♪ jon: welcome to bloomberg markets. matt: let's get a quick check on the markets right now. a little bit of a reversal on this friday in terms of the treasury trade. you have very little movement on the s&p 500. we are still over 4500 on the benchmark index. you see yields starting to rise again on treasuries after the consumer confidence came out better than had been forecast in the best level we have seen since the end of 2021. the 10 year treasury yield is over 8.0. the dollar is coming back a

little bit. it's still holding down about 1200. it's after five days of gains in today's the first decline in six sessions and we see oil coming down as well. the nymex crude is off $1.46. a little bit of a turnaround to end the week. jon: and we've seen that in the financials as well as we look at some of these individual players that have dominated the story today. citigroup for example, their results were relatively strong on the credit side but over, people are looking at it as a mixed quarter. jp morgan, strong numbers. you so they were perceived as strong numbers from the wall street players but this is a stock that is already trading around a 52 week high. some other players reported today, wells fargo, very much in the same boat as jp morgan in citigroup with some overall headline numbers that got a

thumbs up. there were some comments about the deposit picture for wells fargo going forward which may cool some of the appetite for the stock at this hour. one notable mover to the downside is state street. its own admission is that it could have done better is resonating with investors. matt: let's stick with the big banks and bring in david conrad. he is the research analyst at kbw. we really count on top-notch analysis of the bank from kbw so thank you for your time. what can you tell us about the big banks reporting today overall? what is the common thread in terms of strength we saw? >> thanks for having me. it was definitely a mixed quarter. what we saw was better than expected earnings, revenue beats were across the board. i think the issue is the sustainability ofnii.

the sustainability into 2024 is a little bit challenging and that's the rising deposit costs. the quarters beat does this year because deposit costs in this quarter didn't rise much as we anticipated. it sounds i for management, it's a man -- it's a matter of winding up in the same place. i think people are questioning sustainability today. matt: as we get rising deposit costs, don't consumers get used to higher rates and borrowing more money at those rates? doesn't that help to boost the top side of the net interest margin? >> maybe a little bit. i think we are seeing a lot of growth in credit cards. that's been one strong theme through the quarter. we've seen almost 20% year-over-year growth in credit cards so that's one asset class we will look to as a positive. i think the asset side of the

equation is getting close to being kind of done repricing. we still have the consumer now really looking for yield on the deposit side. i think that's where we expect some compression through the year. jon: at a time when many people are still trying to figure out where the economy goes from here in certain sectors -- we talked about what's happening in commercial real estate, in terms of what these banks are saying about how much money they have to set aside for potentially bad loans, where there any takeaways from these results? >> wells fargo would be the one takeaway. they did exactly what we thought they would do and we hoped they would do that this quarter and we are seeing some decent relative outperformance in the shares. wells fargo has about 3% of the loan portfolio in office exposure with maybe just under one third of that in california. san francisco is one of the more concerning markets i guess.

what they did is they put up a large reserve against that, almost $1 billion in excess reserves this quarter. we are more comforted by that because now they're reserve two offices almost 9%. in our reports historically, we have looked at nine or 10% as the loss of stress and was markets. we didn't necessarily put the issue behind them but the reserves they put up really helps address the issue going forward. jon: you mentioned the stocks. there is still plenty of uncertainties for the banking sector but when i look at your target prices for names like jp morgan and wells fargo, it looks like you see a little potential upside, maybe not too much but you are not thinking there is no upside for these names over the next 12 months. >> we are neutral for the group overall. we would expect some

outperformance out of wells fargo going forward but what has happened recently as outperformance has been stability. some of these names have traded in a relatively narrow range which have really been outperforming b thefx overall and respect that to continue as we work through the quarter. the numbers for jp morgan and wells fargo were above my expectations and the guide was supportive so that will help as well. matt: they say citigroup is still rightsizing the investment bank. i'm sure a lot of managers across the street are looking at whose doing well in news not. what will we see in terms of headcount this year? >> going into next week with morgan stanley and goldman sachs, we will see some severance costs there as well. i think we are going to see some continued headcount reduction but keep in mind that headcounts stayed up through the pandemic.

there is some natural rightsizing from there as well but we did see a pretty meaningful drop in investment banking and it's now 25% year-over-year for citibank. it was only down single for jp morgan. quite a bit about performance there. what we are seeing is june was one of the stronger months of the quarter and we are seeing announced m&a pickup quarter over quarter so we are seeing some green juice happening which may limit the downside in terms of letting people go but we expect that to be a theme this quarter. matt: thank you so much for joining us. the banks will kick off this earnings season. in the crypto world, he federal judge ruled that ripple labs, their tokenxrp is a security when it was sold to institutional investors with a

bunch of paperwork that is essentially a business plan but is not a security when it was sold to the general public exchanges. it's a decision widely hailed as a win for the sec. let's talk to the ceo of ripple about it. he joins us now. i wonder what your reaction is because it seems as though the judge was saying that when you sold this tokenxrp to institutions with paperwork that amounted essentially to a business plan, then it is a security. although you can see it as a commodity, way to play in the currency of your own blockchain. how do you react? >> let me back up, the sec brought three lawsuits, they brought one against chris larson, the cofounder and one against me and they brought a lawsuit against ripple. they lost the lawsuit against chris larson and lost the one against me personally and ripple

mostly won the case they brought against ripple. there is one narrow piece in my judgment and as many are reacting, the sec clearly lost as a matter of law and the judge wrote that xrp is not a security. in certain circumstances which is a narrow definition around an inch touche and sale, it could be a security. the market reacted in a very positive way. team ripple is very happy with the decision and coinbase is up 25% yesterday and the value of xrp is up 50-80% of the market has reacted as a clear win for ripple and the industry. matt: what is going to be the result for you as the result of that piece of the decision and what will be the result for ripple as regards to that piece of the decision from the judge

ruled it is a security when looking at the institutional sales? >> the institutional sales ends up from the broad perspective, i don't want to say inconsequential but is the smallest piece. in some ways, it's ironic. mission statement of the united states securities is to protect investors. they went after ripple, suggesting that all kinds of things come everything we were doing was selling an unregistered security and the judge clearly said sales through exchanges is not a security. when it's used for compensation, not a security, used for incentives around the overall xrp ecosystem, not a security. we have already moved a lot of our activity, infect 95% of our customers are non-us so a lot of activity has been outside the u.s. jurisdiction because that's where our customer demand is. i thanks that's where the u.s. is losing and what the sec has been trying to do is to put

power and politics over what is really just sound policy and providing clear rules of the road. entrepreneurs and investors can participate in this amazing new market around joanne blockchain technologies. jon: you raise an important point about the fact that this is a globally connected crypto community. given how all this was playing out, there was a delisting of xrp on platforms in the u.s., there was delisting in canada as well. we are hearing about real listings of xrp over the last few hours but what are the platforms for you like right now? >> those are decisions made by the exchanges. good to see you again. when the lawsuit was first filed, a lot of the exchanges in the united states said we will wait and see what happens and it's because of the confusion

the sec in my judgment had sewed into the market. even as part of this lawsuit, the discovery process we saw is that they knew there was confusion they actually did things they knew would increase confusion. the only reason to do that is because this confusion masquerades as power to the sec. as you pointed out, just in the last 24 hours, all of major u.s. exchanges have either relisted or publicly announced their intent to list xrp because now there is clarity. the clarity is xrp is not a security as judged by the united states. ironically, no other country on the planet thought it was it is nice to have that clear for the market in the united states. jon: this is still a legal process playing out. i think people watching the sec appeal process and what that looks like, what does it mean

for your company and your business in the interim? >> as a matter of law, the law of the land right now is thatxrp is not a security and until there is an opportunity for the sec to file an appeal which would take years, we are very optimistic. if they were to file an appeal that would only further solidified the decision this judge made. as a matter of law and a matter of fact and looking back in the history here, for the sec, it's overreached to suggest as the chair has said many times that basically everything in the crypto space is a security. we now have a judge very clearly saying that's not true and very clearly saying xrp is not a security on exchanges which helps the whole industry. this is a win for ripple and a win for the entire crypto industry and i think the white you saw the crypto industry

react so positively over the last 24 hours. matt: what is the most important use case xrp xrp for and do you feel limited at all in publicizing the case you are excited about less to be considered a security when you do that? >> the good news is, yesterday, before this lawsuit was resolved or a decision came out, i would've said yes, i was worried evangelizing different use cases. i am no longer worried because now there are clear rules to the road. the judge made a determination and the law of the land. ripple is really built our primary business around solving this cross-border payments problem. sending money overseas even from the u.s. to canada can be slow and it's expensive and it really has not kept up with modern

technology. ripple is using ex rp as part of our tools to dramatically increase the speed and reduce the cost of managing cross-border payments. that's how ripple is using it. there is interesting going -- goings-on in the real estate market would blockchain technology to reduce the friction of any financial transaction. these are the use cases and there will be a lot of them. i feel it's the early days of the internet where you couldn't predict how these technologies would impact various businesses and various financial transactions. jon: maybe talk to us about personally for you over this last day, you mentioned the lawsuit specifically with you. you also mentioned the industry itself, a victory for the industry. have you talked with your industry peers over the last 24 hours? >> i have heard literally from hundreds of people throughout the industry and all -- and at

all levels and there is broad enthusiasm and excitement and is the first time the sec has lost a crypto case. i think the sec has been a bully and they've gone after weak players who couldn't mount a proper defense. ripple had the fortitude and the courage and frankly meet individually to fight this fight. i think many people in the industry are responding positively because the industry needed someone to fight because the sec was really just using regulation through enforcement as their primary tool. that's not a good way to build a market. the sec still hasn't done the hard work other countries have done whether it's the u.k. or europe where they have provided clarity for rules of the road so investors and entrepreneurial's can build that's what's been the innovation and technology in america, clear rules of the road and now the sec is more focused on bringing lawsuits as opposed

to doing the work. the good news is, you're finally seeing in congress, number of elected officials yesterday tweeting about the ripple case and calling on congress to pass laws so there is a clarity the sec knows does not exist. jon: we really appreciate your time today and thank you for making some time. we will stay on that story. that coinbase stuck asserting this week and we will get insight and analysis from the u.s. senator pat toomey about what's happening in washington. this is bloomberg. ♪

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time for our stock of the hour. coinbase just got a big target price boost at needham. the analyst boosted the target price from $70 to $120. we just spoke with ripple about a federal court decision with the sec any of the big win for the crypto industry. that has graded a more favorable outlook for coinbase. we have more on this developing story. sonali: if you look at coinbase, they got a big jump yesterday, about 25% off the back of this ripple news. if you look at the sec, they call it the tainted 19, 19 tokens the sec across its lawsuits have targeted as securities, not tokens tied to the likes of aiom infinity. there is optimum that the tokens alone cannot be named securities just for the sake of it. it depends on how it's listed and sold and marketed. a lot of questions still on the

industry but a lot of optimism that there is not a blanket rule that the sec has to ensure all of these tokens will be considered listed securities. matt: let me bring in pat toomey, former u.s. senator from pennsylvania and is also a member of the global advisory council at coinbase. senator, i mistakenly said earlier this ripple decision was view as a win for the sec which is clearly the opposite of how it looks. in fact, regulators, not only the sec had a little bit of egg on their face from a couple of poor decisions over the last few days. how do you view what we are seeing happen with the united states regulators in court? >> i think this case with ripple in the southern district is devastating to the sec. some of us for two years now have been arguing that it's very unlikely that these tokens

should be considered securities and if the sec considers they are, they owe america a clear rulemaking and guidance as to how and why you come to that conclusion and what people should do about it. the judge comes along and in a very thoughtful and very thorough and very persuasive decision she states clearly that xrp is not a security. the logic and the principles she applies and the facts in the case apply to a huge number of tokens. i would argue the vast number of tokens, everything coinbase trades. if xrp is not a security which i never thought it was, now you have the u.s. district court coming to the same conclusion. this completely eliminates the central thesis of the sec which they should have regulatory authority in this space. the only get regulatory authority over securities. we just have a very powerful

decision stating these tokens are not in fact securities. this is a very good day for american consumers and a great day for developers. it starts to dissipate the very dark cloud that was chilling american development in this space. i understand this is one case in one court but it's very powerful. sonali: i want to point out a tweet by congressman tom emer talks about this is a monumental development. he now says let's make it law. when you look at congress and the leg there has been an rulemaking when it comes to the crypto industry, do you think all these sec actions empowers congress to step up and make the rule of law faster so this is not just litigated in courts state-by-state? >> yeah, i think it does.

this probably creates a significant impetus for congress . it comes from multiple directions. there are folks like me who believe this is a very exciting technology and we should create well find guard -- well-defined guardrails to allow to thrive while providing consumer protections. that category of members of congress have always wanted a legislative framework. you have others were more skeptical and want tight regulations. under the logic of this case, they will not get that from the sec because they have no legal authority. they should want legislation as well. you should now have a very broad spectrum of members of congress who should acknowledge that providing a legal framework followed by regulatory clarity, that's the way that you both allow innovation to thrive and protect the consumers. i do think there will be greater momentum for that. jon: bloomberg intelligence is trying to figure out how fast

that momentum could play out they are estimating a 40% chance of passage in the next 12 months. we do have this momentum building this week. care to take a guess on how this process might play out from here? >> that's always tough. crystal balls are hard to come by. we should also remember there are somewhat discrete issues that congress might consider addressing separately. for instance, regulatory regime for stablecoins. they are a subset of the crypto world, relatively simple and easier for congress to rapid brain around and what's the right way to handle that. then there is the issue that judge torres points out when a crypto token is used at -- as part of a broader contractual obligation such as maybe the initial funding of the development of protocol. that can be a security but congress should define exactly under what circumstances it is.

then there is the issue of whether or not and how we ought to regulate spot trading of these non-securities, these tokens that should be considered commodities. is that the purview of thecftc or will the sec be given jurisdiction? there is a lot here to deal with. it might make sense for congress to bite this often pieces. i have always thought the stablecoins might be the best way to start. but it's very hard to know how quickly this will go and it will depend on whether the administration raises legislation and worked with congress to get something to the president to sign. matt: thank you so much for your time, we appreciate you talking to us. former senator pat toomey there and who is now an advisor to coinbase. i want to thank sonali basak for joining us. i think it's been a fascinating couple of decisions on the ftc

and the sec now that could change the way we view regulation. this is bloomberg. ♪ we moved out of the city so our little sophie could appreciate nature. but then he got us t-mobile home internet. i was just trying to improve our signal, so some of the trees had to go. i might've taken it a step too far.

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romaine: so the three bears, who you got? katie: a little bit of a rally. the s&p 500 trying to hang on after hotter than expected data with consumer sentiment and inflation expectations this morning area the s&p 500 still up on the week trying to cling to gains. big tech doing a better job. the nasdaq 100.2 percent. in the bond market a bit of a u-turn. the