaker 2: do look at unrealized gains and losses on your securities
Speaker 2: in order to see whether or not you're a viable
Speaker 2: entity to be lending money too. So if you are
Speaker 2: like super stressed, they might not actually lend you money.
Speaker 2: But on the other hand, it seems like everyone kept
Speaker 2: going to them, and I'm assuming it's because like the
Speaker 2: rate of borrowing is more attractive than the discount rate.
Speaker 6: Yeah, so that's a big piece of it. And it's
Speaker 6: the confidentiality. So the valuation thing you're thinking of is
Speaker 6: only unavailable for sales. So that's part of the story
Speaker 6: is you can still hide the losses and help the
Speaker 6: maturity to some degree, but the pricing is definitely advantageous
Speaker 6: and nobody can write that story that you wrote last February, Tracy,
Speaker 6: where you're saying, okay, it looks like.
Speaker 2: There's December, please sorry, give me my extra two months.
Speaker 6: I think you told these banks to borrow. You know,
Speaker 6: nobody can write that story because the data is not
Speaker 6: it's not public data. We don't get a weekly balanced
Speaker 6: sheet from the Fed.
Speaker 4: Why isn't it public.
Speaker 1: Because you don't want to run on the bank.
Speaker 6: Because the fhlb's are a private entity, they're cooperative basically
Speaker 6: put together by the banks, and so that's a piece
Speaker 6: of the stigma. And the funding is really good because
Speaker 6: this is you know, it's a GSC, it's a government
Speaker 6: sponsored enterprise. So when you have a crisis and there's
Speaker 6: a flight into money market government money market funds, what
Speaker 6: can they buy? They can buy treasuries and they can
Speaker 6: buy FHLB debt and so you really have you have
Speaker 6: cheap issuance. And the FHLB pays out their earnings to members.
Speaker 6: They don't pay it out based on you know, the
Speaker 6: biggest bank it's the biggest or you know, everybody gets
Speaker 6: an eqal share. Whoever borrows is who gets the earnings back.
Speaker 6: So it's it's literally you know, a rebate to anybody
Speaker 6: who borrows. And so what we see as the fhlbs
Speaker 6: are always competitive with the FED, often cheaper, and you
Speaker 6: know that drives part of the story too, is that
Speaker 6: they just have this built in discount.
Speaker 2: So one other thing that's happened recently is the FED
Speaker 2: has basically said they're going to end the BTFP program,
Speaker 2: I think in March, which was when it was supposed
Speaker 2: to end. And I was kind of amazed at some
Speaker 2: of the arbitrage story that came out a little while ago,
Speaker 2: the idea that banks could basically get free money from
Speaker 2: the FED because of the way the rates were set
Speaker 2: on the BTFP versus other financing sources. How big of
Speaker 2: an issue was that, How much did that play into
Speaker 2: the decision to end it? And then I guess lastly,
Speaker 2: given what we're seeing now with one particularler New York
Speaker 2: based bank and the troubles, there is there a possibility
Speaker 2: that the BTFP gets extended.
Speaker 6: So I would say it's unlikely absent a wider crisis.
Speaker 6: The arbitrage story isn't really it's not likely that that's
Speaker 6: why it was ended. It was ended because things you know,
Speaker 6: NYCB notwithstanding and things have been calmer. There's not really
Speaker 6: the unusual and exigen circumstances the FED looks for. I
Speaker 6: think it's probably why we found out in January that
Speaker 6: it was going to end in March and why they
Speaker 6: announced the rate change. Yeah. So the way the rate
Speaker 6: thing worked is the BTFP is for one year. The
Speaker 6: FED charged one year OIS plus ten basis points, So
Speaker 6: that was sort of the penalty built in. But what
Speaker 6: they're lending is reserves, and if you are a bank,
Speaker 6: you can leave those reserves at the FED, not do
Speaker 6: anything with them, and earn interest on reserves. So this
Speaker 6: is sort of a new post two thousand and eight
Speaker 6: thing that actually weighs into the expenses of the FED.
Speaker 6: So when OIS plus ten BIPs drops below ior, you know,
Speaker 6: you could just run that trade infinitely as long as
Speaker 6: you have the collateral and just sort of harvest the
Speaker 6: carry basically.
Speaker 5: For listeners and for myself. Remind me again, so what
Speaker 5: exactly the BTFP stipulated. It was rolled out as part
Speaker 5: of the SVB emergency. I get, you know, there were
Speaker 5: all these concerns about these losses on the whold to
Speaker 5: market book, But remind me what the actual design of
Speaker 5: that program was.
Speaker 6: So the biggest thing about the BTFP is that it
Speaker 6: took collateral at par value.
Speaker 5: Right par and so there was a lot of these
Speaker 5: treasuries in particularly in SVB cases were like way off
Speaker 5: parwer because rates.
Speaker 6: And China right. And so the critique at the time was, oh,
Speaker 6: my gosh, this is not how central banking works. You
Speaker 6: can't just lend it whatever value, blah blah blah. And
Speaker 6: that was pretty overblown because the BTFP still charges a
Speaker 6: market rate. So just like we were talking about before,
Speaker 6: they're not charging the deposit rate. They're charging five hundred
Speaker 6: BIPs at the time. So all it did was turn
Speaker 6: out a bank's losses because you know, a mark to
Speaker 6: market loss on a health to maturity security from interest
Speaker 6: rates is representative of your funding cost over time to
Speaker 6: hold that security. Banks typically don't pay that actual rate,
Speaker 6: right if they're paying cheaper deposits, and that's why we
Speaker 6: ignore the accounting. But once you take that security to
Speaker 6: the FED, if you take a thirty year treasure to
Speaker 6: the FED for thirty years, just keep rolling that discount
Speaker 6: window alone, you're going to pay the market rate, and
Speaker 6: so those losses are you're going to realize them over time.
Speaker 6: So it solved the liquidity problem, but it didn't ignore
Speaker 6: these losses. Banks still had to deal with them.
Speaker 2: You just alluded to something that I wanted to ask you.
Speaker 2: This is sort of a provocative question. I know it's
Speaker 2: going to get you going. But liquidity versus solvency, that's
Speaker 2: not even a question, that's just a statement. What's the difference?
Speaker 2: Does it matter?
Speaker 6: So this is a common versus framing for basically synonyms
Speaker 6: in banking, Like every time a bank fails, it's either
Speaker 6: one political party, it's definitely the executive who ran the bank.
Speaker 6: We just had a liquidity problem. We just needed more
Speaker 6: liquidity from the Fed. People freaked out. The question they
Speaker 6: can answer is why your bank? Right? We don't have
Speaker 6: a panic that takes down JP Morgan right. The idea
Speaker 6: that something can be a liquidity issue alone, it doesn't exist.
Speaker 6: These banks aren't chosen at random, and every bank at
Speaker 6: the very end looks like a liquidity issue because the
Speaker 6: last thing they do is either fail to make a
Speaker 6: payment or look like they're about to fail to make
Speaker 6: a payment and the regulators show up.
Speaker 5: Well, can you have like a pure self fulfilling prophecy,
Speaker 5: like couldn't someone start a false rumor or misunderstand social media.
Speaker 5: And I remember in the wake of SVB as like, oh,
Speaker 5: social media caused the bank run or all of these
Speaker 5: people on his ski trip in Aspen, I think was
Speaker 5: like one of the stories, like they were all like
Speaker 5: whatsapping with each other and that's what caused the bank run.
Speaker 5: Like could that is that a real thing? Like where
Speaker 5: like a bank could go down? You say like, well, yeah,
Speaker 5: but why are they targeting you? But maybe everyone just
Speaker 5: on the WhatsApp group says this is the bank that's
Speaker 5: in trouble.
Speaker 6: They could, but we just don't see that as really happening.
Speaker 6: You know, SVB was running on negative accounting equity for
Speaker 6: months and investors had discounted it. It's not just the
Speaker 6: SVB case, Like there has yet to be a case
Speaker 6: study where Twitter can come out or you know, Bill
Speaker 6: Ackman can just like take down Goldman Sachs. Because it
Speaker 6: goes back to what we're saying about Warren Buffett or
Speaker 6: the capital raise. It if the franchise is strong and
Speaker 6: you have if you have contingent capital, you don't have
Speaker 6: to worry. If you don't have contingent capital, the capital
Speaker 6: structure breaks down.
Speaker 5: This is the thing Tracy that I still like to
Speaker 5: this day, I don't quite understand, which is that, you know,
Speaker 5: there was no question that they were running like negative
Speaker 5: equity and was right there in like probably the ten
Speaker 5: Q or like some SEC filing. But you know, like
Speaker 5: all of these startups like supposedly loved the bank they targeted.
Speaker 5: They understood they had like these special products so that
Speaker 5: founders could get mortgages by posting their RSUs as collateral,
Speaker 5: which other banks didn't like. I don't understand why they
Speaker 5: couldn't have monetized that franchise value, which now seems to
Speaker 5: be gone.
Speaker 6: So they did for so long. I mean, that's how
Speaker 6: they could afford running at negative accounting equity. It's like Amazon, right,
Speaker 6: how long did they take to turn profit? But you
Speaker 6: had long term viability. And the thing with SVB is like, Okay,
Speaker 6: you can have the mostest loyalist depositors in the world,
Speaker 6: like every bank thinks they have, and SVB probably did.
Speaker 6: But what happened, you know what Tracy was observing with
Speaker 6: her article and what was happening before the run is
Speaker 6: they had to spend their money. Like the deposit balance
Speaker 6: at SVV was dependent on new IPOs that just weren't happening.
Speaker 6: So these venture capitalists are as loyal as can be,
Speaker 6: but they're just spending down their cash balances, and so
Speaker 6: the balance sheet.
Speaker 2: Unlines how much of the banking fragility that we've seen
Speaker 2: over the past year is basically an interest rate story.
Speaker 2: So you know, setting aside IPOs which dried up when
Speaker 2: interest rates increased, you also just have the losses on
Speaker 2: the bond portfolio. And to me, this is kind of
Speaker 2: it's kind of a non issue, but it's also kind
Speaker 2: of a fundamental tension in the banking system, which is
Speaker 2: that you've built all the rules around the idea that,
Speaker 2: like the best type of collateral is either cash or
Speaker 2: government bonds, which is fine when government bonds are really
Speaker 2: boring and not very volatile and there's not a lot happening.
Speaker 2: But when inflation starts to go up and the primary
Speaker 2: tool the central bank has to manage that is to
Speaker 2: affect the price of bonds, then we seem to have
Speaker 2: this like tension enter the system.
Speaker 6: For sure. That's how you end up with the BTFP,
Speaker 6: which you know sort of fits in this long trend,
Speaker 6: particularly the FED of like what is a treasury and
Speaker 6: how much do we want to monetize it, Like how
Speaker 6: often do we want to be intervening? How you know,
Speaker 6: what different lending facilities do we have to set up?
Speaker 6: Who do we let? So it does sort of sit
Speaker 6: within that post two thousand and eight tension of like,
Speaker 6: you know, we're really building the system on top of
Speaker 6: these safe assets, so we kind of have to keep
Speaker 6: them money. Like, but yeah, that is the key vulnerability.
Speaker 6: But also there's so many banks who have that same
Speaker 6: vulnerability as su that didn't fail. So that's sort of
Speaker 6: the built in macro vulnerability. But the interest rate risk,
Speaker 6: you know, was also in tech and in innovation and
Speaker 6: in crypto and so that's why we've seen like banks
Speaker 6: like Schwab, banks like Bank of America, like huge unrealized losses,
Speaker 6: but less concerned about the franchise.
Speaker 2: Yeah, it seems like when I say non issue, like
Speaker 2: it seems like there's a tension. But also I find
Speaker 2: it hard to believe that like the banking system is
Speaker 2: going to come down because banks have bought too many
Speaker 2: US treasuries, Like that doesn't seem right, and this doesn't
Speaker 2: seem realistic.
Speaker 6: This was always the nuclear option that the FED had
Speaker 6: is like, the second you're worried about JP Morgan going
Speaker 6: down because of too many treasuries, the Fed's going to
Speaker 6: cut rates and just recapitalize the whole system. So it
Speaker 6: was also sitting in this tension of the FED was
Speaker 6: tightening and didn't want to ease up on tightening, So
Speaker 6: that made it a harder dance too.
Speaker 5: You wrote about this a little bit at this time,
Speaker 5: and I think, even like before SVB, what happened if
Speaker 5: we get into this situation in which the FED is
Speaker 5: trying to put out a financial fire at the same
Speaker 5: time that it's trying to fight inflation, which was certainly
Speaker 5: the case in March twenty twenty three because at that
Speaker 5: point the hiking cycle had not yet reached its peak,
Speaker 5: and so the you know, they re expanded the balance sheet.
Speaker 5: You know, some Twitter people thought that was QI or
Speaker 5: it wasn't, But like, what is like talk to us
Speaker 5: about that tension of if the Fed. You know, it's
Speaker 5: like you mentioned, it's like, okay, let's say JP Morgan,
Speaker 5: we're getting into trouble. But you know that could happen
Speaker 5: at a time of high inflation, and as Tracy mentioned,
Speaker 5: you it could happen that some bank through the treasury
Speaker 5: channel literally did how do central bankers think about this
Speaker 5: tension or how do you resolve that?
Speaker 6: Well, central bankers might not, I mean at the absolute limit.
Speaker 6: This is why crisis interventions are you know, capital injections
Speaker 6: and guarantees and physically you know, it's sort of all
Speaker 6: these things at once. And why this kind can't go
Speaker 6: back to this, i't know why it's not always enough
Speaker 6: and why it doesn't solve every crisis. But that's exactly
Speaker 6: why you see have to see you know, quote unquote
Speaker 6: innovative things like valuing collateral at par and the BTFP
Speaker 6: and the arbitrage and sort of the turning out losses
Speaker 6: is a little unique because all the loss is really
Speaker 6: built up just in treasuries at the time. You know,
Speaker 6: if you're thinking about something like commercial real estate to
Speaker 6: pick a random ass set class, the credit risk is
Speaker 6: indogenous to the FED, right, so it's not a case
Speaker 6: where the losses necessarily materialized over time. The FED can
Speaker 6: come along and write, you know, basically a put option
Speaker 6: on credit risk in a way that even valuing collateral
Speaker 6: at par it sort of couldn't with the BTFP.
Speaker 2: So I mentioned at the beginning that we are seeing
Speaker 2: various attempts to tweak and in some cases like change
Speaker 2: significantly the way these various facilities are used. If you
Speaker 2: were Michael Sue at the OCC or if you were
Speaker 2: Michael Barr, the Vice Chair of Supervision at the FED,
Speaker 2: if you were like the ultimate Michael, basically, how would
Speaker 2: you be arranging this constellation of facilities.
Speaker 6: Yeah, there's a few things. I mean, one we can
Speaker 6: talk about the standing repo facility, but I might pop
Speaker 6: a blood vessel if we do that.
Speaker 3: I want to see that.
Speaker 4: Okay, no, no, we'll get to that.
Speaker 6: The biggest thing is you have to have some carrot
Speaker 6: at the window because the FED, so it used to
Speaker 6: be even in recent history, that there was a premium
Speaker 6: to go to this kind wind to Right, you want
Speaker 6: banks to like be evaluated by the market when they're
Speaker 6: getting funding, and you don't want like haircuts at the
Speaker 6: discount window being your effective collateral requirements. So like there
Speaker 6: is a reason to not run everything out of the FED. Right,
Speaker 6: they're not asset managers. But at the same time you
Speaker 6: have this tension where you want them to come when
Speaker 6: the time is right, So you have to have something
Speaker 6: send there for the banks go because the Fed can't
Speaker 6: go any lower on price. It used to be one
Speaker 6: hundred basis point premium. We've seen the Fed lower this
Speaker 6: in crisis. They lowered it to zero over FED funds
Speaker 6: in COVID and it's been there since. So it's clear
Speaker 6: that they are keeping it. You know, they're keeping the
Speaker 6: discount window right at top of FED funds, so they
Speaker 6: really can't go any lower because then you know, we're
Speaker 6: in the BTFP problem where they're they're taking in less
Speaker 6: and then you can pay on interest on reserves. So
Speaker 6: you have to have some regulatory carrot and stick basically
Speaker 6: for the discount windows. So that's a big piece. Second
Speaker 6: thing is get the FHLBS out of the lender of
Speaker 6: last resort game. We sort of got a unique political
Speaker 6: moment in that the FAHFA put out a report a
Speaker 6: few months back kind is saying this thing right, like,
Speaker 6: you know, my sense is Sandra Thompson, the head of
Speaker 6: the FAHFA, cares about affordable housing, right, she doesn't want
Speaker 6: to be in this world of like bankers just lending
Speaker 6: to each other and it goes to a trillion dollars
Speaker 6: in a crisis, and it's just sort of so far
Speaker 6: from where those institutions started and so far from the
Speaker 6: goal of housing, Like get them out of the lender
Speaker 6: of last resort game, don't let them pay dividends based
Speaker 6: on who borrows, pay dividends based on who does affordable
Speaker 6: housing or something, you know, something along those lines, and
Speaker 6: basically write up a bunch of term sheets for all
Speaker 6: these different potential thirteen three facilities that you're going to
Speaker 6: have to roll out. Because the other piece of this is,
Speaker 6: like going back to your rates question, Joe, all we
Speaker 6: talk about now is central bank intervention. Like anytime a
Speaker 6: market blows up, it's where's the ECB, where's the boj
Speaker 6: like buy equities now, bail out this bank, Like especially
Speaker 6: since two thousand and eight, and where was all this before.
Speaker 6: It's like, well, they just cut rates when we didn't
Speaker 6: have to worry about the zero lower bound. They just
Speaker 6: cut rates, And you know that was sort of the
Speaker 6: green Span playbook, right, just like let some financial froth
Speaker 6: come out and then clean up the mess with rates.
Speaker 6: So that's sort of the other reason that we're talking
Speaker 6: about this more and more and more is we're worried
Speaker 6: about the zero lower bound.
Speaker 5: Talk to us about the standing repot facilities.
Speaker 6: It seems like a.
Speaker 4: Good idea, you know, just always be.
Speaker 2: There and well his head just exploded.
Speaker 5: Shoot, shoot, it's nice knowing you, Steven.
Speaker 6: It's okay.
Speaker 4: What's the downside? Always seemed like a good idea.
Speaker 6: So the standing repol facility is so first of all,
Speaker 6: it's basically they just got window for treasuries and agencies.
Speaker 6: The nice thing about it is that it adds primary dealers.
Speaker 6: You hear the FED talk about it and they like
Speaker 6: want to add all these to it, but it's just
Speaker 6: the discount window. You can bring treasuries to the discount window,
Speaker 6: so that whole piece of it of like, let's get
Speaker 6: banks involved. It would really only be valuable if you,
Speaker 6: as a bank, like the depository subsidiary, had collateral in
Speaker 6: the tri party repol market. Because the FED runs this
Speaker 6: program out of the triparty repo market. It's not like
Speaker 6: the discount window in that sense, so that part's sort
Speaker 6: of goofy. It's nice to have it for the primary dealers,
Speaker 6: but there's two problems we have with it. One, and
Speaker 6: Zultan has talked about this on this podcast at length,
Speaker 6: which is you're relying on the primary dealer's balance sheet
Speaker 6: to sort of on lend it to everybody, you know,
Speaker 6: repurpose the liquidity for every hedge fund that needs it
Speaker 6: in a time of crisis, and that just doesn't work
Speaker 6: because balance sheets get pinched. And then the alternative is like, okay,
Speaker 6: you let every hedge fund come directly to the FED,
Speaker 6: and there are political and legal issues with that. The
Speaker 6: other thing is, again, it's not like it takes a
Speaker 6: matched book, right. The Sandry po facility is not going
Speaker 6: to take your treasury and your future. So if you
Speaker 6: look at something like the basis trade and the risks
Speaker 6: we have around the basis trade, I take very little
Speaker 6: comfort in the standing repel facility, even though some folks do,
Speaker 6: because when the basis blows out, you basically have the
Speaker 6: cash price falls and the futures tightened, right, And that's
Speaker 6: that's what we saw in March twenty twenty. And all
Speaker 6: the standing repel facility can do is replace your repot
Speaker 6: funding at that new market value. So it goes back
Speaker 6: to this issue of like where do you value the Collaterally,
Speaker 6: it's not going to recognize, oh, you have a future
Speaker 6: and you have a treasury, so I'm going to lend
Speaker 6: you know, at the collective value of that portfolio. It's
Speaker 6: gonna lend at the cash value of your dash to
Speaker 6: cash treasury that everybody's trying to get rid of, and
Speaker 6: so you're just gonna get caught in that spiral.
Speaker 4: What does a bank do?
Speaker 5: No, seriously, what is the main product that a bank offers?
Speaker 6: Deposits?
Speaker 5: Can you explain it? And like when I think it's like, oh,
Speaker 5: I want to go to the bank, I want to loan.
Speaker 2: If a bank offers mostly deposits, why are they all
Speaker 2: so bad at actually matching the benchmark interest rate?
Speaker 6: Because deposits are a service. That's exactly what I disagree.
Speaker 5: This is my saying, this is my this is my
Speaker 5: our We should be paying the bank for deposits. I
Speaker 5: love easy online banking services and free ATM withdrawals. Why
Speaker 5: aren't I paying them?
Speaker 6: Well, not only that, it's the ledger tracy, that it's
Speaker 6: the ledger of the whole economy. You cannot make a
Speaker 6: payment that isn't a deposit transfer, you know, happening somewhere
Speaker 6: at the back end, And that is a service that
Speaker 6: banks offer. And that is exactly why the franchise value
Speaker 6: can erode so quickly, because if you say, oh, we
Speaker 6: have all the quity we need at the discount window
Speaker 6: because we're highly capitalized, which failed banks always have great
Speaker 6: capital ratios, right, so they can take their collateral to
Speaker 6: the window, haircut it whatever. But you have no deposit
Speaker 6: franchise left. And the deposit franchise is what was allowing
Speaker 6: you to borrow at zero, you know, and and lend
Speaker 6: it three. So that's your franchise value.
Speaker 2: I realized we've made it through this entire conversation without
Speaker 2: even touching the basil endgame proposals. Should we do it? Yeah,
Speaker 2: let's go for it, all right, Basil.
Speaker 6: I mean, it's almost not worth it because it's not
Speaker 6: going to look anything like it does now. I mean,
Speaker 6: I don't even know.
Speaker 4: What doesn't mean.
Speaker 6: Well, there's a lot of places in it that look
Speaker 6: like easy fixes. You know, there's like weird charges that
Speaker 6: show up for like climate financing, or like random distortions
Speaker 6: that happen in housing. So the Fed's going to look
Speaker 6: very responsive. It's going to look like it changed a
Speaker 6: lot of things. The other thing is they've sort of
Speaker 6: signaled that they want more consensus than they had putting
Speaker 6: out the proposal, and they had two descents putting out
Speaker 6: the proposal. They had Mickey Bowman, who they're never going
Speaker 6: to get. She hates everything the FED has done on
Speaker 6: the regulatory front in the last year. And it's Chris
Speaker 6: Waller who has really talked about the operational piece, which
Speaker 6: is a little bit distortive, so that the proposal sort
Speaker 6: of looks at charging for operational risk based on like
Speaker 6: the size of a business, So like the size of
Speaker 6: an asset management business would cause you to need to hold,
Speaker 6: you know, more capital, but those businesses tend to be
Speaker 6: very stabilizing, Like look at what we've seen that happened
Speaker 6: to Morgan Stanley, Like it's a diversifying business, it's sort
Speaker 6: of a all seasons business. So I think we'll probably
Speaker 6: see a lot of changes on the operational risk charges
Speaker 6: as well.
Speaker 5: Prior to SVB, I believe a lot of fights around
Speaker 5: the regulatory limits and whether stress tests about like banks
Speaker 5: that weren't the mega, too big defail banks, but weren't
Speaker 5: necessarily like the little tiny community banks out in the
Speaker 5: middle of nowhere. And I think like SVB and some
Speaker 5: of these other sort of like fell in that middle
Speaker 5: and in a way like probably harmed themselves because in retrospect,
Speaker 5: they probably just would have been better off taking a
Speaker 5: little bit of hit to profitability for a sort of
Speaker 5: like tighter regulatory requirement.
Speaker 4: What is happening with regulation for some of these more
Speaker 4: mid sized.
Speaker 6: Banks, Well, I mean the goal is to bring them
Speaker 6: all into into to sort of recognize them as big banks,
Speaker 6: which you know.
Speaker 4: It, why not do that?
Speaker 6: There are like maybe legal reasons and blah blah blah,
Speaker 6: But I'm really not convinced. But I'm also like fundamentally, like,
Speaker 6: will we take a step back from the capital regulation debate?
Speaker 6: Like we're talking about changing ratios from like twelve percent
Speaker 6: to thirteen and a half. Like, I get why a
Speaker 6: bank is annoyed. I get why there's all these interest
Speaker 6: groups involved, but like from a systemic perspective, that's just
Speaker 6: not that interesting. That's not gonna be the difference between
Speaker 6: two thousand and eight and not. And it's also not
Speaker 6: gonna be difference between a profitable banking system that beats
Speaker 6: Europe in China and not.
Speaker 2: I mean, it is true that Sphoebe had a carve
Speaker 2: out as a smaller bank, and there is discussion about
Speaker 2: whether or not those carve outs should exist, but just
Speaker 2: backing up for a second big picture, I feel like
Speaker 2: in the US we have yet to decide what we
Speaker 2: want the banking system to actually look like. So there's
Speaker 2: this sort of it's a wonderful life vision where you
Speaker 2: have all these local banks, community banks, even in New York,
Speaker 2: and they know you and they build up that relationship
Speaker 2: and you know, you get those benefits. But on the
Speaker 2: other hand, they're also you know, our experience of last
Speaker 2: year is that maybe there is a benefit to being
Speaker 2: extremely large and efficient and having a funding advantage and
Speaker 2: things like that.
Speaker 1: And it feels.
Speaker 2: To me like the regulators, politicians, basically everyone involved in
Speaker 2: this equation has yet to figure out exactly what they want.
Speaker 6: Yeah, and it's a hard thing to talk about because
Speaker 6: you know, you can't go out as like Japol and
Speaker 6: be like, I think we should have less banks, because
Speaker 6: you'll have less banks by Friday, right, So.
Speaker 4: Yeah, it's a good way to do it.
Speaker 6: It's a hard thing to talk about. And you know,
Speaker 6: they've pushed back on this idea of like a Barbell
Speaker 6: banking system, which is sort of the mid sized ones
Speaker 6: get hollowed out, either downsize or upsize, and you're left
Speaker 6: with community banks. And bigger banks, and that is sort
Speaker 6: of the verdict of twenty twenty threes. You would say, okay,
Speaker 6: big banks did well, small banks did well. Let's just
Speaker 6: get rid of the mid size banks. But you know,
Speaker 6: there's small banks that are very dependent on the local economy.
Speaker 6: I will say, big picture, you cannot be a niche
Speaker 6: bank that is also under the pressure of financial markets,
Speaker 6: like you can't be focused on Silicon Valley and also,
Speaker 6: you know, need to raise equity and have attentive you know, headlines.
Speaker 6: If you're a community bank, you can probably run on
Speaker 6: negative equity longer than you know, a mid size bank
Speaker 6: that has to go to market and things like that.
Speaker 2: All right, Steven Kelly, thank you so much for coming
Speaker 2: on all thoughts and letting us trigger you for basically
Speaker 2: forty minutes. I really appreciate it. That was great.
Speaker 3: Yeah, thanks, thanks guys.
Speaker 2: So Joe, I really enjoyed that conversation. I have a
Speaker 2: feeling it's going to be a very relevant one in
Speaker 2: twenty twenty four as we start to see more movement
Speaker 2: on these various issues, including you know, maybe reforming the
Speaker 2: discount window whatever. The basil end game actually ends up
Speaker 2: looking like there are a few interesting things that I
Speaker 2: would pick out there. So one of them was Steven's
Speaker 2: emphasis of how important the actual banking franchise, the deposit
Speaker 2: franchise is to funding. And you know, if the franchise
Speaker 2: starts to go like that's when you do get the
Speaker 2: deposit issues and then you can't actually raise capital. And
Speaker 2: I think some of that did get lost in the
Speaker 2: conf around SVB and Signature and First Republic, where it
Speaker 2: was more like, oh, these banks kind of got unlucky,
Speaker 2: like they bought too many bonds or whatever.
Speaker 5: No, that really connects some dots and crystallized a lot
Speaker 5: of things.
Speaker 4: And I had forgotten with SVB that prior to the.
Speaker 5: Run that did happen on the bank, there was the
Speaker 5: deposit shrinkage that was simply as a result of Silicon
Speaker 5: Valley financial conditions at the time, which is that there
Speaker 5: was no IPO window for a while there, and there
Speaker 5: was no new fundraising, right, so you didn't have these
Speaker 5: these startups and stuff did not have fresh cash coming in,
Speaker 5: and they were in survival mode and you know, they're
Speaker 5: like spending down their money all the time. So there
Speaker 5: was this sort of like natural it was not a run.
Speaker 5: It had it wasn't even about the treasuries. It was
Speaker 5: not about the report on the sub stack in January
Speaker 5: of that year. That's like Burn Hobart, the author of
Speaker 5: the newsletter.
Speaker 4: It's like, by the.
Speaker 5: Way, Silicon Valley Bank is insolvent, you guys should check
Speaker 5: this out, and like people like ignored it for about
Speaker 5: four weeks. It was not about that. It was just
Speaker 5: about the fact that the deposits were going down.
Speaker 2: Yeah, however, Joe, I really I remain reluctant to pay
Speaker 2: my bank a fee. I don't want to.
Speaker 4: No, I mean I don't.
Speaker 5: I like having free banking and I like having free
Speaker 5: access to ATMs and the website and a nice app
Speaker 5: and stuff like that. But it does really make sense
Speaker 5: and sort of like crystallize this point, which is that
Speaker 5: that is the only sub market rate borrowing in the
Speaker 5: world right like basically for the banks, and there's a
Speaker 5: reason that they can get submarket rate because they also
Speaker 5: throw in this service for you. But you know, there
Speaker 5: was like that chart we had it at our recent
Speaker 5: odd lotch trivia night that Josh Younger showed, which is
Speaker 5: like the Fed funds rate and then is like what
Speaker 5: is this rate below it? And there really is only
Speaker 5: one rate in the world that's going to ever like
Speaker 5: be below the Fed funds rate, and that's like the
Speaker 5: special rate that banks can borrow at from their own
Speaker 5: customers deposits.
Speaker 2: Yeah, you did mention I think earlier in the intro
Speaker 2: that around this time last year. So in addition to
Speaker 2: the Bill Nelson on the Disco episode that we did
Speaker 2: in January, I think in February probably, Yeah, we spoke
Speaker 2: to Joe aboute over at Barkley's about exactly this issue,
Speaker 2: so deposit rates, the beta Joe benchmark interest rates. So yeah,
Speaker 2: I think we're pretty on the ball.
Speaker 5: We're pretty on the ball. And that talking Stephen that
Speaker 5: like at put a bunch of things ye together like
Speaker 5: a lot of like light bulbs. Enough it's like, oh,
Speaker 5: I get why this is the case, or I get
Speaker 5: why that's not really an ultimate fix, et cetera.
Speaker 4: So I really enjoyed that conversation.
Speaker 2: Okay, on that self congratulatory.
Speaker 5: The slubs, I'm gonna start calling it that. That's so
Speaker 5: much easier to say than fhlb's.
Speaker 4: Shall we leave it there, Let's leave it there.
Speaker 2: This has been another episode of the All Thoughts podcast.
Speaker 2: I'm Tracy Alloway. You can follow me at Tracy Alloway and.
Speaker 5: I'm Joe Wisenthal. You can follow me at the Stalwart.
Speaker 5: Follow our guest Stephen Kelly at Stephen Kelly forty nine.
Speaker 5: Follow our producers Carman Rodriguez at Krman Arman Dashel Bennett
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