>> stabilizing solution was absolutely necessary. this solution is the takeover of credit suisse by ubs. >> this was not the best solution but it dominated the other two. >> we just need to see with the sentiment is out there. >> companies are levered and well managed but when things get exposed or moved, it moves quickly. >> it is going to bring down inflationary pressures.

i am anxious to see what the fed does on wednesday. jonathan: if you enjoy the weekend? it's like we never left. from new york city, for our audience worldwide, good morning, good morning. equity futures unchanged on the s&p 500. ubs after securing a deal, the stock is down 8%. lisa: could this be enough to shore up confidence in european banks and confidence more broadly that officials have whatever is going on in the banking system contained? it seems like the plenary answer is not yet, in terms of risk aversion. jonathan: the question is whether we have found a solution or created a monster. have we created a monster? lisa: is this about risk aversion, what do they know that we don't or is this a monster of

moral hazard and questions around what instruments you -- what instruments do and a question of the bailout mechanism of a lot of officials that have previously said that would never happen again. jonathan: kbw has cut ubs and they say considerable uncertainty around earnings trajectory. this is from bank of america saying the logic that was called impeccable and the cost energies could be substantial. that is the constructive view. lisa: a lot of people are saying this is going to be a very positive thing and a good deal for ubs now they have a backstop in a number of guarantees from the swiss government. there is a question about ubs's liable stream of crumb -- of income. jonathan: there is so much we don't know about the situation

currently. in the equity market on the s&p 500, equity futures just slightly negative, down .2%. in the bond market, we have been saying this market is screaming to the federal reserve. the two year yield down 10 basis points. lisa: a different kind of look ahead this morning as what we are looking at is central banker's response to what is going on in the markets and to risk appetite as well as what is going on with the banking sector. christine lagarde will speak to both of those issues. what is she saying now? does she feel confident about her decision to raise rates by 50 basis points and coming in with alternative measures to shore up confidence in the banking system? a host of amazing guests. bruce cast men, william dudley.

leanne cooperman of omega advisors weighing in on how they see this shaking out and credit conditions tightening out. this sets the stage. what does jay powell do tuesday and wednesday? right now, the market is saying they are done. you are seeing the question not do they raise rates but do they cut rates and how quickly? jonathan: good luck to them. it ecb is basically putting us in forecast and everyone is saying, if baseline holds, might have to do more but if the baseline holds, it is a pretty big if, isn't it? lisa: did in a look at the ecb projections and take them seriously? jonathan:.

-- no. 11 u.s. banks come together and put $30 million. this morning they are down another 15% in premarket trading. lisa: after s&p downgraded them again over wars of flight of depositors. what will it take to shore up confidence in regional banks? jonathan: not much confidence there. the lead story is quite it swiss and -- credit suisse and ubs binds the longtime rival. francine lacqua -- credit suisse and ubs buys the longtime rival. francine lacqua has details. francine: we know it is going to cause ripple effects.

given the credit lines and loans in the fresh capital they have in terms of the at1s, is this big enough to deal with anything they find within credit suisse? the investment bank could be problematic in the unwinding some of what credit suisse has, especially in london will be costly. we just look at market share price reaction and found reaction on the back of that we have never seen anything like it it could prove to be a mistake. lisa: much pushback has there been about certain equity investors received a something, even those -- even though these bondholders have been wiped out? francine?

i asked yesterday and had seven of the most power people in switzerland in a panel. the two chairman for credit suisse and ubs, regulator, a swiss finance minister and that is what we asked, what was the reasoning in whitening -- wiping out at1s. they said it was risky assets and that is how they decided to do it but is this the only way ubs has to deal with anything else in what is the market reaction in the next couple of days. bondholders being reminded this can happen to any bank. this went so quickly. it six days ago we haven't -- had an interview at a record low but fully capitalized. when you lose control and market confidence drops, what are your options that is some of the markets will be asking around the world. jonathan: m&s reporting --

tremendous reporting. looking across the european bank complex. deutsche bank down 3%. no real, just yet. joining us is max. are you feeling more confident? next: i feel more confidence after what happened last week. i would feel more concerned if we had sentiment and positioning much less downbeat. i have been listening to you show for the last eight minutes and there are a lot of positives and i think that is a fair statement and will be look at

technicals, strength in risk assets, we look at equity futures, down. across the asset classes, bears risk sentiment singles -- signals. what has been happen over the last week as sentiment has gone and it is going to bearish levels. i would be very careful to throw in the towel. we are still holding onto the constructive view because the deeper scented -- sentiment looks better now. lisa: let's put more specifics around this. are you saying you are going out and buying european banks to move counter to the zeitgeist we see out there?

max: more banks are looking attractive. if we look at the relative performance over the broader market and the performance of banks over tech, that is back to the covid highs and where we were at the busy heights in 2020 and real rates went down to almost record negative levels. we look at the broader bank performance in europe and the u.s., when we look at that against u.s. treasury yield and financial conditions in particular, it is priced for the second sharpest deterioration in financial conditions already. from relative perspective, i would say nothing has happened. there is more divert pain to,. we are getting close to attractive entry levels. jonathan: yesterday the first

cut was said to come in september. and then it was said there would be a hike and in the s&p, he thinks 5.25 to 5.50 what are you looking for? max: there is one rule -- don't overdo things, change too much, particularly for policymakers. what you really want is a 25 basis point hike. i agree with what was said before, has anyone looked at the projections from last week that the ecb, not much. you don't need over action. what i was -- would do is what i'm waiting for is a 25 basis hike and not much change and flip-flopping in opinions and

lowering but a study ship sink we have managed to contain it so far, we can press ahead with the inflation part and we don't have to be as aggressive as we have been a couple months ago. if we talk about restoring confidence, the number one role in restoring confidence is a steady hand and a steady shift and don't overdo it. jonathan: thank you for your thoughts. i would say two days is a very long time and this moment with today's to go up for the fed decision. lisa: he is saying he likes banks here. he is a contrarian. jonathan: he is sticking to it. equity futures just about positive on the s&p.

lisa: shares of ubs are lower after they agreed to buy credit suisse in an start deal at contain a crisis of confidence. ubs is bringing $3.2 billion in an arrangement that includes extensive government guarantees and quiddity. the price per share marks a 99% decline for a suisse's all-time high. u.s. regulators moving toward a breakup solution for the collapsed silicon valley bank. the fbic is looking to sell it in at least two parts. the chinese president xi jinping is making his first visit to russia since the invasion of ukraine. it is a strong show of support for vladimir putin.

xi jinping is likely to discuss his plan to end the war. president emmanuel macron faces two confidence votes over his pension reform. last week he used a constitutional provision to push through the plan to boost the minimum retirement age from 62 to 64. that led to violent protests. the french government says a no-confidence vote won't get a majority in parliament. global news 24 hours a day, online and at quicktake on bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i'm lisa mateo. this is bloomberg. ♪

>> people are doing something that probably is not rational but totally understandable, which is then moving deposits and where they are moving has its out of are the smaller and medium-sized banks into the larger banks. that is not going to stop overnight. there will be a lot of repricing in the credit segment. this is going to be bumping moving forward. jonathan: that was mohamed el-erian weighing in on the

solution with ubs and the banking scenarios playing out worldwide. equity futures unchanged. yields lower by seven basis points on a 10 year, 3.3541. if fed decision wednesday, will we get 25 or nothing? what do the projections look like? i want to look at ubs, down 7% at the moment but basically a session i the stock. it was down as much as 16% early on in the session. the other name we need to talk about his first republic here on this side of the atlantic. i keep going back to the news of last week, 11 banks trying to restore confidence and depositing $30 billion in the stock dropped by 33% in friday's session. it is down another 15. lisa: it is a confidence game.

and what has happened has not restored confidence. the credit rating agencies have been downgrading in real time and with market pricing. how do you entice flows back into a bank that relies on them to execute lending they are known for? jonathan: with great difficulty. it sized banks, we were talking about it yesterday, midsize banks lifting them. lisa: on one hand, it gives depositors confidence but on the other hand, why would they need it. how do you restore confidence when any suggestion of a remedy suggests a problem. jonathan: as we try and work our way through, this is what s&p said yesterday about first republic. i thought this line was scathing

. attracting meaningful deposits will be difficult. how do they turn that around? >> thank you for having me. time will turn it around. they have focused very successfully on the large depositor and those depositors as we have seen have been moving out. we have seen some results and i know that it is not that close and results will come up in mid april but we need to see where the deposit levels are. was a big banks deposit 30 million into the banks and we anticipate as confidence comes back to this company, because the company has made incredible profits over the years, the credit quality is superb but that the miss max -- mismatch. lisa: some people point to fear of deposit outflows or catharsis

as one called it. the borrowing levels rising to levels we have never seen before , that exceed what was at the peak of 2008, one of the crisis measures. what do you make of that? gerard: it is really interesting because the numbers were extraordinarily high on thursday and they were released. first republic pointed out they were into the window at one point for $100 billion last week and the totals were 152 billion. the number was large and i suspect two or three banks, first republic, silicon valley as well as signature were probably the bulk. when we talked to the regional banks, we are seeing no evidence of deposit flight. is there some deposits leaving, that is relatively normal.

i understand the concern and people saying the small banks are going to lose deposits, for the march 8, before the crisis started, deposits were up for the small banks. we will see what happens this friday. lisa: do you feel that this idea of a credit contraction amid smaller banks has been overstated and that these banks will continue lending as they had because they haven't had the positive outflows people are talking about? gerard: i think you are right and i know it is contrary to what everyone is saying, but banks are lending based on the economic activity in their respective markets. we have to remember, many of the banks in deposit ratios are nowhere near the highs we saw pre-financial crisis when the numbers were in the low 90% range. many were in the mid 70's to low

80's, plenty of room to lend if they choose to. if we are talking about columbus, ohio, intel is building a new $30 billion plant , far different in columbus than silicon valley this morning. jonathan: you see the numbers, daily outflows $10 million a day. lisa: which is the reason why they had to come up with a solution immediately because they are not just hemorrhaging clients. jonathan: how close are we to the lanxess -- likes of bank of america and j.p. morgan saying we don't want more? gerard: it is a concept here the big banks are receiving inflows and we will see their numbers in april. the money at credit suisse was dramatic in terms of what was coming out every day. it is going into banks that are considered to be well-managed, high levels of capital and liquidity. the bigger banks which includes

regionals, we are talking about banks with 150 down -- 150 billion and they are considered as big banks as well. we are seeing deposit inflows but the biggest banks by far will get the most. jonathan: a two-tier banking system is a concept we have heard over the past two weeks. people want to deposit cash and another part they don't want to go near. is there another way to look at the banking system in america? gerard: i think it is too early to jump to that conclusion. you may be right if we are talking in six months but i think it is early to jump on that because the banks in america are woven into the fabric of this country and i don't expect to see the smaller banks, commercial customers who they have known for years with very tight relationship with banks pulling all their money out because it is a small bank.

i think it is too early to jump to that conclusion. jonathan: can you live your shot up after you leave. a dog in front of an open fire, the sun is coming up, the water. lisa: i want to be there so i don't have to think about my life. [laughter] jonathan: thank you for that. how relaxing is that? you can listen to the soothing words of gerard cassidy and then the dog walked in and he is not going to bark. he is chill. nothing chill about this market. first republic down 17% in the premarket. i am sure a lot of people thought the actions write a broad confidence but not seeing it this morning. lisa: i don't know for can take a signal from that. i don't know what we can take a

signal from the what we are seeing is definitely fear pervading the financial system. i think the wipe out of bounds, i know it sounds esoteric, it gave larger freight to what else could potentially get wiped out as central bankers and authorities tried to bail out some of these banks? jonathan: ring what bruce katzman is doing, trying to find a zoom. lisa: something to compete. jonathan: equity features on the s&p, a touch negative, no drama. yields heading in one direction, and that is lower. the two-year is down seven basis points. a couple days away from chairman powell and the fomc. ♪ hey david! connect with an advisor to create your personalized plan. let's find the right investments for your goals. okay, great. j.p. morgan wealth management.

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and your store was also the first time you realized... well, we can do anything. cheesecake cookies? the chookie! manage all your sales from one place with a partner that always puts you first. (we did it) start today at godaddy.com jonathan: live from new york city, welcome to the program. i'm jonathan ferro alongside lisa abramowicz. tom will be back in a week. equities unchanged on the s&p 500. on the nasdaq, of every single day of the week. closing higher by almost 6%. we are back to that in the equity market. lisa: again, i cannot create a narrative. at what point to people look at

the prospect for fewer rate hikes from the fed or cuts at least by june? we heard max kettner saying if you thought things were ok a month ago but things are better now. you have people coming out on that side and others say we don't know there will be credit tightening that hadn't been foreseen and his new. jonathan: on the two-year, down another seven or eight basis points, 3.76. on a 10 year, down seven basis points 23.3560. the ecb give the playbook to the fed, hike and talk about the baseline. if it holds, and no i deal with the baseline is and how much it has shifted. euro-dollar close to 1.07. the fed might say they are data dependent, on which data? on bank stocks?

ubs after a tie up with credit suisse, the stock is lower by 6.6%. it was much lower earlier in the session. 7% lower of the back of this is maybe not a story. looking at european banks, bnp down for. i will stay -- down four. first republic down 18% in the premarket. two mondays ago, this was a $123 stock period friday it was 23. this 20 in the premarket it is a sub 19. lisa: is first republic a specific story unto itself as it gets downgraded again and again for is this something that represents the lack of faith in midsized banks that has yet to be restored? that will be parsed out throughout other stocks in the day. jonathan: port-a-let lack of

faith in credit companies -- what about a lack of faith in credit companies? lisa: they got a lot wrong. this isn't a new phenomenon here. they are following the market but at the same time, you said this yesterday, it matters for people who track ratings and are forced to buy or sell on whether things are applicable to the indus -- indices. jonathan: the kind of double down and make it a little more aggressive because the language used yesterday, we do not view this deposit infusion as a longer-term issue to the long-term funds? 11 banks got together and dropped 30 million into this institution. the line here, constraining the banks business position and what are they saying there? lisa: can't get in rating

agencies' heads but it goes to the fundamental question which is is based on faith and the idea of confidence they will be able to give your deposits back when you want them. that is the question for so many people. how do you trade around something that depends on sentiment that can be swayed by different events? jonathan: i have no idea what your base case is but it has shifted in the last couple of weeks. there are two assumptions, the banking issues will lead to tighter lending standards which will lead to tighter financial conditions and stop the growth. one put a number on it over the weekend which is difficult to do. here is the number, he said quantifying the impact of tighter conditions plus tighter lending standards, estimate the events the past week corresponded to a 1.5% increase in the fed funds rate, the risk of a sharper slowdown in the

economy have increased. bruce katzman joins us. wonderful to catch up with you. how difficult is it to equate the events of the last week with a shift in the fed funds rate and a hit to gdp? bruce: i would try to touch that with any confidence at this point. we don't quite know what the event is in terms of how far-reaching and stressful it is going to be for broader financial conditions. at the second point is that we do have a good sense that credit conditions in the u.s. will be tighter and we also have a good sense the fed will be somewhat shallower than it would be otherwise. the other thing we should recognize as we were coming into this event we were watching news telling us in place it -- inflation was persistently higher that growth momentum was healthier in the u.s. and globally than we thought. it is an very complicated

environment. the risks to the downside increase. i wouldn't go as far as quantifying it. i don't think the fed will be there on wednesday in terms of making its decisions. lisa: he didn't have much of a weekend i assume you have been on calls consistently with all the clients and peers trying to understand what is transpiring. what did you tell people and where was your conviction as you fielded these questions? bruce: part of my conviction was not to be confident and understand the event your we have increased the tail risks to the downside but we should recognize the fed will to less and while credit conditions will tighten, monetary conditions will probably proved to be easier. also to understand the economy has come into this with somewhat greater momentum than we at the fed had expected. the other point i would make is that unless we are in the midst of an outright crisis where

credit conditions are seizing up, this event of tighter credit is likely to play out over months and quarters. lisa: what is your concern we will see an ongoing heat in the inflation data and the economy is going to have so much mental that perhaps we have underestimated how that inflation could be persistent as we talk about the disinflation of a credit typing that hasn't happened yet? bruce: our view has been that inflation is coming down this year but will not be sufficient to be satisfactory to the fed and that is what we are tracking in the numbers. if you have a recession starting anytime in the next three to six months, that will do a lot of the fed' job -- fed's job. if we have inflation holding an elevated, the risk that the fed even if it pauses that it has to come back and tighten again is still there and we shouldn't

ignore that. jonathan: where we are pricing right now. bruce: there is a risk and more elevated risk was light into recession. if that happens the fed will ease if not much or more than the market is pricing in. i would not put that as the only scenario that could play out and if we don't go into recession in the next few months, the fed is not using and we have to realize the case for the fed easing is on the back of a financial crisis or sliding into a recession. jonathan: how big is the secular component to the inflation story? bruce: i think there is a loss in terms of supply in the u.s. labor market and ships have gone on in supply around the world that is different and those will add it secularly to inflation. i think the psychology has shifted. i don't think if we try to figure out where underlying

secular inflation is we would have a number higher than somewhere in the mid-threes or close to four. i don't think it is as low as two which is where we were averaging before the pandemic shocks hit us. lisa: reflected with the political aspect at the federal reserve and what that means for the fight against inflation that you feel will be higher than had been recoded and the past three years. with all the pushback from congress and oversight and lack of supervision of silicon valley bank, this potential question around how the fed responds to both that and inflation is their priority, what do you think is the likely political readthrough of these actions? how compromised is the fed in their mandate? bruce: i think the fed still has all of the independence it needs to act here. there is political influence. i don't doubt that, but i think the fed will more likely or not

move 25 basis points on wednesday. that is a relatively clean decision weighing the stresses we are feeling with the continued sense they have to fight to contain inflation. going forward from here, they will probably say let's wait and see this. i think the guidance this week will be open as to what happens next and we will see where we are in three or four months. if the economy is in recession they will ease and if it is well above 3% i think they will tighten this year and the risks have shifted more and the direction of a recession but not at this point decisively so. lisa: do you think jay powell is arthur burns or paul forkner -- paul volcker? bruce: let's hope neither for our six. -- neither for our sakes. jonathan: that is bruce kasman

with us. i asked this question, never mind burns and volker, hiking rates into a crisis, is that the risk they run here? lisa: they run every risk. what we heard is a complete lack of certainty with everything. that is what we hear from everyone with humility and honesty that this is so greatly uncertain with incredible binary potential duality of outcomes. you have the potential for a sooner recession and on the other hand recession gets pushed off because the fed doesn't do much and then they ease and then they perhaps have to re-tighten, perhaps around the burns where we saw in the 1960's and 1970's. jonathan: the conflict between all of these different things, financial stability, price

stability, making sure they don't bludgeon the labor market. that is coming together at a difficult time for chairman powell. lisa: gerard cassidy that he is not seeing the withdraws from the mid-sized banks. if you had someone say, look at all of this, this is just truly an idiosyncratic issue. maybe the fed could raise rates by 25 basis points and hold and try to understand more and make a move. jonathan: to sit here and say every single weekend after a bank has effectively failed that we have to keep calling it idiosyncratic. how many banks do you need to say we have a broader problem? lisa: perhaps we need different language. how many could potentially be susceptible to this similar type of activity? maybe that's fair. jonathan: this is bloomberg.

♪ lisa: with the first word, i'm lisa mateo. central banks endorsing credit suisse's bio by ubs. u.s. treasury secretary janet yellen and fed chair the news and said capital and liquidity of u.s. banks is strong. the european central bank and bank of england also endorsed those moves. signature bank deposits have been taken over and some of their loans. they collapsed earlier this month. 40 branches will operate at flagstar bank starting today. the fbic -- fbic has it valued at $40 billion. jump' is claim that he will be

arrested tuesday -- trump's claim that he will be arrested tuesday has supporters. the rupee union set to agree on a plan to send ukraine million artillery rounds over the next year. the foreign defense ministers reaching a new -- an agreement. global news 24 hours a day, online and at quicktake on bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i'm lisa mateo. this is bloomberg. ♪

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>> the markets are hunting. it is looking for any weakness

across financials and so whether it is fractional or not doesn't matter. it has the tendency of taking a life of its own and that is where we are at right now. jonathan: a guest on the program last week said it was seek and destroy. that was greg peters yesterday evening on our special coverage on the deal between ubs and credit suisse. equity futures slightly positive by .1% on the s&p. all eyes on ubs trading in switzerland, down hard now down 4% or 5% so recovering as the day progresses. first republic is down 17% in the premarket. this has become problematic given the hopes that we had a solution last week to restore confidence. lisa: into clients on top of all the measures that have already place is the issue. we are asking, where does it end but also what do regulators and

what do these officials have to do if all measures they have taken so far haven't been enough? jonathan: wonderful to catch up with you. the developments overnight. what did you make of the tie up and the fallout in certain parts of the market? >> the new credit suisse needed some form of rescue and ubs had been in the headlines for a while. the surprise was they were losses for the riskiest bondholders. it is a long time since we have seen something like this and we have seen repricing of risky debt and high-yield debt in europe that is widespread this morning. the question is whether that is a repricing or reset or whether we move on to different banks and it doesn't stop with credit suisse. the difference from 2008 is in

2008 we had the entire banking system loaded with mortgage bonds that we couldn't value. this occasion, it is more a liquidity issue and entities have liquidity issues but not the same type of asset losses that are hard to quantify. we have losses on bond links but those are very easy to value. that is the difference. we will have to watch where it is and whether the european banking system is actually starting to look more resilient than the u.s. system which is impacted by the regional issue. lisa: do you buy that? we are not seeing that in the market activity in terms of how much certain european banks have a soul off. do you think european banks -- sold off. do you think european banks have a more optimistic approach than the u.s. banks? jens: i think we have in europe

more concentrated banking systems where it is typically two or three big banks in each country that, for the assets. in a situation where it is good to have implicit government backstop, is a good thing. in the u.s. we have a fragmented bank system where half of the assets are in the smaller banks and we don't have any explicit backstop. the dodd-frank relation said we aren't supposed to have any backstop that nature. that is the difference. we clearly have erratic positive dynamics in the u.s.. as we can see in the fed data last week. in the year up market we haven't seen that yet. the confidence shock out of credit suisse, we need more time to assess whether that was specific or will migrate into the euro zone banks as well. so far the jury is out.

investment grade credit is coming back in the last couple of hours. i think that is with watching. lisa: you were talking about the contingent capital bonds. yesterday they were talking about who are the holders of these bonds and taking down the losses, pension funds, foundations, big institutions that will reduce risk elsewhere? what is your view on that? jens: i think that is really important. that is why i have the credit indices at the top of my screen today so we can see everything in the risky part of the credit structure that makes sense. if you look at ig credit, we will have contagion into that space and we were down a lot a couple hours ago and now we are coming back. if the contagion is limited to the most risky part of the capital structure, that is a

source of resilience. i think you can also see within the bank stocks it is really the riskiest banks that are seeing tension and the other ones, high-grade banks starting to come back as well. it is quite nuanced. we have to separate what is a liquidity situation that can be addressed and what are the underlying solvency issues. european banks have been trading the best in years until the silicon valley bank problem. it is very different situation. jonathan: this financial instrument we are talking about, the security, this was an important tool to attract and raise capital for the banks and ultimately restore confidence and the european banking system to make everyone understood they were well-capitalized. this is meant to be the reset for the banking, high rates,

better economy, better story, flow coming back into the euro zone. i wonder how it is reset for you. jens: i actually would stress the biggest change in capital flows in europe is that we used to have zero negative rates and a steady flow out of your into fixed income. with interest rates 3% or 4% in the euro zone, investment managers in the euro zone don't need to go abroad to get fixed income exposure. that money cannot stay home and obviously we'll see what the ecb does and if they continue to raise rates that will become more and more powerful and will be euro supported and could beat negative for other places where the money used to go. that is a key thing to watch and could be important.

jonathan: so euro-dollar, are you thinking about the high ceiling? jens: if we can avoid continued banking instability, the ecb will continue to grow. that is the path they want to go down and we will see if the market allows them to. if they continue to go down that path and we don't have severe instability, that could be a source for support. jonathan: when they say data dependent, do they mean the price of bank stocks? jens: there is no doubt we essentially watch the growth and what is going on in the financial sector. that is what is new. jonathan: monetary policy is banks cap dependent with data. that is wonderful. thank you. if you believe we are bank stock dependent, then two days is a long time going into the fed

decision. lisa: we are bank stock dependent and we have the michigan sentiment dependent. it is a moving target and that is what makes it so difficult. data dependency is tricky to get your hands on when the data keeps switching on the importance and frequency. jonathan: story in the wall street journal, did it feel easy? lisa: they were getting it right. i wonder how much the euro rips if we see the fed hold rates where they are on wednesday after the 50 basis point rate hike from christine lagarde last week. . jonathan: is that a global contagion story were people start to get worried? reason i ask this and i know that smart people say that is not how it is going to work and how they think, we reported last week that is precisely how the

ecb went about conducting policy last week. lisa: i don't think anyone would question why you would say that because everyone knows how much this is a game of psychology. what i would say is it seems like right now there is an unknown about how the market responds to the central bank moves. you said it depends on why. there is a beleaguered sense of if you know what they are going to do, most the response and how it will play out in the market. they are dependent on something that is dependent on them and psychology. this is a cycle. jonathan: you will drive yourself nuts. lisa: i already have. jonathan: the other name to watch is first republic, down 21% in the premarket after falling 33% on friday's session going into the close. trading around 18 in the premarket. don morris will join us with

equity futures on the s&p 500 looking like this, positive.1%. ♪ go. go lights. go big city lights. go spotlights. go stadium lights. emerson software helps clean energy become reliable electricity. go “good night." go boldly. emerson. this is ge vernova, helping generate and move the energy that our world needs.

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>> the solution was absolutely necessary. this solution is a takeover of chris reese by ups. >> this was not the best solution but is dominated the other two. >> the banking sector runs on confidence. we need to see what the sentiment is. >> the system is very fragile. i think they are well-managed

but when things get exposed or moose, it moves quickly. >> it is going to bring down inflationary pressures. i am anxious to see what the fed does on wednesday. >> this is global news 24 hours a day on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. -- >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and ms. abramowitz. jonathan: i am jonathan ferro with a lisa abramowicz. mesa, another weekend putting out another fire. lisa: had narrative after narrative all year. it has been one day when there to come in next day, new narrative. over the weekend, we took all of those narratives and threw them up and we try to grasp it to the one we can cling to. jonathan: i will throughout a range of use on ups, ups is down 4% and was down more than that earlier in the session. here is the less constructive

you, considerable uncertainty about the earnings trajectory. here is the more constructive view from the faa, the logic of the deal is "impeccable and the cost is substantial." lisa: this allows ubs to grow in the u.s.. in boston to consolidate even more income driven wealth management oversight as well as deposits. what are the unknowns that caused ubs to demand a backstop to potential losses? five out of the 81 holders as well as $100 billion liquidity line from the swiss national bank. give raises questions about what is under the hood. jonathan: if you knew they could get the swiss unit for $3 billion, he would say that is a summative. how much time do they have to do due diligence? march 15, really accelerate through the weekend.

there is so much we don't know about what is under the hood wants to lift the lid on the bank and what is done to integrate it. lisa: and this will be three to four years of integration and you hurt ubs say we are still competitors with credit suisse. there are still some questions as you try to parse through what this means. when you zoom out as far as does this stage of the contagion, we don't even know what the problem was that requires such a quick response. there were outflows from credit suisse, but what else is going on? jonathan: the new acronym people are throwing around, 81. -- 80 one -- at one. lisa: this grew out of the press to be built in bonds. they would be the first type of bonds as exhibit their capital thresholds. what we saw yesterday is that

they were wiped out in this acquisition deal. even more, angry holders are still getting something. what we have learned is they are the lucas -- the lowest tier on the capital market. that is a game changer that is causing all of this debt to get written down in a massive wave. jonathan: this is what greg of pgim said, there was always this risk and now we are finding out it is riskier than equity in some cases. lisa: for swiss national bank, the regulator, i should say, single-handedly removed the rules for this entire market. how much pushback to get from other regulators? jonathan: ubs is down 3.7%. ing is down about 5.6%. socgen is down 3.5%. i would not call that dramatic. first republic of the premarket, down 20% after losses on friday

of more than 30%. lisa: raising questions about what they need to see in order to stave the flight of investors. we are watching a number of things today were there only to -- only two things, central bankers and the banking complex. we are from christine lagarde of the european central bank, does she give some not toward what we have seen in ubs and chris reese to the concerns about what happens around other banks. today we have bill dudley, former head of the new york head, michael eric eddie -- leon cooperman of america coming out and talking about 20 expects in a time when our questions about the role in all of this. tuesday through wednesday, the fed will meet and the fed will decide something. this is a big unknown. we don't know what they're going to decide and we don't know how the market is going to respond

with what we have seen is a relating of fed hikes. they have been want out of the market and now we are pricing in cuts as soon as june with the two year yield declining by more than a percentage point. jonathan: the markets made to call and they are done. front end of the yield curve. we were north of five a couple of weeks ago, now we are south of four and we have taken out all this hikes and priced in a real cutting cycle. lisa: this is unprecedented in the speed of repressing rate hikes and rate hikes and rate cuts. at what point does that cause turmoil? think how quickly some of these benchmark instruments are shooting around. you wonder what the readthrough affects our. jonathan: is only 12 months since the first hike. lisa: i am dizzy. jonathan: zero to 4.50%.

-- towards is now. the theme of the morning is data dependency. are they just dependent on this one data point, the price of bank stocks? daniel: i think it is pointed out. -- i think is more than that. what we have seen with the retail sales data, you cannot always press the data. you are always waiting for the next did point with her always has been and will continue to be a problem with these seasonal adjustment bankers which makes the placement -- which makes the inflation getting with us confidence then you would. we care about bank stops but the background is a tight labor market, inflation well above target and that is what makes us think we will not be able to do

anything like the markets for pricing in. lisa: how many times this year have you changed your parameter for the outlook looks like and what you base cases are? daniel: i don't think we have changed that much. the markets have gone from one extreme to another but for a while now the view was we will probably need a recession to get inflation down in the u.s.. what has changed over the last couple of weeks are the parameters toward that recession. it is fair to say that given this low value will see like credit lending from the banks, that was slow growth and inflation. the fed does not need to do as much as he thought a few weeks ago. we think the endpoint is a recession in the u.s., otherwise you're not going to get the employment. you will not get wage growth done enough. lisa: there is a concern in the

fed does start cutting rates, the momentum we keep talking about and inflationary impulse that has been hotter than people expected will get carried away and forth the fed to retrace their steps and tighten policy within the next 12 months even more. how significant is that possibility in your view? daniel: there are a couple of scenarios. we have seen this renewed overheating scenario which is what led to previous increase in the expectations. we were talking about 6% not that long ago. a cut in rates could have one in two affects, it would stimulate growth and stimulant inflation. on the other hand, that would suggest that with the is something bad going on. why else would the fed cut? from the company's point of view, that would be a consideration for the fed

between the worries about confidence and fundamentally the need to slow growth above and beyond what we are going to see what is happening with the banks. jonathan: where does this leave this nasdaq trade? up every day last week except for friday. where does it leave that trade? daniel: when you compare the performance of the u.s. and european equity market, people pointed out how u.s. equities have done better but it is only because of the performance of the tech sector. every other sector has performed much in line. you have boost to stop -- to valuations of tech stocks because of this decline in positive expectations, essentially a reverse of everything that happened last year. that is what help the stock to perform -- helped the stock to perform. we think it is going to have to

go back up which would suggest a lot of what we have seen is going to unwind. jonathan: thank you for that. not the only one who thinks this rich pricing has gone too far. think about where we are today. repressed in cuts, we priced out cuts and pressed in hikes, something close to 6%. people were discussing that. now we are pressing any cuts again and we have said the fed is done, cuts are in our future. lisa: this is unprecedented, i cannot stress that enough. it highlights the complete uncertainty. decision point, you have to wonder at what point people say if you are pressing out cuts, it is for a reason and for slower growth and that will hit oil companies. you are not saying that narrative to colds in the markets into, this correlation. we used to see back in the day. jonathan: not all cuts are created equally. if it is because of

disinflation, wonderful. by what you would like. if it is because people think things are breaking, there is evidence they are. that is not good. lisa: especially for capital creation, for some of the riskier assets of the market that got inflated from lower rates. this is a different lower rate regime if rates get cut event three days ago -- then three years ago. jonathan: ubs improving as the session grows older. it is down 4% or so. first republic in premarket trading, not improving much. down 18% on first republic in a premarket. coming up in about 20 minutes, we are going to catch up with bill dudley. that conversation, coming up shortly. >> giving you up-to-date with news from the world.

shares of ubs are lower after they agreed to by credit suisse in a deal that contained christ's of confidence. ubs is playing -- paying billions of dollars in a deal that secures provisions. it marks and 9% decline from credit suisse's all-time high in 2007. u.s. regulars are moving towards a breakup solution for the collapsed silicon valley bank. the ftse cannot find a suitable buyer for the bank -- the fbi see kadesh cannot find a suitable buyer for the bank. xi jinping is making his first state visit to russia since the invasion of ukraine. the trip is a strong show support for vladimir putin. he is likely to discuss his blue point for ending the war. that plan has been dismissed by most western governments. bitcoin roastery highest level in nine months. it would above $3000 for the first time since june.

bitcoin is up almost 70% this year. analysts say eval is due to the turmoil in banking industry, higher inflation, and hopes for a dovish federal reserve. a group representing uber and l yft is raising concerns about president biden's choice to head the labor department. it is over her stance on labor classification rules. the group wants her to explain how to implement the rule that would make it easier for workers to be considered employees than independent contractors. global news 24 hours a day on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am lisa mateo and this is bloomberg. ♪. it's easy to get lost in investment research. introducing j.p. morgan personal advisors. hey david! connect with an advisor to create your personalized plan. let's find the right investments for your goals. okay, great. j.p. morgan wealth management.

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>> the federal reserve bank and jerome powell are ultimately responsible for the oversight and supervision of these banks. jerome powell has said all he was to do is light regulations on the banks. i opposed him precisely for that reason. jonathan: senator elizabeth warren speaking on cbs. this land right here, he said all he was to do is lighten regulations on banks. i don't remember seeing him say that.

lisa: coming out and saying, all i want to do -- she is overstating. jonathan: politicians tend to do that. lisa: there are questions about randy quarles and his role in the federal reserve and what didn't happen with the con valley bank -- with silicon valley bank. pat does that complicate the fed's role in terms of political interference and political questions? that is the question as jerome powell wants to fight inflation but not under my the financial system. jonathan: let's think about policy. the center for massachusetts was asking the right question about fdic insurance, whether we should give her the cap, whether it should be two men dollars or $3 million. these are questions we need to answer quickly. lisa: and then decide how much banks need to pay for that insurance.

that is something elizabeth was talking about. what is the right risk premium? otherwise you have the taxpayers of the u.s. holding the bag again. jonathan: precisely. lisa: how do they ensure that is not what is going on? jonathan: how do say it is not a bailout or tax funded of any kind when we know what was going to happen, the consumer is going to bear the cost. lisa: the only way to do it is to charge enough of a premium to these banks for that insurance. if you do it enough, his crib still venting to -- it creeps the lending. she is trained to make it simple and it is not simple. jonathan: welcome to the program. equity futures down .1% on the exhibit 500 -- on the s&p 500. two days out from truman powell. two names to watch an early trading, ubs is down 5.5%,

recovering from the losses this morning. that stock was down 16% at one point. this is brutal. first republic down another 18% or 19% after the big move lower down friday. down another 19% to 18.73 in the premarket. we are struggling to restore confidence in these names. lisa: that is probably going to be an ongoing problem. we don't know the problem that regulators are try to fix. if this is a crisis of confidence and they keep coming up with more measures, what are they seeing that we does now. that was the issue with the ubs and credit suisse tie up. jonathan: just silence from the treasury, quiet from the administration. lisa: until they came out last night and said we are so grateful they came up with a solution. we are going to open up lines to prevent a shortage of dollars. you are right, what are they

going to say? jonathan: what can you say? let's talk about policy. and reorder is done in washington, d.c. -- annmarie hordern is not in what is. what is policy look like? annmarie: the statement they put out was three sentence long -- three sentences long and they say they see resilience in u.s. banking. this week there will be a lot of questions on capitol hill about what went wrong, starting with the collapse of svb. you already heard from senator elizabeth warren. she was to go down the regulatory path. he also heard from patrick mchenry and alongside the top democrat on the committee, maxine waters. they put out a statement that there is going to be hearing on all of this starting march 29. they will be starting with the fbi see chair -- fdic chair and

the chair supervision at the fed, michael barr. other questions about was this a regulatory issue, should there be a rollback in terms of dodd-frank in 2015 or were some regulators not paying enough attention and that is what you heard from elizabeth warren when she was going after jerome powell. lisa: in 2018, there were republicans and democrats who voted two affect the measures for small banks. republicans have been the party of deregulation. have there any republicans that have come out after this and said we think more regulation is in order? annmarie: no. what he will be hearing from republicans and democrats is they first went in the autopsy of all of this. they want all of the information before throwing on this idea of legislation. they all know is not possible in this divided government. you have the centerboard by the democrats --

17 democratic senators voted to go back dodd-frank. i am talking about chris coons, joe manchin, these people who still have their senate seats. there were 33 democrats in the house. when donald trump side of this legislation, he called it a huge moment of bipartisanship and something he wanted to continue. don't think there is going to be regulation and legislation for that. a lot of democrats will use this going into 2024 as a rallying cry. you have the republicans using this saying they're going to attach at any moment they can the term bailout to the biden administration. lisa: we were talking about the fbi see -- fdic cap. -- is it too many dollars, is it

$3 million -- is it to an end dollars, is it three-man dollars? annmarie: this is what senator warren wants to look into. it has set a precedent as this is a talking point whether or not this needs to be adjusted. to senator warren's point, she was saying what is that threshold going to be. when the fbi see -- fdic and post this -- and post this, -- this is going to be a talking point and this could have bipartisan support because no lawmaker wants to go home and tell their constituents, especially small businesses which keep a larger payroll capital in their banks that they do not want those funds to be

uninsured. jonathan: the conversation is now what the cap should be, not whether we should have one or not? whether -- where is that conversation? annmarie: i think it is a little bit of both. it is what happened with svb and lifting the threshold and making sure individuals get their money back. that has led to this discussion of should we have a cap if we have a cap, does the limit needs to be lifted? jonathan: thank you. following those comments, senator warren is not alone on that front. lisa: a lot of people are saying this is the only answer, especially given that has been some implicit to guarantee that cannot be removed. policy codified by legislation has to follow what has been the de facto policy put in place by what we heard from janet yellen and the fdic must begin. jonathan: ubs looks like this

this morning. we are down 4.7% on ubs. first republic's number by 18%. another downgrade after the downgrades we saw last week from fitch and moody's. this was raised to investment grade and now it is junk. agreed futures on the s&p 500 are changed, the bond market is doing his thing. currently a rally, yields lower by eight basis points on the two-year. let's call it down seven basis points to 3.36 on the tenure. -- on the 10 year. lookahead with bill dudley formally from the fed. pilgrim -- ♪.

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jonathan: two hours away from the opening bell, let's work through this situation together. equity futures unchanged on the s&p. as the on the nasdaq 100, up every day except for friday. upon the week close to 6%. two year yield, lower again this morning. we are down seven or eight basis points on a two-year throughout much of the last few hours. 3.7676 on the two-year. over in germany, the german two year down another 11 basis

points, -- a big turnaround there. euro-dollar, 1.06. much confusion about what happens now to the at 1 market. lisa: they say the bylaws say equity needs to get wiped out first and there come up statements trying to ensure the entire market that equity gets wiped out and tenant take losses which is different than what we saw in credit suisse. first of all, what lawsuits ensue? second of all, did the swiss regulators without getting in the way -- what does this mean in terms of how much confidence people can get if it is changing on a dime? jonathan: there is what is in the prospectus and it is detailed and his perception of this market and what people

thought would happen or didn't think would happen. there is a well-educated man of fixed income who turned around and said i have always struggled with how to value this market. i don't really understand it. if you didn't understand it before, maybe you don't understand it's now. lisa: it is ultimately dependent on contracts and if the contracts aren't held in the same way, all of a sudden user to raises serious doubts. the stocks i am watching, i want to go through a number of the banks, european and u.s. you see ubs climb back some of the losses, down three points 10%. there -- 3.1%. more people are weighing in on the bar inside as time goes on. jp morgan shares are lower. not a lot of drama given some potential uncertainty. bank of america shares are up, .3% in midsize banking in the u.s. first republic shares are the

outliers in terms of carnage. bancwest, -- two other bags we are watching are up considerably. i find this interesting. it highlights perhaps we have got into a place where there is more confidence. i want to end on oil. goldman sachs came out over the weekend and downgraded their expectation to be the $100 per barrel. you see people continually retrace. you see all of the oil majors lower on the day, down less than 1%. it is interesting to know the readthrough of what sloth--what slow economic growth means and how that is going to affect growth. jonathan: here is the statement from goldman sachs, the first line of report, "expect the fomc to pause at its meeting this week because of stress in the banking system." how many others fold going into

wednesday? lisa: if you base it the markets, all of them. around the margins, people are waffling. a lot of people are saying how can they raise rates at a time when something is breaking. they said they will hike until something breaks. marjorie there -- aren't we there? jonathan: maybe we have another weekend. they went on saying, "well policymakers have responded, markets appear to be less than convinced that support for small and midsize banks will prove sufficient." it goes on to say this, "we think that officials will share our view the stress and in the banking system remains the most immediate concern for now. -- for now." is a positive end orders a possibly to restart -- is a pause the end or is there possibly restart? lisa: if you pause and say we

are just going to watch the faang stocks and decide whether or not to hike rates at the next meeting, there is this shifting data dependency as to what data you are watching and the relevance of it. jonathan: the link between a single basis point hike and the future is a tenuous. golden went on to say the fomc can get back on track and a bank can have his inflationary -- have his inflationary effects. lisa: what it says to me is nobody knows anything and people are saying let's wait and see what happens. jonathan: nobody knows. bill dudley might know. he joins us now, the former new york fed president. goldman says to us -- to pause. where you think we might be? bill: the real question is zero

or .25%. we know the banking system is under stress so why would you continue to raise rates? the case for .24 .25% is -- the case for .25 percent is we still have inflation. one of the problems of pausing is people are going to say why is the fed, things must be worse in the banking system that we think. this is different than the financial crisis in that this is a question of confidence in banks due to uninsured -- uninsured deposits. it is not about the economy collapsing. in the last recession, we began in 2007. we are not in recession now. the economy is doing well.

the banks that are under stress are a small share of the entire banking system. it is important to recognize this is not the great financial crisis. it is a lack of crisis -- a lack of confidence in banks. lisa: you still think this fed should bring their terminal rate to 6% or possibly above that based on visionary pressures if there is this ongoing tightening people expect for a small and midsize banks? bill: that is the question, how much is this stress today going to result in tighter credit conditions that will change the trajectory of economic growth. i think the problem is market to market losses and uninsured deposits. it is different than the financial crisis when we had this housing boom and bust. it is the bus that fundamental

values. it also damaged households because households had used the rise in home prices to support their spending. the u.s. economy is fundamentally in better shape today. balance sheets are strong. this is more about confidence in the banking system. one reason we are having more problems is last time they were big banks ready to rise to the rescue and by the banks under stress. they are less willing to do that this time because less time at the assumed who -- they assume huge legal liability as they hadn't anticipated. another reason is if i buy a bank and get bigger, i could be pushed into a higher surcharge buckets based on my size and complexity which would apply to my entire business, not just the new part i acquired. you don't have people coming in

to buy the banks under stress like last time. lisa: maybe you don't get whiteness coming in to bail out these -- white knights coming in to collect these banks, but some people say live under a rock of bearishness and you don't understand the momentum you see from around the world and u.s. given that there is this momentum, q think it is folly for people to be pricing in significant risk -- significant rate cuts from now until the end of january next year? bill: that seems premature to me. that means that the fed has physically failed in providing a backstop and i do think the fed can succeed at providing a backstop. if i were sitting at the federal reserve, i would be asking myself, how can i do more on the liquidity front so i can free of the more flexibly on the

monetary policy side. if we can restore confidence in the banking system, the fed can use monetary policy to defeat efficient. jonathan: do you live under a rock of bearishness? do people said that to you? lisa: no but they say you are a horrible person with no positivity. jonathan: we all love you. lisa: we can deal with it because i am duly bearish. but i am not, it is about looking for the unknowns. jonathan: i got this one over the bloomberg moments ago. someone watching? if the gap between fed funds and bank deposit rates matters here? bill: the banks have been slow to raise deposit rates because of what happened to deposits. when the fed is quantitative easing and that--was flowing into the banking system.

when people look at the market to market, that has to be set by the fact that banks do quite well in terms of the deposit base. the value of a retail think network today is greater than it was when it was just a zero. if you are looking at the baking as a liability mixture, you have to look at the deposits which are high right now. for most banks, that market has been expanding. silicon valley bank was an exception. jonathan: i would love your thoughts on the balance sheets. there has been a rush to use the discount window. the new facility opened up by the federal reserve will encourage the same. can you tell me whether just because the balance sheets is expanded again, whether that is the end of cutie -- of qt. bill: i think quantitative

tightening, the one north the treasury for the and mortgage-backed securities is going to continue unabated. i see these tools as separate and different. i expect quantitative tightening will continue. jonathan: wonderful to get your thoughts. elderly, the former new york fed president. going into wednesday with chairman powell around the corner. lisa: do you think he is just sitting there on his room saying, why me? jonathan: you think that is how he sikes himself up? lisa: do you think he listens to the rugged soundtrack? jonathan: i could not care less. lisa: how do you really feel? ♪ lisa m: keeping you up-to-date with ms. around the world. central banks worldwide are endorsing it is -- endorsing credit suisse's rescue after

they agreed to by ubs. janet yellen and fed chairman jerome powell welcome the news and said capital and liquidity of u.s. banks is strong. the european central bank at the bank of england and was the actions taken by swiss authorities. first republic is set to extend its record loss. shares of the bank are plunging after s&p global markets cut its credit rating once again. some of the biggest banks pledged $31 in cash to first republic. donald trump's claim he will be arrested has political -- has a publican party leaders rallying to decide. he wrote he is expected to be arrested as part of an investigation into hush money payments. he urged his supporters to protest. the european union is set to agree on a plan to send ukraine one million artillery rounds over the next year. foreign and defense ministers

are expected to reach an agreement today. they will approve spending more than $1 billion to reimburse eu dollars -- eu members who sent shells from their own stockpiles. volkswagen is planning an even cheaper electric vehicle. the branch chief told a german magazine there could be a model selling for less than $22,000 as early as 2026. volkswagen unveiled an easy this will sell less than $27,000 when it reaches showrooms. global news 24 hours a day on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am lisa mateo and this is bloomberg. ♪ it's easy to get lost in investment research. introducing j.p. morgan personal advisors. hey david! connect with an advisor to create your personalized plan. let's find the right investments for your goals. okay, great. j.p. morgan wealth management.

♪♪ what will you do? will you make something better? create something new? our dell technologies advisors can provide you with the tools and expertise you need to bring out the innovator in you. it's easy to get lost in investment research. introducing j.p. morgan personal advisors. hey david! connect with an advisor to create your personalized plan. let's find the right investments for your goals. okay, great. j.p. morgan wealth management. >> we have had a recognition that the inverted yield curve has hampered the balance sheet

of some niche banks. when the first crisis happened in 2008 and the issue was a systemic collapse, we don't have a system collapse now. we have a crisis of confidence and that can ratchet into a bad economy. jonathan: a fantastic lineup of guests for a special coverage of ubs and chris reese. -- and credit suisse. a 157-year-old institution. switzerland's second-largest bank which opened in 1856 and was one of the 30 systemically important banks around the world , but no longer exist as a standalone entity. we have to take in the gravity of the moment, 167 years old and here we are, credit suisse is essentially no more. lisa: when you step back even further, switzerland, known for its banking complex, a safe

haven for capital from around the world, now eight one make town when it comes to important global banks. what are the ramifications of that? what happens in disintegration? ubs is saying credit suisse's to a competitor -- saying credit suisse is still considered a competitor. jonathan: not to be distracted by what is happening over the last week. lisa: talking about employees, how do you communicate to everyone to come in every day at work their hardest in this uncertainty we continue to see develop in real-time? jonathan: ubs is down 4%, a recovery from where we were at 50% or 16%. i -- i mentioned a call from goldman. they expect a pause as the wednesday meeting.

normally i don't like to think about the fed knowing something. the market does not. if we are talking about economic data, i don't think the fed has any edge at all. this period is unusual, the fed might actually know something we don't. which is why the signaling on wednesday becomes that much more complex. lisa: given the fact that the economic data does not justify a cause -- a pause. they do have intelligence when it comes to the making complex. it is a good point. how do you deal with that, work on their knowledge is in their data dependency? jonathan: joining us, the manager principal at mrd. last week it was a signature, then svb, this weekend it is credit suisse. what do you expect next weekend? >> that is the question.

i'm afraid the regional banks in the u.s. are still sensitive to this crisis of confidence. the demise of credit suisse is different and unfortunately i her some swiss regulars and government officials naming the u.s. banking chaos for the credit suisse demise and this one cannot be dependent on the american banking sector. crooks have long been banking at credit suisse. it has think is long history of many scandals. if anything, i february about those big banks that have weak operational risk. lisa: just had a bill dudley, and he was talking about one of the main differences now from 20 years ago is that big banks don't want to acquire other banks so quickly.

litigation risks, the regulatory risks are significant and opaque. what do you make of that in terms of how many provisions had to be put around ubs acquisition of ubs -- ubs acquisition of chris and what does that mean to certain pockets in the u.s.? mayra: the big banks have a lot of interconnections. there is a tremendous amount of capacity investors don't know and that is what we should be focusing on in the coming days. right now everybody is trying to go to the fine print of the ubs memorandum. imagine all of the opaqueness in the banks, especially in credit suisse, there is a lot of duplication. there will be a lot of people fired because ubs will get a say into who gets to stay. you have shared facilities in terms of liquidity and you have

a lot of systems as both banks, many of which are legacy systems. ubs is going to have to be coming through this carefully. are there hidden liabilities that ubs hasn't had a chance to find out? there is no way they were able to do this level of in-depth due diligence to be able to do this deal. that is really what ubs and any databank february about in terms of trying to buy out another one. lisa: there is what was going on with credit suisse and ubs and there is what is going on in the u.s. and regional banks. the inter-linkages a confidence story. but the stories are separate in terms of what is going on and why. i want to go to the u.s. toy and this -- the u.s. story and the story of supervision and the role of people to identify problems and to prevent them spiraling out of control. what is your concern level and the inability to do that with

silicon valley bank and others that have drawn scrutiny? mayra: i am glad you said the word supervision because we need more supervision, not necessarily regulation. having said that, if big banks were required to be called systemically important which is what the trump law deregulated, those banks, the size of silicon valley would be disclosing more about liquidity, the composition of their deposits. in the u.s., we have a complex regulatory framework. you have the state regulator. state regulators often do not have the money or the resources. they are right there on the ground. the state regulators are the ones who have to be empowered and the banks should be empowered to disclose more about liquidity, capital, other kinds of risks such as leverage, concentration.

if investors had that information will often than once a quarter, they would be able to discipline at the banks. you cannot count on regulators or rating agencies to discipline the banks. but the banks are opaque and should be disclosing a lot more about their concentration and liquidity risk. jonathan: bank failures go back centuries. i wonder if our biggest problem is the fact that banks fail or seemingly we cannot tolerate failure any longer. mayra: that is it. you have to let banks fail. the people who are going to get hurt by the junior level employees, the ones not getting big bonuses, all of the restaurants and hotels anywhere that had any business with those banks were the ones that get hurt. we are no longer really a capitalist society. we are constantly letting these banking executives socialize the losses and that is the problem.

they should be allowed to fail, there should be clawbacks for bonuses, and you have to discipline rogue professionals. otherwise we are constantly doing this and it is always the taxpayers manning out of the banks. it is a problem for all of the central banks. the fed is probably not going to be able to raise rates but not just because of what is going on in the u.s.. do you think switzerland is good to raise rates or the european central bank? we have global information. now, all of these problem thanks and it is going to be quite a challenge for all of these central banks and the bank regulators locally. -- globally. jonathan: we appreciate your time this morning. not really a capitalist society anymore, that is quite a line. lisa: you get a prize. everybody gets a prize.

that is the implication, banks will not be led to fail. silicon valley declared legacy -- cleared bankruptcy and will be a small entities. but -- jonathan: politicians understand there is some fallout when he thinks fail. they know how this plays. that is why they were keen to say it is not a bailout. how can this was say this is not a bailout and at the same time, a government guarantee? lisa: how do you game out what is meant to generate more losses for the taxpayer? is it going to be creating a backstop to a bank or is this going to be assuming the losses from whatever panic or deterioration in credit answers from that? jonathan: angry futures are down .1% -- equity futures are down .1%. ubs is down.

first republic, down 21%. matt from invesco is up next. ♪ with the lowest transaction fees and keep more of what you make. start saving today at godaddy.com lomita feed is 101 years old. when covid hit, we had some challenges. i heard about the payroll tax refund that allowed us to keep the people that have been here taking care of us. learn more at getrefunds.com. this is ge aerospace, advancing flight for future generations. ♪ welcome to a new era of flight.

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>> the swift and stabilizing solution was absolutely

necessary. this solution is a takeover of credit suisse by you -- by ubs. >> it was not a great solution, but it was one of only two. >> the banking sector runs on confidence paired we need to see the sentiment out there. >> companies are levered and i think they are well-managed, but when things get exposed or moved, it moves quickly. >> for sure, it is going to bring on inflationary pressures. i am interested to see what the fed does on wednesday. jonathon: what a weekend in switzerland. another cliff edge deal to close out a week. this time, it is credit suisse taken out by ubs for $3 billion. from new york city this morning, good morning. this is bloomberg "surveillance" on tv and radio. first republic is down about 20%. ubs is down about 5%. lisa: which is retracing losses

from earlier this morning. the unknown is really percolating through the uncertainty we have heard from our guests this morning. as well as this sense in markets whether we have restored confidence. maybe in some of the jonathon: other originals. jonathon:steak and pasta or solution? lisa: that's the question right now. can you call this a solution when we have no sense and there are still people raising questions? i think we will hear from share -- from fed chair jay powell whether this was enough. jonathon: if you have to say idiosyncratic on three different issues, you have one big problem. lisa: that's a journalism world. i think you are right, in the sense that that is what everyone is looking for. you are seeing that flight in real time. that said, at what point does this cause contraction in the credit impulse? i think this is really a question we have rolled with. this would lead to a tightening in credit conditions, particularly regional banks.

yet, we heard from gerard cassidy that he is not seeing deposit flows and we are seeing ongoing credit creation, given the strength in the economy we've been talking about the past couple of months. jonathon: we are already getting calls from wall street, economists looking ahead to chairman powell on wednesday. we expect the fomc to pause at its march meeting this week because of stress and the banking system. pause, to some people, means that that is the end. pause, to some other people, means that that is the end for now and then we restart hiking later in the year. what does it mean to you, if we get one on wednesday? lisa: to me, it means the end of the cycle. at this point, how can they say the turmoil has been enough for us to stop hiking rates, to shift from the economic data coming in hot on several occasions, and say that this is a change in circumstances where something broke.

if they say that, how can they go back and say nothing broke and we are good? this is the conundrum they are facing. the market is pricing in more than 100 basis points of rate hikes through january of next year. jonathon: equity futures on s&p totally unchanged. let's give you a snapshot of the price action. equities not doing much, bond market is doing something. 3.36 on the 10-year. on the two-year, down to 3.74. the spread now is only -36 basis points. was that after adp? it was a huge turnaround after the delivery of the front end of the curve. lisa: you are seeing the long end of the curve and yields come in and rally pretty steeply. really, it is the short end. we have seen a complete repricing of that rate hikes.

jonathon: i think people are just doing copy paste from other people. we believe the u.k. has a robust banking system. have we heard that from the u.s.? yes. from switzerland? we heard that yesterday, didn't we? lisa: yes, and even australia. they came out and said our baking system is kind of the cut and paste. jonathon: they are dammed if they do and dammed if they don't. francine lacqua has done a phenomenal job of pushing the story forward. she joins us now from zurich. they now have a robust banking system. francine: it pains them saying they have a robust banking system. i spoke to a couple of people on the ground saying that gay leaders were a little slow to the game. they took issue that in france, regulators, as soon as something

happened with credit suisse, they came in and said we have got this. we did see the story developing very quickly in the last two or three days. there is still a nagging feeling that maybe they could have placated it very quickly. there's not a lot of chatter on whether or not they should have done something differently. may convert things into equity and taken a haircut, but this is where we are right now. the system is what it is. we had assurance that a deal will go through. we will see what happens with the investment bank, with the swiss universal bank, and we will see how the rest of the markets react. lisa: you are in zurich and i'm wondering about the psychology of this tie up, given the fact that switzerland is known for its banking complex. now, effectively, it is a one bank town, with ubs being the dominant global bank. francine: the psychology is one

of shock. even if he spoke to the people on the press conference yesterday, it is one of shock, they cannot really believe that this unraveled so quickly. remember, when we could go, we were talking about credit suisse having a lot of problems, but it was still sound. it was well-capitalized. they cobbled together this deal, maybe giving credit suisse too much of a cheap price, but ubs did not have time to do any due diligence. dane needed to get backstops, do what they could, and make sure that if there is anything ugly that they need to unwind in parts of credit suisse, they will have enough capital to do that. the question is, you are right, one of regulatory concern. if you have a massive swiss bank, does a regulator go and give its blessing? we tried to speak to the chief executive. he said that is probably the case. what i suspect is that they will absorb it and break bits off, because that is the only thing

that makes sense going forward. they don't keep everything. they take it, look at it, job losses, job cuts, then you see what else you can spin off. jonathon: wonderful francine lacqua there from zurich. ubs is down by 5.5%, well off session lows. we talked about the last hour, here's an institution that opened its doors in 1856. the test of time, goes through all of it, two world wars, still standing, and this is it lisa: there was a lot that built up to it. let's be honest. this has been a tumultuous period, with a lot of scandal in issues that really emerged all of this. that said, was there a trigger in silicon valley bank? a midsized bank in the united states that led to this? jonathon: swiss officials in the news conference, one by one, all basically saying that it was about what happened in the u.s.

you don't buy that and i'm not sure many people do. lisa: it raises the question with what this means if a midsize bank can cause the downfall of a giant. jonathon: matt, the key there, investment grade. a few banks we were discussing weeks ago were ig. make sense of that for us. matt: good morning. it is almost unimaginable what has occurred in the last six days. you think about banks in general. they are founded on confidence. when that evaporated, so did ratings in the bank. that is essentially what happened in two or three different places. now everyone is questioning where it goes from here. in terms of where you should be trading, because it is hard to analyze right now, you have to be getting paid more to own the banks. a traditional industrial cannot default in 24 hours unless there is fraud. that makes this a very different situation.

that is why nobody has confidence in owning it right now and credit spreads continue to sell off. it is certainly a challenge to navigate. this could have been analyzed, but when confidence goes away, it makes it all the more difficult. lisa: at this point, is it really holding a falling knife? are we trying to understand the risk before diving back in? matt: i think that's what most people are doing, certainly. i look at risk managers. they are telling you to own less than what you owned yesterday. that is the number one mandate. what ever you owned today needs to be less than yesterday. we have quarter and coming up, which will be some addressing ahead of that. i think the banking system will get through this. the solutions that have been proposed and brought out, i think, are going to work. everybody just needs to calm down, which is harder to get people to do. when someone tells you to calm down, you never calm down. at the end of the day, these are sound financial institutions.

what if there is no confidence, then there is no ability to have a foundation there. i think that is the problem. we just have to keep talking this up. everybody's going to tell you that everybody is fine. that will eventually get cooler heads to prevail. but it is a very volatile period of time. until we get through that, everyone will want less. jonathon: you say the pollutions they have propose, what do you think are really going to resolve this issue? matt: i think the bank facility window was a great wine, in terms of not having to crystallize losses. that's essentially what took down svb. now, they have come back quite a bit with this rate rally. you don't have to crystallize that loss. i think that is huge. we don't have an asset quality problem, we have a liquidity problem. but as long as it persists, it will create an asset quality problem. they're giving up as many liquidity lines as they can, to make sure there aren't more dominoes to fall.

i think the liquidity they are pumping in the system should work. it should restore confidence. again, we just need a few more days of not having the next domino to be in the news, which would certainly help. jonathon: you said something earlier on in the conversation with lee so that stood out to me. the risk around financials relative to all other industry groups, because banks can fail so quickly, just like that, and a couple of days. you see that as a permanent shift or something that is resolved in time? matt: he saw after the financial crisis, banks and spreads trend will back of industrial for 13 years. then, they finally got back in line around 2021. i think it's going to take a long time. regional banks will trade cheaper. the big six will trade better, but i still think those have to probably trade cheap to industrials as well. this is not going to be fixed overnight, even if the fed continues to talk a set.

jonathon: they're playing the music, which means we have to go. one word answers. 25 or zero on wednesday? matt: 25. jonathon: thank you, sir. futures negative 0.1%. >> keep you up-to-date with news from around the world. with the first word, and lisa mateo. chairs of ubs are -- shares of ubs are lower after the agreement to buy credit suisse. ebs is paying $3.2 billion in an arrangement that includes extensive government guarantees. the price per share marks a 99% decline from credit suisse's all-time high in 2007. gliders are now in moving toward a solution for the collapsed silicon valley bank. the fbi see could not find a suitable buyer for the entire bank. it is looking to sell it in at least two parts. west texas intermediate fell

below $65 per barrel at one point, while brent dropped below $71, after last week's 12% decline. concerns about a global banking crisis is hurting demand for commodities and other risk assets. china's president is making his first state visit to russia since the invasion of ukraine. the three-day trip against today and is a strong show of support for vladimir putin. xi jinping is likely to discuss his 12 point blueprint for ending that war. the plan has been dismissed by most western governments. global news 24 hours a day, on air and on bloomberg originals, powered by more than 2700 journalists and analysts in over 120 countries. i am lisa mateo. this is bloomberg. ♪ personal advisors. hey david! connect with an advisor to create your personalized plan. let's find the right investments for your goals. okay, great. j.p. morgan wealth management.

it's easy to get lost in investment research. introducing j.p. morgan personal advisors. hey david! connect with an advisor to create your personalized plan. let's find the right investments for your goals. okay, great. j.p. morgan wealth management.

>> one of the problems with pausing is people will ask why. i think it is worse for the banking system than we think. i think it is a very different situation than the financial crisis, and the sense that the banks are a question of confidence. it's not about the economy that is collapsing. jonathon: this is a difficult moment for chairman powell. that is bill dudley, the former new york fed president, catching up with lisa and i in the last hour or so. what do they do, or is there a signal you send when you do something?

and maybe a signal when you choose not to? lisa: we said this before the ecb meeting last week. they were clearly debating. they came out with a 50 basis point rate hike. it was probably the right thing, based on market response that day. whether was this week, we will have to see. i point is, it is hard to know what the market response will be to the decision, let alone what the decision is. jonathon: everyone is pretty split because no one has an idea. we expect the fomc to pause at the march meeting this week because of stress in the banking system. that is goldman. matt brill five minutes ago, same data in front of us all, is basically saying they are going to go 25. lisa: financial advisors are financial therapists to their clients. how are they giving therapy when they say they have no clue? this is the sort of conundrum they have. where do you get a guide if this is really a moment we haven't seen before? jonathon: i have always said

that they are therapists and they need to do psychology. on the s&p right now, down 0.1%. bond market yields in 3.39 on a 10-year. down another seven basis points on a two-year. taking out more hikes, pricing and more cuts. it is not just the u.s., it is your, the u.k.. maybe there won't be a party over in japan after the events of the last few weeks. but who knows. michael joins us now, cofounder and ceo at aris management. michael, wonderful to catch up with you. i think we need to talk about speed. just how quickly this is moving. what do you make of it all? michael: i think you hit on a big challenge in today's market environment, relative to past cycles. i think the speed with which money moves in the system, the speed with which information is coming at us, it is getting

harder and harder to distill the signal through the noise. lisa: we are talking with you at a time when people are wondering who will take over some of the institutions that are seeing some distress. who will come to the rescue? we are talking about how big banks learned their lesson. given the areas overseas, $352 billion in assets, what is your view on that? what is your role? michael: it's interesting. i think the private credit markets have been playing a little bit of a stabilizing role in the last couple of weeks and months as the quiddity in the traded markets is not what it used to be. i think folks are coming in and providing liquidity where liquidity has gotten thin. when i think about now is one of the largest private credit managers is, we don't how this will all unfold.

but we will see more regulation of banks, both midsize and large. we will likely see a change through bain capital framework in the u.s. and abroad. that capital contraction will make it evermore important that credit plays a role in funding the economy. lisa: i want to go to funding the real economy and a second. but in terms of the here and now, are they going in and picking up bank funds? are they talking about how to finance banks that are perhaps threatened with deposit outflows? michael: i remind you, we place strictly in the private market. we do have certain pockets of capital with opportunistic credit for distressed businesses. but the opportunity for aries and those that look like us is really to come in and be a liquidity provider to small companies that may be challenged. it could be a real good

counterparty to the bank on rate caps that they tried to visit on their own balance. lisa: you talked about the broader capital fear and this concern with whether individuals and small businesses can get the loans that regional banks used to provide to them. private credit might step in, but how much more expensive bullet be to get it from a private equity company or private debt firm than from a regional bank? michael: i think historically, the private credit markets have been more expensive. that is largely because they tend to provide a level of creativity or innovation, or frankly more leverage or structural flexibility than a bank could. but i think the market as well attuned to a higher cost capital. you raise an important point paired what we are dealing with now is liquidity in duration, not credit. we are already seeing the impact that cost of capital is having as rates are moving up so quickly.

i think we first need to get to the point where the equity valuation environment adjusts to the new realities, so people can accurately afford the cost of capital. jonathon: one issue that is come up repeatedly over the last week is this idea that ultimately, we will end up with tighter standards and conditions. i think a lot of people are lining up to get us the stats about how dependent certain economists are from the financing was certain banks. where think about real estate a whole lot more. how are you thinking about the ripples what's developing over the last couple of weeks and what regionals are going through, and what it means for an asset class that i imagine you are exposed to? michael: i think it could be very challenging. i think the fed is doing everything it is supposed to do to step in and provide confidence. i was pleased to see larger banks in the market stepped in to provide support in first republic. i think at the end of the day, this is duration, liquidity, and

confidence, not credit. i would hope that folks calm down and see the signal through the noise, and get back to lending. but it is a real risk that people continue to lose confidence. capital weaves that part of the banking system and it will make it harder for people to back capital, for sure. lisa: last week, larry fink from blackrock said things will drop. next, it would be the private credit and equity venture capital markets that would not get that credit. do you agree with that? michael: i think one thing most misunderstood about private markets, which is why there has always been this view of the canary in the coal mine, yet every time we have a crisis or mini crisis, markets emerge fairly unscathed. i think the difference is that folks really appreciate it.

private assets are held unlevered. they are monster -- modestly unlevered. with banks, you get a much different outcome in a market like this. similarly, on the equity side, they are operating out of funds with 10-year to 12-year lifecycles. most private owners of assets that are institutionally backed are neither first -- forced sellers or buyers, and that is a little stability people don't appreciate enough. jonathon: have to leave you there. wonderful to hear your thoughts. michael arougheti of ares management. lisa: a lot of people been talking about this. if you don't have to sell, you can ride there without the constant real-time pricing. i might argue it depends on what sectors you are exposed to. if you are exposed to certain companies in silicon valley, and

might have been a little quicker than the maturity you have. i think people are parsing through exactly who the companies are, but this is a point that has been made. liquidity mismatch is not there to the same degree. jonathon: this has moved so, so quickly. two weeks ago, chairman powell sitting there and saying 50. people lining up and asking how low the bar is. now, we are asking how high it is lisa:. is it twitter's fault? jonathon: ok, next hour, bloomberg tv. edward jones. looking forward to this. lisa is going to catch up in the next 30 minutes. ♪ ♪ to guide you through a changing world. ♪

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lisa: welcome back. this is bloomberg surveillance. after a morning of turmoil, trying to parsley what it meant for ubs to agree to take over credit suisse in a deal very much facilitated by swiss authorities. we are seeing market reaction, with ubs shares sharply lower. they have retraced some of that in the market. in the u.s., basically unchanged in equity futures. in the bond space, the move is much more clear. yields are lower, price is up, both in the u.s. and europe. we are looking at two-year

yields at 3.8 percent, off earlier lows, but still down for more than 5% at the high earlier this month on march 8. over in europe, you are seeing that two-year yield down to 2.28%, from a high also on march 8 of 3.3 percent. a complete retracing. what does that mean for europe to be raising rates at a time when the u.s. might be on policy? that is the question facing jerome powell. christine lagarde speaks again. murray's -- maria tadeo is in brussels right now. what are we expecting to hear from christine lagarde at a time when she made her movie? -- move? will she pull back a little, in terms of reasserting future rate hikes ecd? -- ecb? maria: what a situation she finds herself in. when you look back to last

thursday, and she obviously went in for 50 basis points, and that made it clear that the european central bank does not see a trade-off between's -- between price stability and financial stability. sources told me that was one of her best press conferences to date. done. she finds herself four days later here in brussels, now having to instill confidence in a market where obviously the jitters continue. having to once again reinsure -- reassure not just investors, but the general population. it's a huge talker here in europe about the european banking system. what a communications exercise from madame lagarde. that statement from the ecb yesterday, this session today was already on the agenda. this is a meeting that happens regularly. obviously today, it will be all about banks. these will be the questions that

lawmakers will put to her. that is the focus point for us, too. lisa: when we talk about confidence, have to drill into this one instrument a lot of people haven't heard of yet. 275 billion dollars of debt are now called into question after credit suisse's debt was written down by swiss authorities peered we are hearing pushback from european authorities, saying that equity has to get wiped out before these instruments. is there a bit of a tift emerging between european regulators and swiss regulators that acted alone? maria: i think you read it quite well. if you look at the statement last night, and to me it is very telling, but if you look at the statement yesterday and read between the lines, essentially what they said was thank you to switzerland and ubs for essentially stabilizing the situation, alongside repeating that european banks are solid and there is liquidity.

if you look at the statement from the regulators today, it is different. i want to read it to be very accurate. "obviously, the instruments are not the first to absorb losses. only after that, you would look at 80 once." again, this goes back to your point. there are several criticism here. "additional tier one is and will remain an important component of the capital structure of european banks," --." i think that tells you a lot about how sentiment has changed overnight to the morning, when you now have time to figure out the details to a deal like this. we will see market participants -- lisa: we will see market participants reevaluate as well. maria tadeo, thank you so much. we will catch up with you throughout the morning. the ftse just releasing this. extending the bid window for silicon valley bank.

this question of whether there are buyers. why did nobody so -- show up, or did anybody show up to the auction, the effort the fbi see made to find some buyers see? now, they have interest from multiple parties. how that comes in remains to be seen. the fdic's says bidders need more time to explore all options. how much of this is due diligence to understand all the potential liabilities? we will bring this to you as we parse through some of the documents and what they have so far. tiffany wilding has been studying this throughout the ups and downs of all the rate hiking and cutting expectations. she is a north american economist at pimco. you came out with this question of whether they hiked or don't hike, which is kind of not the issue anymore. it is when they start cutting. from your vantage point, what is the answer? tiffany: i think it's really going to depend on how this

situation escalates. really, the issue here is how tight our financial conditions. what this has revealed is that they are actually quite tight. i think there's a lot of question around that because maybe the impact on the economy or labor market was a bit slower than some had expected. but these things happen in a nonlinear fashion. i think with the situation revealed is that financial conditions are quite tight. i think the question for central bankers will be, have they tightened so dramatically as a result of the bank stress, which is going to put pressure on lending? have they tightened so much that may be the federal reserve needs to think about interest rate cuts? unfortunately, i don't think they are there yet. we are still discussing of they're going to do 25 or not. but certainly, if history is a guide, when they do get to the top of a rate hiking cycle and pause, usually the next move is

down. lisa: if credit conditions are so tight, why are we not seeing it in the data? why is it not percolating through to a loss of momentum? why am i getting letters from people saying you clearly haven't been out and seeing people eating out, flying around, doing things, getting jobs? where's the disconnect? tiffany: i think the issue here is what's happening in the banking sector right now is a bit more of a leading indicator. look at the actual data. that is kind of what has been happening. as i said, these things happen in a nonlinear way. the economy does not tend to slow down in a stable way. it kind of slows down and then at some point, it starts to deteriorate. obviously, that is when we go into a recession. we have been suggesting that --

over the last year, in order to get inflation down, we still think that. if anything, the developments in the banks over the last couple of weeks have probably pulled forward those recession probabilities somewhat. lisa: this is what bob michele was saying as well. he thinks this brings forward the potential recession. that said, what is the risk? if the fed pauses now, possibly cutting rates by june, and more aggressively cuts rates throughout the year, one of the risks of inflation perking back up again? basically that momentum does not die out quickly enough as people start to buy homes, take out auto loans, do all the things they can do with lower rates? tiffany: i think the issue here is that inflation is very elevated. if we were at even 3% inflation, i certainly don't think the fed would be hiking, if they turn out to doing so this week. but the thing is, when you have

banking sector stress that tightens credit conditions, reduces a bank's willingness to lend, you have activity slowing down and you will ultimately have inflation coming down. the issue is that there are lags to these things. even if we do go into a recession over the next couple of quarters, it's going to take a little bit longer even despite that for inflation to be more clearly coming back to target. unfortunately, as a result of high-level inflation, the federal reserve and other central banks are going to be kind of lagging in their response relative to what we have seen in the recent past. i think the question there is, does that tighten financial conditions even more as investors get worried? lisa: i'm a little concerned about political applications here. i've been raising this out the morning. i'm not sure exactly how this plays out, so please help me. i'm taking about silicon valley bank.

the story in the "new york times" and on bloomberg's about how aware federal regulators were of the issues there, the fact that there were oversights, the fact that we don't know what oversights were in medium-sized banks that were highlighted that they are watching right now. what is the signal of not raising rates by 25 basis points if they do have a handle on what's going on in the financial system in a way that the rest of the market does not? tiffany: it's true that the federal reserve has more information than market participants about banks and what is going on. i think the fed basically has to weigh two issues here. one is just the risk that things deteriorate. they hike again, things deteriorate quite a bit more within the banking sector. that in and of itself destabilizes confidence. one of the issues here is higher interest rates. that's what created some of the unrealized losses on these banks. there is a question around how

much banks can raise their deposit rates to stem some of the deposit outflows from those institutions. raising rates is certainly not going to help those types of things. i think the fed has to weigh that with the fact of what you are talking about. what is the signal if they do policy? i think that if they did pause, chair powell could very easily communicate in such a way that keeps confidence. he could suggest there's a lot of volatility in markets right now and we are going to pause. our outlook is still for additional rate hikes, contingent on this not getting worse. that would sort of suggest markets that we are pausing, we don't want to exacerbate the stress, but our outlook is still for hikes. that could potentially bridge the gap. lisa: just quickly, if the fed does start counting, where they end up? what is the new normal for neutral? tiffany: i think that's still a

very key question. that is something we unfortunately are not going to know intellect of the fact. even the models that people have devised to estimate neutral, they need to see the data, so we don't really even know where neutral would be until well after where we are right now. i think that is still a key question. ultimately, i think our view would be that we are in this world of new neutral. it is still pretty low. lisa: tiffany wilding, thank you so much. coming up, we have leon cooperman, to parse through the role of private investors. and how quickly we have brought forward recession risk. this is bloomberg. ♪ global news 24 hours a day, on air and on bloomberg originals, powered by more than 2700 journalists and analysts in over 120 countries. keeping --lisa m: keeping up-to-date with the first word. thanks worldwide are endorsing

the buyout of credit suisse. the u.s. secretary and fed chairman jerome powell welcome the news. they say the liquidity of u.s. banks is strong. they also endorse actions taken by authorities. chairs of the bank -- a first republic bank are plunging. last week, some of the biggest u.s. banks pledged $30 billion cash for first republic in an attempt to stem the turmoil. donald trump's claim that he will be arrested tuesday has a publican party leaders rallying to his side. the former president wrote on social media that he expects to be arrested as part of a new york investigation into hush money payments to an adult film star. he urged his supporters to protest. the european union is set to agree on a plan to send ukraine one million artillery rounds over the next year.

foreign and defense ministers are expected to reach agreement today. they will also approve spending more than $1 million to reimburse eu members who send ukraine shells from their own stockpiles. starbucks says they have a new chief executive officer two weeks earlier than planned. he began working at the coffee giant in october and spent the last few months getting to know operations in more than 30 stores and other facilities. he is replacing the starbucks founder, who have been interim ceo since april. global news 24 hours a day, on air and on bloomberg originals, powered by more than 2700 journalists and analysts in over 120 countries. i am lisa mateo. this is bloomberg. ♪ advancing flight for future generations. ♪ welcome to a new era of flight.

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should calm the fears of a global banking crisis. what i will be watching this week is whether there are more pressures on the liquidity of midsize and regional banks in the united states that would conceivably keep this many crisis brewing for the next few days. lisa: all eyes are certainly on regional banks, as people digest what happened over the weekend, with ubs taking over credit suisse in biggies -- and basically a shotgun marriage operated by the swiss authorities. this is bloomberg. jonathan ferro is off preparing for his next show. given what concerns are about the banking industry and given that people are trying to parse through a fed response which is likely less, in terms of hikes, and more in terms of cuts, we're seeing the s&p of about 0.2%

ahead of the open. euro strength is interesting, after christine lagarde came out and raised rates by 50 basis points. will jay powell also raise rates on wednesday or not? we see the 10 year yield coming in just a touch. the action is in that 10-year. just sucking -- just shocking to see 3.8% after it had been has high as it was earlier this month. it is interesting to see this, as people expect to see some sort of deterioration in the overall economy. ubs shares pong back some losses, lower by more than 0.1%. really clawing back almost to zero, almost to neutral, no gains, no losses. people think maybe they got a better deal than they otherwise thought because of the backstop from the swiss government because of the losses being

written into the 81 bonds, given the fact that they are getting the crown jewel for such a discount. joining us now, i want to get straight to this guest, because he has been calling about the potential for a recession, about irresponsible federal reserve policies, about how to conduct market operations in a market that has gotten a little bit beyond what we are used to thinking about with a capitalist society. leon cooperman, of a family office. leon, i just want to first start with, what is your impression of everything we have seen over the past week? last week and, with what happened with silicon valley bank, and just now with ubs taking over credit suisse? leon: to me, it is kind of textbook. we have a self-induced crisis by response to fiscal monetary policy over last decade. i do not forecast -- i did not

forecast a silicon bank issue, but i did foresee an issue of some kind. we are getting a particular response by government. -- a predictable response by government. i think it is sad what is going on in the country, but it is necessary to be done. we have to preserve the system. i am assuming that the fed will go 25 on wednesday. they will accept a higher level of inflation and they would like to accept because of the stress in the financial system. the volatility of bonds is so great that it is destabilizing equities. lisa: i want to pick up on that. we've been talking about that. we have seen unbelievable fluctuations in the basic, most liquid and students in the world's, treasuries. what is the readthrough effect of even just that volatility on

other risk assets, and how much further does it have to take that out, in terms of volatility pressuring? leon: it's not my area of expertise, but i would say that is due to debt buildup in the country. today, we are handling this five or six years later. this is going to create issues. who is the buyer? the banks are not the buyer a bonds anymore. you're relying upon the kindness of strangers. they are probably not imbued with our financial policy. when you look at the politics of the country, it is also very depressing. we have a country i think has lost centuries to nature that has taken over by two political parties, the radical right and the radical left ruling the day. lisa: we are dealing with a situation where the political

overlay is raising questions about the debt ceiling debate. we can get into that. people are trying to figure out what that means economically and for the market. her expertise is in the s&p, in the market. you have been warning about a recession for a long time. you have been saying that this is a self-induced error of monetary policy and woes. i am curious if you are getting more optimistic about returns because of the declines we are seeing and because of people waking up to the reality of the potential for recession, as you have been saying? leon: my view has been as follows. i tell the story about the pharaoh. i told this almost a year ago on tv. the pharaoh had a dream. it was interpreted by joseph in the bible. his dream was heading for seven lean years after seven fat years. that is my view. i think the 4800 and s&p will stand for quite some time.

then, i kind of analogize that to my own career. i got my nba from clung to business school on january 30 1, 19 67. i had no money in the bank. i had student loans to repay. they were not forgiving student loans. i could not afford vacation. i went back to work the next day. i joined goldman sachs in my 25 year career on february 1, 1967. i made my money picking stocks. i'm not selling anything to anybody because i am a retired money manager and i'm turning 80 years old in a few weeks. but i would say that we are in a stock pickers environment. our -- i expect returns to be very pedestrian. i want to make this point. if the government is looked upon to moderate the downside risk, the government has every right to moderate the upside return.

this chips act, i thinks intel sits at a balance sheet of $50 billion. they don't need the government to build plans for them. they can do it themselves. i'm in favor of private-sector solutions. and the extent that the political system is getting corrupted, that is negative for capitalism long-term. lisa: from your perspective, you have made your career in picking single stocks. where you putting your money now, given that you're still investing, if perhaps for yourself and others? where do you go? leon: i am a one-off kind of guy. i am looking at these mortgage rates that are yielding 14% to 16%. i'm going to discount book value and buy back stock whenever it is cheap. but those are one-off. i basic -- my biggest exposure is energy. i am generally of the view that world travel will come back, which would be a plus for energy

demand. china coming out of lockdown would be a plus for energy demand. we will no longer deplete the strategic petroleum reserve. we have to rebuild it. we are not replacing reserves to the extent that we should be, in terms of where we are producing. i have a bunch of oil stocks in my portfolio that have current yields of 5% to 10%, reduction costs well below current prices. they are largely debt-free there in a position to buy back on bad stock. my favorite is paramount resources up in canada. they produce well for $31 per barrel. they are doing production at 15%. the stock yields over 5%. no debt. lisa: bumping up against the clock. 30 seconds, do you agree with elizabeth warren that there should be insurance for deposits more than 250 thousand dollars and that banks should have to pay for that? leon: there's very little that

elizabeth warren says that i agree with. i think we have to do whatever we have to do to stabilize the system, and i think we will do it. but i'm focused on the long-term implications of what they are doing. i think yes, they should do whatever they have two to stabilize the system. it is a dam shame we have to do what we are doing. it should not be a problem. mr. powell, the fed head, said that the stock market wasn't overvalued of years ago because of where interest rates were. everybody was saying that interest rates shouldn't be where they were. lisa: we have to leave that they. leon cooperman of omega family office, thank you so much for your time. we are seeing shares climbed back all losses on premarket trading as people reassess this deal. coming up at 3:30 p.m., mike wilson, the chief equity

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>> every thing you need to get step for the start of u.s. trading, this is bloomberg, the open with jonathan ferro. jonathan: live from your, ubs agrees to take over credit suisse