tv Squawk on the Street CNBC March 10, 2023 11:00am-12:00pm EST
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welcome back to "squawk on the street." i'm dominic chu. let's check on relative bright spots in today's trading check out what's happening with health care, vertex, amgen in the green right now. by the way, most of the major energy stocks are tracking for weekly declines, marathon, che chevron, holding above the flat line today now let's send it back downtown to the new york stock exchange to carl and sara for the final hour of "squawk on the street. good friday morning. i'm carl quintanilla with sara eisen live on the floor of the new york stock exchange. setting the agenda today council of economic advisers chair cecilia rouse is with us live from the white house and we'll address the turmoils in financials. absolutely, kbw ceo thomas michaud. is this liquidity crunch for
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financials. former federal reserve chair donald kohn is with us when this means for the fed. taking a look at the market right now, it's actually holding up the dow's gone positive. it was under pressure earlier this morning s&p down only 0.2 of 1%. the nasdaq taking it the hardest, but we're off the lows already. we're seeing strength in groups like energy and health care today. the market is treating it like an isolated event, even inside the financials with jpmorgan about an hour ago going green. >> jpmorgan went green cramer's been saying watch j&j, the most pristine balance sheet on the s&p elevated vix back up to 24 and change as we said earlier, the fed's next rate hike is in focus after today's pretty good jobs number but the fallout in the banks is adding to that the financial sector shows some cracks a chance of 50-basis-point hike jumped to 72% on wednesday
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following those hawkish days of testimony from the fed chair now down to just 30% let's bring in steve liesman man, we thought they had a lot to absorb a couple of days ago, steve. it jets more and more complex by the day. >> you have ever seen anything that as wiped out, essentially, the testimony of the chairman? if you could put that three-bar chart up, it's like it never happened and i can show you three or four different charts that have completely gotten rid of it. we were at a 23% probability on monday actually, if you go to 9:59 a.m. on tuesday, it was right around there. then 72% where it becomes not only the odds-on probability they'll hike 50. now we're back down as if the chairman didn't speak. and i think what we're learning here and what we knew from the great financial crisis, even from the pandemic, guys, is systemic risks, concerns about the bank trumps everything as far as the fed is concerned. i don't think they're at a point yet where they could get rid of the 25, but i don't think the market pricing here that they're more likely to do a 25 than a 50
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is wrong especially if there are concerns about what's happening in the banking system >> i totally agree, steve. but, you know what, we've got an inflation report out next week and there are indications that it could be another hot one. this is going to be a tough call >> let me just say a couple things about that. we don't have very good high frequency inflation data we have pretty good jobs data that told us this number was going to be hotter than expected i think the market was positioned for this hotter than expected number. every report i read from reliable forecaster was above consensus. inside it, important to remember, you remember talking about this in the last hour, those two components were sort of disinflationary one is you had wages come in at 0.2% against a forecast of 0.4%. and a participation rate up now
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three months in a row. so, we are bringing people back into the workforce and i think that's helpful for the fed. the fed doesn't care if a million people are employed, as long as you have a million bodies to fill those jobs. >> steve, thank you. >> pleasure. >> steve liesman. joining us, former federal reserve vice chairman donald kohn great to have you back on an important day. >> good to see you, carl, and good to see you, sara. it's been several days >> welcome back. you couldn't have picked a better day. >> what do you make of this moment the long-standing battle to rein in inflation starts to get checked by evidence of cracks in financial systems? >> we have yet to see if it's getting checked by cracks in the financial system
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let me comment on the jobs report i think the jobs report reinforced the idea that the economy has been very resilient in the first part of 2023. this kind of gains in job markets, i agree with steve, if a whole bunch of people keep coming into the labor force, that's fine, but you can't expect that. so, i think 300, average 350 job gains over the last three months, that is not sustainable under any reasonable assumption with a labor market that has to cool down. the jobs report by itself, i think, reinforced the idea that at least the peak in the federal funds rate would need to be higher than they might have thought a couple months ago. >> so in large part the chair's testimony is intact, even with some of these new fresh concerns >> so, i do think the fresh concerns will weigh on the -- on
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both the peak and 25 versus 50 the fed will not be worried about the banking system cracking the banking system is very safe. they've done stress tests on the capital, on the liquidity, new regulations put in place since the global financial crisis makes the system much, much safer. the system itself, the banking system, is not going to crack. but i do think they need to take account of the effect of these concerns and the fact that deposits are flowing out not only of silicon valley bank, where they have special factors causing deposits to flow out, but deposits are flowing out of the banking system more generally. we've seen a decline in m2 over a number of months and so how are the banks going to respond to that we saw the fed itself has a survey they did in the fourth quarter they released in january that showed a general tightening
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of terms and conditions for all kinds of loans and i think the withdrawal of deposits, if anything, will strengthen that. if i were looking at that, i would say there are problems -- it's not a problem, but the banks are tightening up. that's reinforcing the tightening of financial conditions from what i'm doing in the -- in my policy rate. and maybe it means the rate doesn't have to go quite as high as i might have thought without that happening. >> i've been making that point, too, don i'm glad you raised it at the very least it's going to tighten lending standards even further, which is going to hurt the economy, even from the biggest banks if they're not that effective one thing i don't think people are talking about and bringing up as much is the balance sheet. that's what's creating a lot of this pressure that the fed is trimming the balance sheet i wonder how high the bar would be for them to stop doing that >> oh, i think they would need
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to see -- need to see problems in the treasury market considerably more upset and dysfunction in that market and more generally in the economy to stop doing that. i don't know, sara, how much the rundown of the balance sheet has contributed to the runoff of deposits the rundown on the balance sheet should put some upward pressure on intermediate and longer term rates, in particular as the treasury replaces what the fed was holding by going out into the market but it's not huge. it's some upward pressure. i think the more the upper pressure is coming from the rise in the funds rate. that's what's really putting the pressure on deposits rather than the rundown of the balance sheet. >> i guess when you take this and put it into the broader fikt, the problem for the fed is that -- it's sort of like europe they have to make policy for
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multiple economies if you're right now in electronics or the housing market or the crypto industry or now increasingly in parts of the banking industry, you want the fed to pause you're not growing jobs. you're laying off workers. you're seeing demand fall off. if you're in the tourism, hotel, hospitalitity, restaurant, grocery business, things are booming. it's this really weird two-part economy they have to figure out how to make policy for >> and the important thing to keep in mind is they can't do that their policy affects the whole economy and it affects different parts of it differently. so when they're looking at this thing, they're looking at the macro economy. they have really one tool or one and a half tools the balance sheet shrank agile give a half to but mostly the increase in interest rates they have to look at the whole thing. that's what the january/february jobs report said, that the
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economy taken as a whole is still pretty darn strong and stronger than we'll be consistent over time with getting inflation down to 2% i think that's got to be foremost in their mind i get the housing industry and silicon valley might like them to pause the rates that's not going to be the -- that's not going to be foremost in their mind. >> i always think about a fire running through a building buildings don't combust in their entirety all at once it starts in their living room, smoke trails through the hallway. it can be in one place and not the other. i wonder if you think some of the hawks like daley or neil need to be more balanced in their commentary once this blackout period ends. >> i don't want to talk for individuals. i like the fact there are diverse views on the federal reserve and they're having debates about what needs to
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happen and they should continue to have those debates. i do think people on the committee need to take account of the fact that financial conditions are tightening across a broad array of financial markets. we've talked about bank terms and stands sara's been talking about banks terms and standards, that's very important. but also we've seen the stock market level to down someone over the last couple of months we've seen certainly interest rates, ten-year rates go up, including real rates so, the real five-year rate is 1.6, 1.7 when i checked a couple of days ago. i don't know what it is today. that's a moderately restrictive policy so, they have to look at the whole array of financial conditions, decide how that plays into both the peak and the pace at which they get to the peak and i think part of the tightening of financial
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conditions might make you less confident that you know where the peak is. and more likely to go in baby steps rather than big giant steps. >> i just want to remind our viewers, i told you, don, it was a good day for to you come back on with us i don't know if people realize, you were the vice chair, number two of the fed, what, 2006 to 2010 >> that's correct. >> that was the financial crisis you were there on the front lines, chief firefighter. >> right. >> on a day like today, there are people that are comparing it to savings and loans, comparing it to the financial crisis i know we're nothing like that but what are the alarm bells you would look at and you as a fed member a little more concerned about what we're seeing in the financial system. >> so, i think, let's go -- we seem to be in fire analogies right now. let's go back to carl's fire analogy. and i think what we saw in 2008
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was the fire rage from lehman and aig through 2008 but i think we have right now, carl, i'm very confident in the firewalls around the banking system i don't know anything about individual banks but i think the system has good firewalls around it. what i would worry about and want to be looking very carefully at, and i'm sure they are, is what's going on in nonbank finance. and i think one of the interesting things about svb is that it's a window into venture capital, which is an important part of nonbank finance. and i'm sure that mary daly has her people all over the venture capital industry now trying to figure out what's going on and what the inner connections and possible contagion might be between -- so we've seen little bubbles breaking here, right
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venture capital, crypto, et cetera, and where are the connections. even if they're not through the banking system, are they somewhere else and so that's what they have to be careful of. i do think we can't -- it's so important what happened after that crisis, building the fish walls around the banking system, which is at the center of the financial system >> that's a really good point. don, thank you very much it's good to have you here today. fire analogies and all appreciate it. >> good to see you let's see if someone can put out this fire. >> exactly don kmohn. it's not him happy to not be fighting on the front lines. we'll continue to watch shares of svb financial. david faber reporting a little while ago that deposit outflows outpacing the speed of a sale
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process and the company has put itself for sale, sholing around. the kretf on pace for worst week since 2020 that was during the covid pandemic we'll speak with kbw ceo thomas michaud. the dow tries to hold on to a very small gain. it's up about ten points you do have three sectors positive nancials at the bottom of the nancials at the bottom of the market we got this. we got this. life is for living. we got this. let's partner for all of it. edward jones
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a. ' we dif deeper into is the vb, the kwb down after posting its worst day of june 2020 in fact, mechambers of the index shedding more than $90 million in value since yesterday some of the banks are seeing life jpmorgan, pnc, wells fargo and have gone into the green tom michaud from stiefel joining us how do you think about the spillover effect of this debacle? >> it's remarkable i think there are a couple of important takeaways. one is this contagion or is this something that's unique? i believe it's idiosyncratic in that silicon valley had a much larger bond portfolio of
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percentage of assets than a typical bank their area of focus, they've been the leader in being the niche bank to the growth sector. that sector is under a lot of pressure, burning a lot of cash. i think it's very unique to silicon valley i don't think this is going to be a broad-based contagion i think so many other banks have much broader forms of funding and they're just much better diversified in terms of their assets and business mix. i don't think it's going to be -- i don't think it's going to be that, even though the stocks are all being painted generally with the same brush. so, our research department actually came out and recommended a couple of stocks recently in the middle of the selloff. that's number one. number two is, sara, this is also part of the bigger picture which is the markets are still and policymakers are still undoing covid. meaning we're coming off zero interest rates we've just gone through one of
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the fastest, most significant tightening cycles in my career, and also the fed is shrinking it's balance sheet, which is draining the banking system of a lot of surge deposits that showed up as part of the stimulus and monetary policy to help during covid. that's the environment we're navigating it's not going to be linear. it's created challenges and pressures. i think most of the industry, we expect is able to handle it, but there are a couple of companies that had too much exposure in a particular concentration of their assets and i think that's where we are. >> that's what i wanted to dive into with you. because the concern is that unlike the big banks, the regional banks aren't as well capitalized. they're certainly not as regulated. and we don't know exactly how well they've been managing this interest rate risk in the face of what has been a rate shock. a very quick move and a very big
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inversion of the yield curve >> yeah, i will tell you the question isn't about the type of regulation the question is are they regulated enough i can assure you they are regulated enough they may be regulated differently but they're regulated enough i would address that point i think the message of last couple of weeks in banking is you want diversification having all your eggs in one basket makes you very prone to changes in that sector or having too much concentration on your balance sheet, in the case of the bond market, might not be a good position to be in and so i think that's the message. the other thing is, a lot of the regional banks have a lot more retail funding, which doesn't tend to move so fast and also probably is a percentage of deposits, they have more coverage from the fdic so i wouldn't say this is going to spill over. the central bank can stand behind a lot of the banking industry with their support and make sure we don't have a
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banking crisis so -- and i think those factors are certainly going to be at play here. >> it's interesting, you know, last 24 hours i've seen arguments we should blame dodd/frank and thank dodd/frank for either bringing our attention to this early or creating worries where there were no worries to begin with. by the way, jpmorgan reports on the 14th as the earning cycle begins again i wonder how much of this is going to be visible once we start getting those quarters >> you know, my feeling is that this is going to be very company specific when we get to the end of this. the banking industry -- the regional banks are still very well capitalized they're maybe not as well capitalized as they were a couple of years ago but the banking industry is still pretty well capitalized i think what we're going through is just the fact that fdic deposits are shrinking as the fed is shrinking its balance
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sheet. that's what's unusual. we downgraded the banking sector in december because we felt there was going to be a lot of revenue growth headwind. i think we're seeing it maybe a little more starkly than even we thought. but i still think it's a question of earnings growth. not a question of solvency with the banking industry, even though the stocks today are suggesting otherwise, which is why our research department actually came out and kind of rallied around a couple of our core recommendations >> so, are you saying they're not in the same sort of problematic state where they're funding their long-term treasury holdings with deposits that are now bailing? >> well, the whole banking business is about duration what i can tell you is silicon valley's bond portfolio as a percentage of their assets and percentage of their equity was extraordinary. extraordinary. did not look like a typical
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bank's a typical bank has a lot more diversification to their balance sheet. that gives them multiple sources to provide liquidity and so i view this, if i look at a peer group analysis, you would see silicon valley in that regard was an outlier. i think the industry is on more solid footing. doesn't mean there won't be pressures. there's tremendous competition for deposits right now because of higher rates and because the fed has been draining liquidity out of the system. that's a competitive situation, in my opinion. not a solvency situation, in my opinion. >> all right in defense of the regional banks, tom michaud, it's great we've had such good guests on this topic today thank you very much. >> thank you, sara thank you, carl. >> good to see you. coming up next, a mexico stock market well outperforming u.s. equities so far this year we'll get a look at some possible international opportunities.
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welcome back obviously, banks are the story of the week. take a look at first republic stock of the day at its highs, off about 5%, 6% closed yesterday, sara, at 96 and a penny. opens today, goes to 45. now back to 91 as the dow's up 100 and the s&p is up 6. >> it's crazy. to see a stock from down 50% to up 5%. they're based in san francisco they cater to wealthy clients. they do have -- cramer was up on the website showing me private and equity capital a lot of these banks are coming back i think the word of the day is
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idiosyncratic. if another person says that, maybe they'll all rally. >> i think jpmorgan was the first to idiosyncratic. >> we just heard it from kbw, tom michaud. have you seen the mexican market, hit an all-time high in late january the etf, eww up 17% this year. far outperforming the major averages here at home. the dollar index itself continues to rise. the mexican peso at its best level since 2017 bank of america shows it has tight monetary policy, a narrow current account deficit, fiscal restraint, political stability relative to the rest of the region, and what many on wall street are calling the nearshoring advantage. companies moving supply chains closer to home in this country away from places like china. the last few months we've seen a
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number of companies doing this tesla, big announcement, ford, gm, mattel and honeywell, all moving to mexico morgan stanley predicting mexico could see a $155 billion surge in exports to the u.s. the cherry on top of all of that, inflation has fallen to 2021 levels which gives policymakers more run way to potentially slow down their monetary tightening, again, and help their economy engineer a soft landing just as an anecdotally piece of evidence, i was there last week with my family on vacation, and tourism is booming and we're paying a lot higher prices for it. >> it's long been talked about as an alternative to asian manufacturing. the tesla thing is huge. there are anecdotally episodes of crime, obviously, breakdowns of rule of law, kidnappings, a couple of high-profile events this week that takes a little shine off the thesis. >> absolutely. but that's always been the case. they've got a few economic
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factors converging in a positive way. if you're looking right now in this world where u.s. stocks are under pressure, rates are rising everywhere for a bright spot, potential winner, mexico is interesting. >> yeah. also pay attention to the relationship between amlo and the president as that's an important one. a news update. dow session highs, kristina partsinevelos. >> good morning, carl. good morning, everyone california will be getting what the national weather service is calling a burst of heavy precipitation this weekend as yet another winter storm moves across the state forecasters say heavy snow and rain could cause flooding, potentially putting lives and property in great danger the white house says saudi arabia kept it informed on its successful talks to restore diplomatic relations with iran the u.s. was not directly involved in the negotiations a spokesperson says it's not clear what the development might mean for saudi arabia, normalizing relations with israel two traditional european allies are working to repair their relationship that has been strained by brexit
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british prime minister says his summit today with french president macron marks what he calls a new beganing for the two countries. back over to you carl >> thank you. coming up later on this hour, we'll continue to track the fallout from the crash in silicon valley bank. what comes next? a bailout, a bank run? a lot of possibilities the a lot of possibilities the street is having to si i couldn't keep up until i found ziprecruiter. ziprecruiter helps us get out there quickly and get us qualified candidates quickly. they sent us applicants that matched what i was looking for. size today we're back in a moment service advisors, store managers. ziprecruiter helps me find all the right people, even the most difficult jobs to fill. - [announcer] ziprecruiter, ratedthenumber one hiring site. try it for free at ziprecruiter.com
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let's turn back to svb we just heard from the treasury secretary referencing svb in her testimony on capitol hill this morning. >> i will just say, you mentioned silicon valley bank. there are recent developments that concern a few banks that i'm monitoring very carefully, and when banks experience financial losses, it is and should be a matter of concern. >> while the worries over contagion haven't disappeared, the bank stocks are starting to see some light kbw bank index has erased losses after being down 7%. joining us, oppenheimer's directing manager chris joining us appreciate the time on an important day. >> thank you for having me. >> what do you make of some of these reversals and also some of the filings we're getting from the likes of an frc saying the deposit base is strong >> well, we have been saying
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since last october, and the numbers clearly told you since last october, that silicon valley is an outlier relative to the industry and you could just see that in the results. it was clear in the third quarter results. it's clear in the fourth quarter results. let me just give you an example. for the average bank in the third quarter, their assets yields increased 22 basis points more than their deposit yields for silicon valley, it was the other way around their deposit yields increased 36 basis points more than their asset yields in the fourth quarter it was the same thing where the industry on average, asset yields went up 9 basis points more than the deposit yields and for silicon it was minus 62. so, and you see it was stark in the fourth quarter, the average industry net interest income was up 8% for silicon valley it was down
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13 so, it should not have been a surprise to anyone that they have issues different from the rest of the industry >> right i've seen a lot of the street today come to the defense of the names. schwab is a great example where they compare just deposit growth over the last three years at svb versus others like schwab. and nowhere near the same ballpark but how do you characterize any kind of concerns about names that have had deposit growth over the last few years? >> well, it depends on what kind the problem with svb, in my opinion, is their deposit growth is almost all commercial and it's a lot of venture-backed companies and so on. but in each case, you always have a cfo or treasurer that is trying to get the last basis point on rate. whereas if you compare that to the average bank, right, the average account in the united
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states has $5,000 or $6,000 in it, and the retail customer has a couple thousand coming in on the average month, on direct deposit and a couple thousand going out on bill pay, right so, you know, are people really going to move their operating accounts out of that are they going to go to hr and change their direct deposit bank and then reinput all of their payment data no, they're not going to do that to earn 2% or 3% extra on a couple thousand dollars. the average retail depositor has their money in the bank for the convenience of that and the convenience of the branch and being able to go get cash out of a cash machine for free. that's why they leave their money in there the only reason why a corporate treasurer leaves their money in a bank is, a, they think it's safe and, b, they're getting the best rate possible. >> what do you see happening to
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scb? do you see a buyout? >> well, it would take time in any case these things don't happen overnight. and, you know, one of the problems is that if somebody bought it, they would probably have to mark the whole portfolio down as well that would be -- could be quite a significant writedown as well. so, i have a feeling they probably need to tough it out on their own, come up with plan b, and then plan b probably involves more of a balance sheet shrink and at some point probably raising -- raising equity, even if it is painfully diluti dilutive. >> can you characterize for the sector in aggregate where you think commercial real estate risk stands right now? >> i think, in general, the
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banking industry has massively derisked itself since the great financial crisis and the asset quality numbers, i've been covering the industry on and off since the mid-'80s. and, you know, it was always the practice that every seven or eight years they would have some kind of major accident and i think the annual stress tests have really raised the cost of making a bad loan so the banks make a lot less of them. and, you know, the early delinquency data i see are off the charts low and good. so, i bet you there will be some office nonperformers and probably some losses that is not the bulk of the commercial real estate i mean, when you think about a lot of the commercial real estate portfolios that banks have on their portfolio, a lot is apartments and hotels and
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logistics facilities and, you know, all kinds of -- offices still is an important component but it's a relatively small component. i think the asset quality concerns for the most part are still quite overblown. you know, we still see economic numbers. it's overwhelmingly, you know, strong -- we have overwhelmingly strong economic data still >> right >> appreciate -- >> there are going to be some issues in office but it won't be huge. >> it's hard to imagine there wouldn't be any. appreciate the time. obviously the street is looking for as much information as it can get. thanks so much >> thank you for having me next, venture capitalists have conflicting viewpoints on whether to support silicon valley bank. we have those takes and the impact it will have on the broader vc market. a programming note, don't
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miss "last call" with brian sullivan, delivering fresh takes on the biggest business topics of the day with an eye on what is going to matter to the markets the next day 7:00 p.m. eastern every night. we're back here on "squawk on the street" after a quick break. dow continui tgango in a little bit. up 67 points
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the open it's come a lot back from there. saying quote in a release, first republic has consistently maintained a strong capital position with capital levels significantly higher than the regulatory requirements for being considered well-capitalized also saying that the deposits are safe and then we are getting news from the fdic on svb. >> we'll turn to dom chu. >> to your point here, this is going to be for the record, maybe something not unexpected the fdic has now put out a release with regard to the now winddown of silicon valley bank. in their news release, silicon valley -- the fdic, rather, says silicon valley bank santa clara was closed today by the california department of innovation and protection which appointed the federal deposit insurance corporation as the receiver so, the administrator of this now wound-down bank, the process of being wound-down bank, to protect depositors the fdic has
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created deposit insurance at santa clara bank they have immediately transferred to this new receiver bank all of the insured deposits that were held at silicon valley bank they go on to say that all insured depositors will have full access to their insured deposits no later than this coming monday morning, march 13th the fdic will pay uninsured depositors an advance dividend within the next week and those uninsured depositors will receive a receivership certificate for the remaining amount of their uninsured funds. uninsured that are held at silicon valley bank. this is all happening as the fdic sells the assets of silicon valley bank. when they do, future dividend payments will be made to those uninsured depositors the point here being, carl and sara, a receiver bank has now been set up to basically take over all of the operations of silicon valley bank. those with fdic insured deposits
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will have their money back, no problem. the ones that have in excess of insured deposits amounts will have to wait and see what happens with the certificates as they go through this whole liquidation and sale process, guys >> yeah. even offers a 1-800 number for those who have more to contact the fdic would we argue, dom, relatively swift action by the agency, the fdic and reports on the tape right now that the regulators actually showed up last night. >> not just that, i mean, the moves were fast, no doubt. what was even more interesting was the juxtaposition with regard to some of the comments out of the treasury department earlier this morning with regard to monitoring the situation there. also some regulators downplaying this idea there's a contagion effect at play what this, i think, tends to do, and, sara, carl, we've seen this kind of with certain bank stress situations in the past, that there is a really quick ring fence being put in to silicon valley bank to reassure
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financial markets that this is not going to have a contagion or ripple effects to other parts of the banking sector now, we already know and we've been reporting on, carl, sara, all of us, our colleagues here have been showing charts and trading halts with regard to other west coast banks that are certainly not silicon valley bank, but have similar geographic footprints that are also now going down in value because there's a concern that depositors, who had business with silicon valley bank, might also have business with some of these other west coast banks as well so, a lot of this intervention right now happening very quickly, carl, to your point, because of lessons learned in the past with regard to how you kind of ring fence these situations off to prevent that contagion fear from really taking hold, guys. >> i think what it shows is that this is why we have an fdic, right, to protect depositors and to dom's, i'll use his word, ring fence crisis from becoming worse. if you have insured deposits, they'll pay them out if they have uninsured deposits,
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they'll pay a dividend that's why there's a system. this was a regulated bank. dom, thank you >> you got it. back in a couple of minutes as the dow has lost some of its gains. down 24 points obviously, it's been a wpshiaw action kind of day action kind of day stay with ush confidence. the markets may fluctuate but you're still on track. more than 9 out of 10 clients are likely to recommend us. ameriprise financial. ready to shine from the inside out? say “yes” to nature's bounty. the number one brand for hair, skin and nails. with our signature blend of health and beauty nutrients to bring out more of your inner beauty. get more with nature's bounty.
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than expected. with us now from the white house senior economic adviser to the president gene sperling, under presidents obama and clinton gene, it's good to have you here, welcome. >> thank you for having me >> that good news on jobs is being overshadowed here by concerns about silicon valley bank, which the fdic just shut down, and the potential ripple effects on the financial system. how are you processing these headlines? >> well, i think we're at a point in the jobs numbers where everybody is looking for goldilocks, everyone is looking to see that strength of jobs, strength of recovery going on but also wanting things to be neither too hot or too cold. the numbers today, 300,000 showed the economy is still creating jobs. and yet there were some signs of moderation, which i think people are weighing in terms of silicon valley bank, you'll understand that here at the white house we're going to
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be letting treasury handle much of that. secretary yellen, you had on cnbc, her comments, that it is a concern she is monitoring. she also mentioned we are in a situation where we do have more tools than we had in the past, things to reforms that have happened so obviously silicon valley bank is a unique bank but this is the type of thing you're going to, as the secretary said, monitor, monitor carefully. >> sure. >> and you know the federal reserve and fdic are doing so as well >> sure. but it's not every day that we have a bank failure, gene, so i do wonder if you worry as an economist about potential spillover effects, even if it is unique in terms of -- >> right >> -- their deposit base and their venture capital exposure about tighter lending standards for the rest of the financial system which has already been happening on the back of
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deposits that have been falling. >> look, there's no question that when you have anything like this if you're at the white house, at treasury, at the federal reserve, yes, you're going to be looking exactly at what you're saying are there knock-on effects how much is this a one-off does it reflect other challenges like all of you we will monitor the situation. it is also important to remember that this economy has shown as we saw the jobs numbers, significant resilience across the board. one should be concerned, but just like one shouldn't overreact to a positive sign, one should look at a song. we're monitoring, we're, of course, you never like to see a situation like that, but, again, i want to point to the resill
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yen resilience of the economy. this shows why you don't play games with the u.s. economy and i think one thing one could do to help the entire financial and economic system is take off the table the idea that the gop is going to risk a financial default, you know, over their demands which i think as we've seen quite unreasonable demands on the budget. let's have that discussion, but let's let financial markets know right now nobody is going to be holding the u.s. economy or the u.s. financial system hostage by saying if they don't get their way, they're going to default the u.s. government and have an unprecedented financial catastrophe. >> we mentioned some of the comments she made on that, gene. it's good to see you again it's carl. the president a few moments ago said he's optimistic cpi next week will be, quote, in solid shape. i mean, what are the hopes for cpi ahead of that print?
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>> look, right now if you look internationally we're at the middle or lower in the pack. it's too high. it's a lot better than the average but it's not good enough for us we want to see that come down. i think when you look at the last few months you are seeing a moderation you are going to have unpredictable bumps in the road, i think signs are moderating, that we're moving in the right direction. i never want to get ahead and be a predictor of economic statistics if i did, there would be too many scars on my back. >> we'll wait until tuesday. we don't have a problem with that, gene we appreciate your time very much gene sperling. >> thanks. thanks for having me turning back to the demise
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of the silicon valley bank, deirdre bosa who has more color here, deirdre, after the fdic shuts it down. yeah, my phone is blowing up, sara, a lot of concern from startup founders and investors i heard from one founder who said he just got his svp bank account approved a few days ago and was about to wire millions of dollars of seed money into that account he didn't. his anxiety is rising. he dodged a bullet in that he didn't put his money in silicon valley bank, but he's saying the longer he waits, the chance some investors will bail, and i quote him here, the sky is falling again. i know other founders as well were not able to get their money out in time. in fact, i spoke to one investor this morning who said some of the founders were actually lining up at the bank -- at bank branches to try and get cashiers checks that's how desperate the situation is here on the ground. there's a lot of questions
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people are just trying to figure out right now, continue to try to figure out. what happens because of the most important bank in silicon valley, in tech. we've said it a bunch of times this morning, about half of all startup money goes through this bank so its failure in terms of debt financing in so many different ways, right now i think investors are trying to figure out how much they can get out. maybe that's only $250,000 because that's what's insured by the fdic there's still hope maybe someone will swoop in here but, again this is moving very, very quickly and the ramifications are only starting to be sorted out. >> i think that's why fdic had that notice for those who obviously had more at stake. it does have implications for how you manage operations, how you make payroll depending on your exposure to the bank and your startup >> deirdre, who is exposed do we know the list of startups?
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what is it, half the startups in this country >> exactly i think you can say but it goes beyond that. it's an american tech ecosystem but also a chinese tech ecosystem story. chinese is the second most active venture capitalist in the world. a lot turned to silicon valley bank which started to serve chinese companies decades ago. they couldn't be served by the global banks because of rising bilateral tensions they couldn't turn to the citis and hbics of the world this is really only the beginning. but when you think about where silicon valley bank stood here, i mean, it had a very different deposit base they would loan against equity that wasn't even public yet. they loaned against the earliest stage startups, even wineries, i have to say. 2% of their loans was for something called premium wine.
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and that included wineries and wine producers and something they call economic innovative influencers. back to you. >> deirdre, we have to go. thank you. you'll be doing a lot of digging and those names will come up watch the bond market, lower yields signal this is all changing the way the market thinks the fed will react. >> the biggest drop for the two-year yield since '08 over to post 9 and "the half." all right, carl, thank you very much. welcome, everybody, to "the halftime report. i'm scott wapner front and center this hour those two major stories we're following just like all of you the jobs report, the continued faumout as well from silicon valley bank, its closure, and now its impact on a whole host of different areas we discuss and depp bait with the investment committee and some special guests joining me, josh brown, liz young and steve weiss. also with us senior economics reporter steve liesman today we'll show you what's happening in the markets today it's been a bit all over the plac
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