Speaker 1: Life from the Bloomberg Interacting Burgers Studios. This is Bloomberg
Speaker 1: day Break for Friday, March twenty fourth. Coming up today,
Speaker 1: Janet Yellen says the government stands ready to protect the
Speaker 1: banking system. The chorus grows louder for the Fed to
Speaker 1: cut rates this year. China rolls out the welcome that
Speaker 1: for Tin Cook and other top corporate executives and TikTok testimony.
Speaker 1: False flash on Capitol Hill. What made hundreds of students
Speaker 1: sick at a high school on Long Island? Plus? North
Speaker 1: Korea says it has an underwater drone with a nuclear warhead.
Speaker 1: I'm Michael Block. More ahead, I'm John Stash, Aaron's wards.
Speaker 1: The Knicks and Nets lost, the Rangers won. Four teams
Speaker 1: advanced to the Elite A to the NCAA tournament. That's
Speaker 1: always straight ahead on Bloomberg day Break, The Business News
Speaker 1: you need to sturn your day, and just one fifteen
Speaker 1: minute podcast each pointing on Apples, Spotify, The Bloomberg Business
Speaker 1: Appen everywhere you get your podcasts. Good morning, I'm Nathan
Speaker 1: Hagar and I'm Karon Moscow. Here are the stories we're
Speaker 1: following today, Karen. We began with the latest on the
Speaker 1: turmoil in the banking industry, Treasury Secretary Janet Yellen says
Speaker 1: regulators are prepared to take more steps if needed, to
Speaker 1: protect the banking system. Yellen spoke before a House Appropriation subcommittee.
Speaker 1: The strong actions we've taken ensure that Americans deposits are safe.
Speaker 1: Certainly we would be prepared to take additional actions if warranted.
Speaker 1: Treasury Secretary Yellen's comments came a day after she said
Speaker 1: officials had not considered temporarily expanding insurance to all US deposits. Well.
Speaker 1: The con former economic policymakers are criticizing the fed's bank
Speaker 1: stress tests in twenty twenty two for failing to pro
Speaker 1: potential vulnerabilities in the banking system. Be got up with
Speaker 1: former FED Governor Dan Tarullo, but I think in the
Speaker 1: most immediate sense this is clearly a supervisory failure. Other
Speaker 1: factors may be uncovered as the own investigation proceeds, and
Speaker 1: Dan Trullo, oversaw financial regulation and supervision at the FED,
Speaker 1: may be cooments in a special Bloomberg round table, along
Speaker 1: with former Treasury Secretary Larry Summers and Bloomberg News Head
Speaker 1: of Economics Stephanie Flanders, hear more of that conversation a
Speaker 1: little later in the program. Well Karen, one top banking executive,
Speaker 1: says the worst of the crisis may be behind us.
Speaker 1: We spoke exclusively this morning with Standard Chartered CEO Bill
Speaker 1: Winters in Hong Kong. I hope we're through the worst,
Speaker 1: and I think there's still some questions around business models
Speaker 1: around the world, or have there been weaknesses that have
Speaker 1: been exposed in the business models of any of the
Speaker 1: companies that have had trouble that need to be addressed
Speaker 1: at this point, But it certainly seems that the acute
Speaker 1: phase of the crisis has done. Standard Chartered CEO Bill
Speaker 1: Winter says he'd be open to looking into credit suite
Speaker 1: as assets if they were made available. Well, Nathan, there
Speaker 1: may be more trouble for a credit suite and ubs,
Speaker 1: and it's related to the war in Ukraine. The banks
Speaker 1: are among several facing a Justice Department investigation into Russian
Speaker 1: only guard finding help avoiding sanctions. Amy Morris says more
Speaker 1: from our Bloomberg in ninety nine one newsroom in Washington,
Speaker 1: sources tell Bloomberg News the Swiss banks were included in
Speaker 1: a wave of subpoenas that were sent out by the
Speaker 1: US government before the crisis that resulted in UBS's takeover
Speaker 1: of Credit Suees. DJ is focusing on identifying which bank
Speaker 1: employees dealt with sanctioned clients and how those clients were
Speaker 1: vetted over the past several years. US Deputy Attorney General
Speaker 1: Lisa Monaco says the Justice Department is beefing up its
Speaker 1: National Security Division, saying, quote, corporate crime and national security
Speaker 1: are overlapping to a degree never seen before. Credit Suis
Speaker 1: and UBS declined to comment in Washington. I'm Amy Morris,
Speaker 1: Bloomberg Day Break. All right, Amy, thank you. Now, let's
Speaker 1: turn to the economy. The chorus is growing on the
Speaker 1: Fed not to raise rates this year, but to cut them.
Speaker 1: Let's get the latest live from Bloomberg's John Tucker, John
Speaker 1: and A Double Line Capital's Jeff Gundlock is adding his voice.
Speaker 1: He took to Twitter saying the Fed's going to be
Speaker 1: cutting interest rates substantially, and they should be doing it soon. Well,
Speaker 1: he sees the same data as everybody else, an adverted
Speaker 1: yield curve that Gunlack calls a red alert recession signal.
Speaker 1: He's at odds with the Fed. Share Jpale, who said
Speaker 1: this week that officials don't anticipate cutting rates, the market
Speaker 1: is pricing for easing before the end of the year.
Speaker 1: Live in New York, I'm John Tucker, Bloomberg day Break.
Speaker 1: All right, John, Thanks World. China is hoping to show
Speaker 1: the world it's back in business. It's hosting a high
Speaker 1: profile corporate summit this weekend, and some top American executives
Speaker 1: will be there. We get the latest live with Bloomberg
Speaker 1: Steve Rappaboord's Steve, Good Morning, Good Morning, Karen and Nathan.
Speaker 1: Organizers of the China Development Forum say hundreds of foreign
Speaker 1: representatives from various industries registered to attend the three day event.
Speaker 1: Corporate a listers like Apple CEO Tim Cook and Fiser
Speaker 1: boss Albert Borla plan to show up, but many American
Speaker 1: companies are sitting this one out. Sources tell us that's
Speaker 1: because they want to avoid scrutiny from a newly formed
Speaker 1: House committee investigating China's Communist Party. The conference will be
Speaker 1: held fully in person this year for the first time
Speaker 1: since twenty nineteen, before the pandemic upended business for Beijing.
Speaker 1: Live in New York. I'm Steve Rappaport, Bloomberg Daybreak. Thanks
Speaker 1: Steve While, the CEO of TikTok, had a long day
Speaker 1: on Capitol Hill, but it might not have gotten him
Speaker 1: any closer to assuring House lawmakers that the wildly popular
Speaker 1: app is safe for national security. Show Chow was asked
Speaker 1: repeatedly whether the Chinese Communist Party can access Americans data.
Speaker 1: I have seen no evidence that the Chinese government has
Speaker 1: access to that data. They have never asked us. We
Speaker 1: have no provided in a way I've asked it. I
Speaker 1: find that actually preposterous. I looked in. I have seen
Speaker 1: no evidence of this happening. Man. We got reaction to
Speaker 1: show choose testimony from Senate Intelligence Chairman Mark Warner, and
Speaker 1: I kind of feel for the CEO because he doesn't
Speaker 1: have an answer end of the day. TikTok is owned
Speaker 1: by Bye Dance. Bye Dance is a Chinese company. Chinese
Speaker 1: law as of twenty seventeen says every Chinese company the
Speaker 1: first obligation is not shareholders or customers. Their first obligation
Speaker 1: is they got to turn over any information or any
Speaker 1: kind of belity to manipulate content to the Commonest Party
Speaker 1: of China. Democratic Senator Mark Warner spoke on Bloomberg Sound
Speaker 1: On with Joe Math. You can catch the show weekdays
Speaker 1: one pm Eastern on Bloomberg Radio, or listen on demand
Speaker 1: wherever you get your podcasts. Right now, SMP futures are
Speaker 1: lower by two point Stown futures are down sixty one,
Speaker 1: and Nastack futures are higher by eighteen points. The ten
Speaker 1: year treasury is up twenty three thirty seconds now for
Speaker 1: a yield of three point three to four percent. The
Speaker 1: yield on the two year is at three point seven
Speaker 1: one percent. Straight ahead your latest local headlines and a
Speaker 1: check of sports. This is Bloomberg. It is forty nine
Speaker 1: degrees in New York. We got a chance for some
Speaker 1: showers tonight. We'll head up to the year fifty. So
Speaker 1: pretty much where we are now. Let's take a look
Speaker 1: at some of the other stories making news in New
Speaker 1: York and around the world. Good morning, Michael Barr, Good morning, Nathan.
Speaker 1: Students became ill at a Long Island high school. About
Speaker 1: two hundred and fifty students classes at Babylon High School
Speaker 1: on Monday. Absences were down to one hundred ten yesterday.
Speaker 1: About seven hundred students go to the school. The Suffolk
Speaker 1: County Health Commissioner believes the likely cause is no ravirus.
Speaker 1: There's a push in some New England states to help
Speaker 1: the police know how to deal with the drivers who
Speaker 1: have autism. Connecticut launched a Blue Envelope program for artistic
Speaker 1: drivers three years ago. Now Rhode Island is considering the
Speaker 1: same type of marker. Joanne Quinn has a twenty seven
Speaker 1: year old son with autism. She says those police sirens
Speaker 1: and lights will likely be a trigger and maybe even
Speaker 1: take off if he says, hey, let's get out of
Speaker 1: the car, and he'll get out of the car and
Speaker 1: then he'll start talking at him, and with the lights
Speaker 1: and noise going, Pat's going to turn and walk away.
Speaker 1: I can't be here. I need to go somewhere else.
Speaker 1: This is a century overload. How's that going to go
Speaker 1: over with a police officer? Meanwhile, opponents fear this kind
Speaker 1: of designation could lead to a breach of confidentiality. The
Speaker 1: Pentagon says a US contractor was killed and five US
Speaker 1: service members and another US contractor were wounded when a
Speaker 1: suspected Iranian drone struck a facility on a coalition base
Speaker 1: in northeast Syria. Defense Secretary Lloyd Austin says US Central
Speaker 1: Command Forces retaliated with precision airstrikes. North Korea says it
Speaker 1: has tested an underwater attack drone in its latest warning
Speaker 1: to South Korea and the US to stop their current
Speaker 1: military drones. According to state media, the weapon, fitted with
Speaker 1: a nuclear warhead would destroy enemies with a large radioactive wave.
Speaker 1: Analysts are skeptical. Secretary of State Antony Blincoln says funding
Speaker 1: for Ukraine should last for much of the year. Bloomberg
Speaker 1: said Baxter as the story. Blincoln before the House Appropriation
Speaker 1: Subcommittee says the billions already being approved as being closely watched,
Speaker 1: and the embassy in Ukraine, he says forty five people
Speaker 1: they're overseeing. This is a series of hearings focused on
Speaker 1: the budget request for an eleven percent increase. Some lawmakers
Speaker 1: have worried money is being lost to corruption and that
Speaker 1: other nations are not doing enough. B Lincoln telling the
Speaker 1: committee the US does have real burden, but notes the
Speaker 1: other nations are doing other jobs, like taking in refugees
Speaker 1: in San Francisco. I'm at Baxter Bloomberg. Day Break Global
Speaker 1: news twenty four hours a day, powered by more than
Speaker 1: twenty seven hundred journalists and analysts in over one hundred
Speaker 1: and twenty countries. I'm Michael Barr. This is Bloomberg Nathan.
Speaker 1: Thanks Michael, time for the Bloomberg Sports Update, brought to
Speaker 1: you by Tri State Auty. Good morning, John stash hour
Speaker 1: yead morning, Nathan. Not a good trip to Florida for
Speaker 1: the next they lost in Miami, followed a night later
Speaker 1: by a lost in Orlando. Knicks were without Jalen Brunson.
Speaker 1: They fell behind by nineteen. They did rally, but the
Speaker 1: Magic hit four late three pointers and one one eleven
Speaker 1: one oh six oh chance for the Nets to get
Speaker 1: to within a game of the Knicks for fifth of
Speaker 1: the East. At Barkley's Nets Buckley, they had a victory
Speaker 1: until three turnovers of the final minute. Cleveland, on a
Speaker 1: three pointer with less than a second ago, pulled out
Speaker 1: the win one sixteen one fourteen, sweeping the home and home.
Speaker 1: Rangers and Hurricanes played at home at home, each winning
Speaker 1: on the road. Rangers in Allie won two to one
Speaker 1: on an out of Bucks Bowl NCUBAA tournament in overtime
Speaker 1: at the Garden, Kansas State pulled out a ninety eight
Speaker 1: ninety three win over Michigan State. The Wildcats Marquis Snowel
Speaker 1: had nineteen assists. That's the most in any tournament game ever.
Speaker 1: He's a New York City native. This is probably my
Speaker 1: career high an assists. You know. Ever, I had a
Speaker 1: couple of games of fourteen, a couple of games of
Speaker 1: seventeen back in high school. But you know this one
Speaker 1: was special. In front of my hometown, in front of
Speaker 1: you know, the city, you know that loves me. I
Speaker 1: came here playing some worries. You know how blessed and
Speaker 1: grateful I am. Tomorrow at MSG Kansas State versus Florida Atlantic,
Speaker 1: a surprising East Regional final the owl small school from
Speaker 1: Boca Raton, Florida, but they've got a thirty four and
Speaker 1: three record. They upset Tennessee sixty two fifty five a route,
Speaker 1: then a thriller West Regional in Vegas, Yukon a third
Speaker 1: straight blowout victory for the Huskies eighty eight sixty five
Speaker 1: over Arkansas and Gonzaga, then top UCLA seventy six seventy
Speaker 1: three on a late three point shot. Four more games tonight,
Speaker 1: including Princeton seated fifteenth, taking on freighting that game in Louisville.
Speaker 1: John Dashaw Bloomberg Sports Live from coast to coast from
Speaker 1: New York to San Francisco, Boston to Washington, DC, nationwide
Speaker 1: on Sirius xamp, the Bloomberg Business App, and Bloomberg dot Com.
Speaker 1: This is Bloomberg Daybreak. Good morning. I'm Nathan Hagar. Markets
Speaker 1: are searching for calm on this Friday as we close
Speaker 1: out the most tumultuous two week stretch for the US
Speaker 1: and global financial systems in recent memory. A weekend of
Speaker 1: US regional bank runs was followed by a weekend that
Speaker 1: saw the collapse of Credit Suie capped off by yet
Speaker 1: another Federal Reserve rate hike this week. It's all left
Speaker 1: many asking what went wrong, where did it go from here?
Speaker 1: And should the FED shift its priorities from inflation to
Speaker 1: financial stability. Not to mention, many are left wondering if
Speaker 1: the Fed can achieve that soft landing amid all this turmoil,
Speaker 1: When we explored the bank failures and financial stress tests
Speaker 1: with some of the top voices in economic on a
Speaker 1: special episode of Bloomberg's Wall Street week Our, David Weston
Speaker 1: hosted that roundtable with former Treasury Secretary Larry Summers, former
Speaker 1: FED Governor Dan to Rulo, and head of Economics at
Speaker 1: Bloomberg News. Stephanie Flanders, let's bring you part of that discussion.
Speaker 1: I want to start with you, Dan. You were a
Speaker 1: colleague for several years of j. Powell. During the time
Speaker 1: you were on the FED, you had responsibility for banks supervision.
Speaker 1: We've been told the banks were so strong we didn't
Speaker 1: have to worry about it what happened here. We didn't
Speaker 1: think we still had banking problems. I trust that the
Speaker 1: largest banks truly are in the much better capital and
Speaker 1: liquidity position that Jay Powell referred to yesterday during the
Speaker 1: press conference. But I think there are some things that
Speaker 1: we do know. We know first that there was a
Speaker 1: significant supervisory failure somewhere along the way. Was that failure
Speaker 1: in the San Francisco Fed's inability to identify problems of
Speaker 1: growth and maturity mismatches? Is in the like early on?
Speaker 1: Was it a supervisory failure because of the light touch
Speaker 1: approach to supervision that the Federal Reserve Board had put
Speaker 1: in place over the last four or five years, Or
Speaker 1: was it a supervisory failure because the supervisors generally had
Speaker 1: not adjusted their method of assessing liquidity to take account
Speaker 1: of very high uninsured deposit concentrations. Coexisting with the capacity
Speaker 1: of big depositors to run at warp speed rather than
Speaker 1: the way they used to run. I also would not
Speaker 1: rule out a contributing factor being the twenty eighteen legislation
Speaker 1: in twenty nineteen FED regulation, both of which deregulated banks
Speaker 1: of under seven hundred or the regulation banks of under
Speaker 1: seven hundred billion dollars in assets the legislation banks of
Speaker 1: under two hundred and fifty. But I think in the
Speaker 1: most immediate sense this is clearly a supervisory failure. Other
Speaker 1: factors may be uncovered as the FED Zone investigation proceeds.
Speaker 1: So Larry, let's put you back at the Treasury or
Speaker 1: for them, or at the White House. If you were
Speaker 1: looking at this situation, what questions would you be asking
Speaker 1: to make sure you understood the possible ramifications of what
Speaker 1: we've seen so far in a broader financial context. Before
Speaker 1: I answered, Before I answer that hypothetical, let me put
Speaker 1: a question to my friend Dan, who I'll just say
Speaker 1: I think did an enormous amount to strengthen our financial
Speaker 1: system during his time at the FED. Dan, I've heard
Speaker 1: it said, and I don't know that. Even in twenty
Speaker 1: twenty two, the FED stress tests that were applied to
Speaker 1: the largest banks did not include an analysis of the
Speaker 1: stress from a major interstrate hike. If that's true, that
Speaker 1: seems kind of bizarre from the point of view of
Speaker 1: the world of early twenty twenty two, when it certainly
Speaker 1: many people, certainly me on David's show, were emphasizing that
Speaker 1: there was likely to need to be very substantial increases
Speaker 1: in interest rates. Can you say something and if the
Speaker 1: stress tests weren't considering increases in interest rates, then perhaps
Speaker 1: the exempting of Silicon Valley Bank from the stress tests
Speaker 1: was not central to understanding the problem. Can you say
Speaker 1: something about interest rate hikes and FED stress tests? Sure? So,
Speaker 1: First off, I think Larry, I agree with the statement
Speaker 1: you made towards the end of your question, which is actually,
Speaker 1: if Silicon Valley had been in last year's stress test
Speaker 1: FOREL rather than its stress rehearsal, I don't think it
Speaker 1: would have made much difference, for precisely the reason you
Speaker 1: say that they weren't stressing the things that were the
Speaker 1: SVB vulnerabilities with respect to stress testing. Generally, over again,
Speaker 1: over the last five or six years, the stress test
Speaker 1: has become eminently predictable. The scenario that's used is now
Speaker 1: a single scenario, which is essentially a variant on the
Speaker 1: very first one we put in some years ago. That
Speaker 1: is a severe, quite severe recession, but it follows the
Speaker 1: basic pattern of the scenario that was developed when we
Speaker 1: began doing the annual stress test. The scenario, of course
Speaker 1: includes a reduction in interest rates because of the hypothesis
Speaker 1: of a recession and the Fed's reaction. When I was
Speaker 1: at the FED, we were using also an alternative scenario.
Speaker 1: It's called the adverse rather than severe, adverse scenario, and
Speaker 1: we use that scenario to test things other than the
Speaker 1: prototype of the severe recession, And indeed we used it
Speaker 1: at least one year, and I think a couple of years,
Speaker 1: to test what would happen with unusual changes and interest
Speaker 1: rates which were not then anticipated. So to some degree,
Speaker 1: the answer to your question is like supervision. Generally, the
Speaker 1: stress test has become less rigorous over time, and I
Speaker 1: think more importantly, it's become too predictable. And the whole
Speaker 1: purpose of a stress test is that you're trying to
Speaker 1: stress against the unanticipated, not the anticipated. At the risk
Speaker 1: of preps being too tough on your former colleagues at
Speaker 1: the fair, you talk about predictable versus unpredictable. I would
Speaker 1: argue that at a very minimum, the stress tests ought
Speaker 1: to consider what is the major risk of their moment
Speaker 1: When you were at the fed DAN in that period,
Speaker 1: I think it was reasonable to think that the major
Speaker 1: risk was a tilt towards recession and deflation. But I
Speaker 1: don't see how anybody last spring could have thought that
Speaker 1: the major risk was anything other than a spike in
Speaker 1: interest rates. So a process that didn't consider as a
Speaker 1: risk seems to me to be a profoundly problematic process.
Speaker 1: It seems almost like the supervisors were mailing it in.
Speaker 1: Is there a defense? I would say, first, this is
Speaker 1: not by way of defense, or certainly not an apologia,
Speaker 1: but just a bit of explanation. It's quite likely that
Speaker 1: the scenario development was taking place in the latter part
Speaker 1: of twenty twenty one if it was going to be
Speaker 1: the twenty twenty two stress test, And of course this
Speaker 1: is the period in which the FOMC was still figuring
Speaker 1: out that the inflation problem was not transitory. But I
Speaker 1: don't want to use that as a kind of exculpation
Speaker 1: of the supervisors. Second thing to say is it's not
Speaker 1: the supervisors meeting the staff who are making the policy
Speaker 1: decisions as to what kind of stress tests to have,
Speaker 1: whether they have multiple scenarios, that's a decision of the
Speaker 1: Board of Governors, and so it rests with them. But
Speaker 1: I agree with the gravenment of your remarks, which is
Speaker 1: not to have tried to think about something other than
Speaker 1: the same scenario is a failure of supervision in and
Speaker 1: of itself. Stephane, you've worked at the Treasure United States.
Speaker 1: You also have covered financial markets and other business issues
Speaker 1: over in Europe for a good long time. One thing
Speaker 1: we're hearing from both Larry and and is rates were
Speaker 1: going up and there weren't just going up here, They're
Speaker 1: going up over in Europe as well. Was what we're
Speaker 1: seeing around now in the banking system. Maybe not the
Speaker 1: specifics of Silicon Value Bank, but was something like that
Speaker 1: almost inevitable. After we've pumped so much money in the system,
Speaker 1: we start taking it out, there's going to be stress,
Speaker 1: real stress, and there's going to be some failure. Yeah,
Speaker 1: And I wish I was I was closer to you guys,
Speaker 1: because I knew I was going to struggle to get
Speaker 1: a word in with you too. But I think in
Speaker 1: this conversation, I think it is important when we're thinking
Speaker 1: about what the implications are. You know, you have to
Speaker 1: distinguish what is an outlier about not to Silicon Valley Bank,
Speaker 1: but others that have got into trouble in this episode.
Speaker 1: What is fundamentally a regulatory stupidity, you know, a very
Speaker 1: traditional problem the interest rate risk that was just hiding
Speaker 1: in plain sight, and what is a genuinely new issue
Speaker 1: which was not being fully taken into account by anyone
Speaker 1: looking at the risks. And I think when you look
Speaker 1: at something like Silicon Valley Bank, you know clearly it
Speaker 1: was an outlier in the speed with which deposits have
Speaker 1: been built up, in its massive exposure to uninsured deposits
Speaker 1: and reliance on that for funding. I hope it was
Speaker 1: an outlier in not having a chief risk officer for
Speaker 1: nine months, which was an extraordinary state of affairs. But
Speaker 1: what was very traditional about this, and as the discussion
Speaker 1: with Larry and Dan is suggesting, was that you know,
Speaker 1: right here was a massive interest rate risk that was
Speaker 1: whether or not it was in the stress test was
Speaker 1: something that central banks should have been thinking very hard about.
Speaker 1: And I think it was sort of striking that. We
Speaker 1: had a lot of the debate around this, what are
Speaker 1: the hidden risk You know, all the conversations that you
Speaker 1: will have had, David, when you ask regulators what's keeping
Speaker 1: you up at night, they would always talk about private equity.
Speaker 1: They'd talk about non bank shadow banking. Has been the
Speaker 1: thing that people were you know, was this worry for
Speaker 1: all these years, and in fact it was the most
Speaker 1: obvious problem sitting on bank balance sheets as a direct
Speaker 1: result of monetary policy actions by central banks that has
Speaker 1: actually caused this issue. I would just say, though one
Speaker 1: of the reasons maybe they weren't looking at that so closely,
Speaker 1: or that'd be interested to know what Dan and Larry
Speaker 1: think about this. You know, there is an element of
Speaker 1: this which is new, and we see in the speed
Speaker 1: with which deposits left these institutions, and that's the non
Speaker 1: stickiness of those deposits. And I think, you know, one
Speaker 1: of the things that regulators were thinking when they looked
Speaker 1: considered interest rate risk potentially was that there was a
Speaker 1: sort of self hedging mechanism in a bank of the
Speaker 1: fact that deposits would be slow to move if they
Speaker 1: weren't being paid the higher interest rates. That is no
Speaker 1: longer the case, and I think that probably does have
Speaker 1: longer term implications for regulation and potentially longer term implications
Speaker 1: for how much we ensure deposits. We had a decision
Speaker 1: from the Fed this week to raise another twenty five
Speaker 1: basis points. Some people had been urging that actually they
Speaker 1: just hold given the difficults with banking. At the same time,
Speaker 1: he Jap admitted that there's more uncertainty about the extent
Speaker 1: of which what's already happened with financial conditions may have
Speaker 1: essentially imposed or the rate hike already. Did they get
Speaker 1: it right? Dan, from your point of view, did j
Speaker 1: Pal get it right? Market expectations helped him. They had
Speaker 1: sort of converged around twenty five basis points, and so
Speaker 1: then it became a communication issue. He said, quite explicitly,
Speaker 1: it's too soon to tell how monetary policy should respond
Speaker 1: to the anticipated credit tightening. But I actually think their
Speaker 1: actions yesterday were a fairly significant response. I mean, everybody,
Speaker 1: three or four weeks ago, people are anticipating a fifty
Speaker 1: basis point increase. We got twenty five. Three or four
Speaker 1: weeks ago. We thought we might see the step suggest
Speaker 1: a ceiling of five to seventy five or six percent interest,
Speaker 1: and now we're back to exactly where they were in
Speaker 1: December at last December when they did the last SEP,
Speaker 1: and of course they changed the language on the forward
Speaker 1: guidance type language. Instead of ongoing increases, we're back to
Speaker 1: may have some firm And of course some people were
Speaker 1: reading that as the end or close to the end
Speaker 1: of the tightening cycle. So I actually thought that they
Speaker 1: were conveying more of an assessment of the impact than
Speaker 1: Chair Palace suggested in his remarks yesterday. I think what
Speaker 1: they did was broadly appropriate. It was a time for temporizing,
Speaker 1: because there's a lot of uncertainty and a lot of
Speaker 1: cards are going to be turned over in the next
Speaker 1: several months. And the question then was just temporizing mean
Speaker 1: stopping all rat increases. And I think if they had
Speaker 1: done that, it would have sent actually a signal that
Speaker 1: they were very highly alarmed and would have been a
Speaker 1: mistake whether to continue precisely on the path that they
Speaker 1: were on before these banking concerns arose. I think that
Speaker 1: would have seemed almost oblivious to what was a potentially
Speaker 1: gathering storm. And so I think, as Dan suggests that
Speaker 1: a middle ground path was right, and it was particularly
Speaker 1: right if the policy is going to be signaling in
Speaker 1: a clear way that even if your bank fails, you're
Speaker 1: going to be a depositor as well. But yes, I
Speaker 1: think what they did was broadly appropriate, particularly if we
Speaker 1: can be sending reasonably strong signals of confidence in the system.
Speaker 1: This is Bloomberg Daybreak Today, your morning brief on the
Speaker 1: stories making news from Wall Street to Washington and beyond.
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Speaker 1: here on Bloomberg Daybreak