futures. we with wil now tumbling for the dow futures. we withl show you what is movin now. it is monday, march 13th, 2023 "squawk box" begins right now. good morning welcome to "squawk box" here on cnbc we are live at the nasdaq market site in times square after what was a wild weekend, we have so much news to bring you i'm andrew ross sorkin along with becky quick joe is off steve liesman is at the table with us. here is what you need to know. federal regulators sweeping in to guarantee deposits of the customers of silicon valley bank i just got an email from somebody in silicon valley who went to an atm at the silicon valley bank and could not access it yet let's hope things open in a bit.

shareholders and bond holders in svb in watch out and taking over a second risk of signature bank in new york it will backstop its deposits by the federal government and i noted barney frank is on the board of signature bank. it will provide financing across the countryby offering loans for up to a year janet yellen is saying keep your money where it is. it is guaranteed for the next 12 months it may give some of the banks, the smaller banks which may be having trouble, time to get their acts together and get deals. new this morning, hsbc is

buying the us silicon valley bank for 1 pound the sale protects the deposits of the silicon valley bank uk clients. and first republic getting additional funding from the fed and jpmorgan $70 billion in liq. all weekend, lots of folks talking if the company would get taken over bankers hired and lots of people looking at the bank. we will keep our eyes on this bank for some time having said that, between this investment firm jpmorgan chase and the backstop from the fed, the hope is that money does not move to prevent a run on that bank president biden is set to speak about the banking system at 8:00 we will have the comments live. we have covered every angle of the story with reporters working the phones from coast to

coast o coast. we first get to the market reaction u.s. equities. s&p up 2 points. nasdaq up 62 dow has turned negative. right now, dow futures indicated downthe -- down 80 points. you see jpmorgan chase down k o% citigroup and wells fargo down each 2%. in europe, the market is sliding as people ask what the european banks have and what the ecb will do to offer lines to them. the dax is off 2.5%. so is the cac 40 in france the ftse 100 is off 2.1% italy stock down 4%. spain is off 3.5%. treasury yields have continued to come under pressure we watched this happened on friday that has continued this morning. the 10-year treasury is now down

below 3.6% it is sitting at 3.55% the 2-year treasury, as of thursday, trading at 5%. now down to 4.2195%. this is a flight to safe pe -- flight to safety and crypto firms have shored up nicely bitcoin is back above $22,000. up 4.25% we want to dig into the collapse of silicon valley bank and more issues from regulators. steve liesman has more >> how about the reporters it was a busy weekend. it reminds you of the great financial crisis regulators looking to shore up the fragile banking system and looking to avoid a crisis.

investors asking if they succeeded. the failure friday of silicon valley bank was the second largest failure in u.s. history. the first bank run of the digital age because of the concern of tweets. it created a broader run on smaller and regional banks in the country and that money in silicon valley bank would not make pay payroll. andrew, a source telling me it is not always that smooth. the transfer of deposits you may think you transferred money on friday and it may not be available to you today. >> is the system gummed up there were things that made me think that a little bit. it will take longer than usual to sort out. >> i don't know about your account at your bank there is a new owner out there in receivership. i'm not sure how that works. the guarantee deposit of silicon valley bank. they shutdown signature bank also as becky said earlier,

there is new financial at first republic you know regulators made that happen they guaranteed all uninsured deposits you are guaranteed for a period of time. they created a new federal reserve fund to finance bank assets they eased lending rules at the emergency discount window to make it less expensive to borrow there. officials said they took these actions to avert a situation where uninsured depositors would pull money from healthy banks and deposits end up only in big banks. there are not major problems with the assets, especially with the treasuries and mortgage-backed securities main problem is rates are up bond prices are down that creates large unrealized losses for banks and little default risk in the assets another usual you is how fed

policy is affected here. look at what has happened. this is dramatic 54% probability that the fed does nothing right now sorry, is that right we're scrambling to put stuff together here this morning i want to double check that. that is right. it changed in the two minutes. that is correct. the correct chart. 48% probability of no hike it was 54 a couple minutes here. there was no probability of no hike before all this >> last week, it was thursday, we were still looking at the odds of 50 >> odds on being 50 or 70% hike at 50. that is before svb blew up the peak right price, i'll wait for the screen to come up before i read this. 4.82%.

that is equal to adding -- 88 basis points of easing one more thing, guys, it is a risk-off trade the 10-year treasury and 2-year treasury yields are down. the dollar is weaker you are not getting a pile into stocks >> muhamed el-erian said don't let this dictate policy. the fed and treasury should save the banks. on fed policy, on the policy of what happens this week, if i read it correctly, he said don't let this situation dictate where it goes. what do you think of that? >> i think i wouldn't be happy about that idea. one, we talked about this in the last hour. the bank of england successfully

paused qt to give pension funds a chance to catch up that was a one-month pause i would be concerned if we still had an inflation problem and the fed paused longer than that. if there is a benefit to waiting a little bit to let the financial system catch its breath, i would be in favor of that the second reason is the discussion of whether or not what happened here has changed the economic outlook is there a disinflationary impulse here i have to say this gary cohen said, steve, the fed wiped out all of the tightening. i don't think that is true gary thinks this, bonds financed at 80 or 90. the new fund the fed allows you to finance at 100. let's say the financing value

was 90 now it is 100. you have more assets upon which you can make loans there is a certain caution part of the lending as well. >> what do you mean? >> i think banks will say wait a second maybe we want to husband our cash and reserves. not be the other -- the other thing which is interesting is the wake-up call on the banking system right now we have to pay 4% or 5% on interest rates >> deposits. >> it was a failure of bank management to realize they were potentially open to runs if they didn't -- you wake up in the morning and becky, you bought treasuries >> i bought t-bills. >> you took it out of the bank and gave to the u.s. government. you gave up liquidity for that >> if you are talking for three months, you get good returns. >> i tell you what you can get

for that >> 4.60% versus 0.1% from a checking account. >> why >> stay where you are. we have richard fisher here. former dallas fed president and cnbc contributor i want to start with this, richard, which is contextualize this on monday morning a lot of people comparing to 2008 i don't think that is the right comparison necessarily steve had a smart question we asked it a couple of times. is this a bear sterns weekend? precursor to something bigger? has the tide been stemmed here and what the government has done ended this for good? what do you think? >> first, we know becky is responsible for the back run by the way by putting her money in

treasuries bear sterns did not have deposits it is different from 2008 when i was on the open market committee. i think it is better to go back and look at the texas banking crisis in the 1980s. and penn square bank that failed remember, because of it, which is continental illinois failed >> the first time too big to fail was used. continental illinois. >> exactly we didn't have interstate banking, that bank that failed in the '80s, was the sixth largest bank in the united states at time you can look at how they were worked out although they have taken as steve referred duration risk out of the banks by offering 100 cents on the dollar on the u.s. treasuries, i don't think they

should be pausing the 25 basis point hike i agree with muhamed el-erian. i think they came up with a program that is responsible. the equity owners and bond owners will be wiped out that is appropriate. the one thing, andrew, we will see criminal allegations with the management of both banks there is a lot of turmoil going forward. >> a lot of smaller banks now that people are focused on on two fronts one, has the work the fed and treasury done prevented the flight from the banks? i imagine you will see some. you look at first republic and others we had on the screen earlier. you say are there transactions over the next year will have to happen they may not have to be gunshot

deals, because we have more time, but what happens to those institutions >> there will be acquisitions and failures i don't see -- this is an extreme circumstance this is a black swan there is always a black swan swimming in the lake you don't see it until it happens. yet, it is being contained it is both a plus and a minus the way the authorities are dealing with it and the fed is dealing with it. that is reassuring people over the insurance level. there is always going to be doubt, andrew. i think we will see more movement in the money market funds and parttparticularly tre driven even. -- driven. >> what do you think this morning? people were saying this is the fed's fault. the fed did not take proper consideration of what was happening in the banking sector

and they did this. >> i understand that the management of silicon valley bank and other banks are responsible for looking forward as we raise rates or decrease them in the old days and managing to that risk. they failed. the main reason i go back to the texas banking crisis, i'll back then is what tech is now all those working capital needs were suddenly halted when those banks failed now we have technology you watch any institution that grows geometrically as the banks did in texas back then and silicon valley bank did here or as signature and crypto banks have done. you need to be harsh on the regulation side. look at them carefully if anything, the failure is not so much the movement on the fed funds rate, in my opinion p, but it is they did not supervise the

institutions properly. >> let's get to that the regulators being at fault here we are looking at hold to maturity this was a classic bank run where you were in a situation where you were borrowing short and lending long why didn't the regulators have better ideas is this a problem in other places and other banks that is the big question >> you have to ask the governor of the fed in charge of oversight of supervision regulation i would be watching the discount window for the smaller banks i'm sure if we go back and look at the data from last week, you see a ramp up in activity at the 12 federal reserve banks i guess that would have happened i oversaw that for ten years at my bank in dallas. we just have to see if this quells that fear i'm take an example of frost bank in texas. not the biggest bank in the country. what they did last time in 2008,

they did not take any government money. they put up billboards in texas and said they didn't take government money there are smart banks. they are the second biggest in the district who can take advantage of this as well as be vi victimized by this, becky. we have to be careful not too f -- not to feed the rumors i don't like the duration risk we have to see how long that lasts with regard to the banks it should stem the problem for now. the regulators will have to scrub overall these banks carefully to make sure -- not growing and not having hyper

concentrated risk with silicon valley bank. they need to make sure they have a better portfolio >> richard, i have to ask moral hazard if you had over $250,000, you are not insured. now we insured them. >> to infinity. >> i see the argument for moral hazard on the other hand, the complecomp complexity the banking system, it is unclear the choices that inflict or inject into the banking system can you speak to that? >> i'm not sure what your question is, steve >> my question is, if you have to turn to page 2,000 to find the percentage of uninsured deposits and cross that with the loans and the percent of hedging that has gone on with the bank's balance sheet. as a depositor, how much moral

hazard or how much discipline about where to put your money and how much does that provide to the banking system? it seems remirrelevant >> they have lifted the limits, as you say people will always be concerned when they say a bank or a deposit institution with hyper concentrated risk. a small depositor will not have the sophistication to page 1,000 or whatever you referred this is the regulators responsibility >> we may as well have them insured, right if you are saying -- >> then the whole business -- every banker will be working for the government that's what we're saying. >> that's the problem. >> hello all of the snl guys in the '80s

worked for the government. there was a receivership. >> every depositor is insured business by the government whether fed-backstop it is true at some level, do you say we have just nationalized the system >> that's going to be the criticism. we will see a lot of political throwback. we protected i cancan hear it. you are protecting the rich. helping the little guys, but protecting the big guys. >> to that point, ceo of silicon valley bank sold $3.5 million of stock two weeks ago. daniel beck sold 5$575,000. >> they will claw that back. >> they paid bonuses hours before the bank was shutdown on friday. >> i wonder where they deposited

their money when they sold their stock. >> they say it was on a plan to do that. two weeks ago. they were able to cash out i wonder if they claw that back. >> congress who love the show will be all over this. the drama has not stopped. i'm looking forward in that sense to the drama side. the banking system needs to be secured and made safe. from london, have a great day. >> thanks, richard we appreciate your time this morning. folks, we have breaking news detail from the fdic concerning silicon valley bank. it named tim mayopoulous as ceo. tim is the former ceo of fannie mae. the fdic says no losses associated with the resolution of svb will be born by the

taxpayers. this is the fdic and banks do it shareholders and debt will not be protected depositors for svb will access their money this morning when the bank resuming normal banking hours. loan customers should continue to be making loan payments as usually. the bank's official checks will continue to clear. again, that is the latest from the fdic we want to get to washington where we will hear from president biden this morning kayla tausche has more on that ka kayla, what are you hearing? >> reporter: becky, president biden will deliver the remarks on the banking system at 8:00 a.m. before leaving on the trip to california. the statement said the american people can have confidence that the bank deposits will be there when they need them. the president and lawmakers were briefed over the weekend with

treasury telling them sunday their priority was to pursue a sale of silicon valley bank, but without an answer to the question of who would answer to uninsured depositors the sale was difficult to notch. the senior treasury official said the parties decided it was more urgent to inn ststill confidence the white house held the final signature on the packages that regulators revealed last night every statement released by every single regulator and every part of the administration highlighted taxpayers will pay no cost or bear risk for rescues. sh the challenge for the administration will be the branding banking secretary janet yellen quoted with a tweet calling it a bailout. many americans will see the money in the bank ping system the same way although the fed

will make the money back once loans are repaid president biden wants to know who is responsible for the mess. we will see if he found the scapegoat when he speaks later today. becky. >> thank you, kayla. our next guest says he would like to see any wrongdoing at the bank aggressively investigated and search for any shorting that may have manipulated that failure joining us is california congress member swalwell what did you hear what you thought could be a problem >> good morning. i am grateful for the swift response on the shorting, i want it to be ruled out. again, this is unique in that was done over social media money was moved almost faster

than we have seen before because of the means we can do that these days we should look at options and shorting and see if there was any market manipulation to rule that out certainly investigate any mismanagement at silicon valley bank or signature so that taxpayers can have confidence and depositors can have confidence there will be accountability >> this wasn't a crazy scheme or fraudulent base on the face of it if you are looking at what they did, they screwed up on risk management they were taking a lot of treasuries which you would have the full faith of the government they weren't investing in risky things they were investing in treasuries they did not realize their deposit base could disappear so quickly. that is what it looks like from the early going. my question is would you have regulators >> certainly you need to, i think, make sure

that was the case. when you see people pulling money out or selling stocks before a collapse, it also raises questions around insider trading. all of that has to be looked at. i want to say these are my constituents there are a few districts with more bank customers and employees affected by silicon valley bank. they will, rest assured today, will be able to meet payroll on wednesday. these are people working in bio-tech, tech, wine industry, entertainment industry, drivers of the california economy which our governor said is the tent pole for the global economy. >> congress member, i'm curious how you think about the description of this as a bailout. the yoen i as-- in my mind, the

depositors in this case were bailed out these were people who were the smartest people in the room and we had the world of vc in your district screaming from the rooftops they needed government help over the weekend. there's an irony to it insofar as so many have been screaming so long they don't want regulation, but special tax treatment in the form of carried interest and so many other things here they are getting government help >> yeah. my priority is as i advocated to the fdic is the paychecks. the bank executives and investors should take a bath that is the free economy the assets of the bank as it was pointed out, the long-term t-bonds are strong the customers are the best customers anyone could possibly have for the work they do in the

long-term profit payoff you see in the industries. letting them fail would have meant millions missing paychecks and layoffs coming because of liability laws that directors will have to follow to layoff people if they don't see a foreseeable paycheck in their future by the way, no taxpayer dollar spent. these are bank fees and new industry to set up to ensure liquidity for smaller and regional banks it is irresponsible to say it is a lazy take to say this is a --e long-term assets are strong and hope acquisition follows >> congress member swalwell, thank you. we will talk more this morning and in a moment we talk to one of silicon valley bank's

customers scrambling to raise cash to stay afloat. that's next. and roger ferguson will join us to see if the fed will have to pause rate hikes in the wake of all this. "squawk box" will come back right after this you're a rock star. you are a rock star. no more calling co-workers rock stars. look, it's great that you use workday to transform your business. but it still doesn't make you a rock star. so unless you work with an actual rock star. hi, i'm ozwald. hello ozwald. pam, you are a rock- i wasn't going to say it. ♪♪

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you're probably going to want to start running. the next generation 10g network, only from xfinity. one giant leap for mankind. welcome back to ""squawk box. i want to bring you another story that follows the silicon valley bank collapse a customer camp puts on brands and experiences geared to kids and families ben kaufman is the co-founder of camp and they had a sale over the weekend to generate cash to stay afloat. nice to see you. >> good to see you >> it has been a long time >> it sure has. >> what a long weekend for you >> it is a little better the second week of march, the

weekend tends to have a bad deal >> bear sterns >> i was thinking of my middle kid's birthday last time it was his birthday, it was this memoranble was covi. >> right. >> how concerned are you with where things stand making payroll? we heard from a customer in silicon valley who had gone to the atm and still says closed. >> we feel good right now based on the outpouring of support from customers when it was unclear if we were going to have access to funds, we emailed customers and forwarded those to chase. >> why do you use silicon valley bank >> they were one of the only banks to provide us with a line of credit. >> if you had gone to jpmorgan

chase or bank of america, they didn't give you one? >> that's right. part the of the stipulation is you have to keep deposits with them >> can i ask a question, i heard about this over the weekend, from a number of founders who said you had to keep all of your deposits with them and others had certain thresholds to capture certain rates. the loan rate, obviously, was lower the more deposits you kept inside the bank? >> we no longer have a line of credit with them that is history for us everything was tied up in there. at the time, with the line of credit, we had to keep 100% of our deposits. >> that was the rule 100% >> it was the rule. >> the second piece that relates to this, a number of founders over the weekend, said if you want a personal mortgage, they offer amazing rates for a

per personal mortgage and on the business side of your life kept all its money there. >> i was never that are fortunate. i emergency that was happening i know people. >> wait. that is important. that you do that to get the personal favor and put your business aftet risk >> this is a long-running practice of the banking business a bank takes a company public and wealth management guy says we like to do business with you. by the way, you did this wonderful business with us using your shareholder money and now we like to help you here and you get great rates. this happens the question is how should that work >> i'm no expert in banking. i run a toy store. you know, what i felt on friday and a lot of evntrepreneurs fel is the lack of clarity and the only thing is the assets and

customers and that's what we leveraged to survive >> what would you do differently now? a lot of people are saying depositors are blameless if $250,000 was the insured amount depositors are not just, you know, anybody on the street who knows nothing. these are business leaders like yourself >> yeah. listen, i feel like the situation was hard for people like us. again, i'm not a banking expert or finance expert. i'm an entrepreneur. we did what our investors, you know, and others -- svb is a beloved institution. >> you have a number of investors early? >> yes. >> they directed you there >> when we were looking for a line of credit, they helped make

the calls. >> i went through the financial statement from january 19th. a couple of months ago they were going through this they said at the time broader market conditions are limiting growth and driving higher credit costs, but we see strength in our business we remain well positioned with the strong balance sheet all of the pages throughout, what is there? they were talking about the average deposit balance for 2023 would be down mid single digits in the decline lots of pronouncements in here it fooled a lot of people who are savvy investors. i don't know why the depositors would have a better idea >> we are already doing hard stuff. startups is hard retail is hard now this >> this is what i worry about. it is a hard question only because i think i know the answer

assume you get your money back today or the next week what will you do with that money? >> right now, our plan is to have it at chase that's where things are going. our cfo is looking into it >> this is the usissue we have o focus on my understanding is that every person i know at jpmorgan chase for the last 72 hours, the phone is rainging off the hook. this is happening at bank of america. this goes to the flight of money and whether that persists and continues after the situation. we really want money to stay put at the regional banks. >> that makes sense. >> ben, thank you for joining us we hope everything is okay. >> thanks to the customers for the support. >> keep us updated >> thank you. when we come back, former vice chair of the fed roger

ferguson on if the fed will halt or hike interest rates at the next meeting stick around ♪

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good morning welcome back to "squawk box. we are live at the nasdaq market

site in sometimes square we are live with the latest. two banks rescued and saved. the rest of the banking system saved. depositors guaranteed across the country. look at futures ahead of the market down 61 points on the dow. nasdaq up, i should say, 65 points s&p 500 up 3.5 points. treasuries is something to pay attention. 10-year treasury is 3.556. 2-year treasury at 4.2 crypto prices and irony in the last hour. bitcoin had gone down and was only saved by the government >> with signature bank stepped in and taken care of. >> and circle and specifically stablecoin pretty interesting. the fed rate hikes are front

and center as regulators try to figure out how to manage the silicon valley bank failure. goldman sachs said yesterday that it expects the central bank to halt rate hikes joining us now is former fed vice chair roger ferguson. the former president and ceo of tiaa and now a fellow for international economics with the council on foreign relations he is, of course, a cnbc contributor. roger, let me ask the measures taken by the fed and treasury. are these enough to stem concerns about other banks at this point >> obviously, time will tell i certainly hope they are enough to stem concerns what i find most interesting is the easing of the terms around the discount window through the special new bank term facility the fact that the fed is willing to basically take as collateral the good risk and riskless

assets and provide liquidity should give them a great deal of comfort. it says the fed is ready to provide liquidity to banks in good shape that, i think, i hope, is sufficient to give the comfort it is called for >> i sure hope, too. let me raise the question. depositors are safe. shareholders and bond holders are not the case any stocks that have been under pressure and banking stocks down double digits and not low double digits for many. one of the banks we were watching today, first republic has been given extra cash from jpmorgan chase and from the fed. that stock is still down 50% today. what does that tell you if you are someone who is a share hholr and your money is decline and you are a demposdepositor, you t pull your money otherwise? i wonder if that happens in

other places by the way, first republic bank is down 70% this morning. >> first, obviously, there is stress in the system that should be shown through equity value equity is the first thing that will be wiped out in one of the resolutions. it is opposite of a bailout. that word bailout is inappropriate here with deposidepositors, there wi process in the uninsured category which will show things down, but meant to be as quick as possible because the other point is many of the depositors, as with one of the earlier guests, there were startups and a dozen people on payroll. you shouldn't think of these as large and sophisticated. the system is under stress yes, that is the case. it will take a while, a couple of days, for all of this to

settle down and individuals to realize that capital is pouring in and realize that many of the banks have an asset that is worth 100 cents on the dollar. that is really important here. e everyone learned panic is driven here and the government is getting people to keep deposits where they are only time will tell. >> roger, the message is keep your deposits where they are they are safe. don't move as we heard over the weekend, it is not just silicon valley bank clients, but jpmorgan chase, bank of america, you name a big bank, they were getting calls. can you open an account? i want to open money immediately. what can you do? i was getting a text message from somebody about it right now. that is not people who are at svb. that is people at other banks

after this how much of this, do you think, will contain the damage? >> no one knows for sure what is interesting is what you are seeing from consumers which is frankly buying into a small number of banks. i hate to use the phrase too big to go under. that is where you want to put your money the system needs the community banks and regional banks they play a really important role you heard that one reason that silicon valley bank got started is the big banks would not bank a startup we are an economy where most jobs are created by startups people should remember that, you know, the money you put in the bank in your local community and region probably goes to support mortgages in that region and businesses in that region. there is a reason we have a system that is not just these four national banks or five national banks, but regional and community banks play an important role they are now backstopped by the

central government and central bank of the united states. the notion of if i take my money some place else it will be safer. not necessarily the case the message is your money is safe wherever it is. i'm sure president biden will do that >> roger, let me ask what this does to the fed. the fed futures are indicating the majority think there is no rate hike next week from the federal reserve. does this put them in a box? can they raise rates with the stresses >> they have to take the stresses on board. it is too early to say they should pause i think the 50 basis points is certainly off the table. i think at best it is 50/50. i would center my attention on a carefully trcrafted statement. 25 points is probably more likely than not. it is early to say if this fragility continues, a

pause may be on the table. we still have an inflation challenge and we don't want the fed to take its eye off that ball in fact, the new facility has, in some way, dampened one of the transmission mechanisms for monetary policy through the banking system this is a tricky time for the fed at this stage based on the information we have and we have a cpi coming in. a pause may be on the table. 25 basis points should also be on the table at the stage. 50 is off the table. >> steve liesman has a smart question if we don't know what this means for further rate hikes, is this action the equal of the additional qe? for get qt qe >> i understand. the answer is yes.

you can see that in some el elements of financial conditions that loosened up you reported on the 10-year treasury and 2-year treasury both of which are benefitting from flights to quality. interest rates through the 10-year treasury and 2-year treasury are lower absolutely itdown. >> -- are somewhat lower. to say it's offsetting quantitative tightening, there's no doubt that financial conditions have eased and that is something the fed has to take into consideration, and so, you know, that is one of the things that says to me, you know, 25 basis points can't simply be thrown out the window because the fed has numerous jobs, and right now their monetary policy and price stability job is coming up against the reality of their financial stability job. and how those two things balance themselves out will be done literally i think almost day by day, and i think it's impossible

for anyone to have a really strong point of view we should be thoughtful that there could be a pause, could be 25 basis point, and i think the statement will have to reflect the great uncertainty and show that the fed will be as nimble as possible and balancing the challenging issues their con confronting, inflation is up and financial instability in the banking system. >> former vice chair of the federal reserve, thank you. take a look right now at banking stocks in the premarket trading. your next guest expecting that bank equity markets to stabilize saying the run on deposits is over, at least for now thanks to regulators' plan to backstop depo depositors joining us is the head of u.s. bank strategy at rbc capital markets. you think this is over, finished i hope so. >> i would say that obviously we're moving out of the woods. we're not out of it completely,

but we're certainly heading in the right direction based upon what we saw yesterday from the federal reserve, the fdic and the u.s. treasury. those actions were very powerful. >> okay. so how do you feel about some of the smaller regional banks, we'll look at some stocks that are still off and i'm talking about first republic, some of the smaller banks in california where, by the way, looking at comerica is off 6%, fifth third is off they don't have a gun to their head the way they used to. but the question is over the next year do they end up merging? do they end up getting sold? what happens here? >> i think what we have to take a look at, andrew is that these banks are very well capitalized. they've got plenty of liquidity and unfortunately some of their bond portfolios are upside down, and we all know what happened to silicon valley on friday and signature bank yesterday i would suggest that as things calm down and the message gets out and roger said it will in

the prior minute there, that the messaging has to get out that all deposits are safe. now, some are going to leave i'm with him you're not going to see a smooth transition this will be very bumpy. within the year, to your point, i think these banks will obviously maintain profitability and build up confidence in the system. >> the other component part is even if they do that, it is likely, i imagine, that regulators decide that all of these banks are systemically important. if all these banks are systemically important to some degree or another, you're going to be requiring higher capital requirements, things that look a lot more like some of the big banks that we've looked at if that is true, i imagine either you know, loan rates are going to have to go much higher, it's going to be much more expensive for customers, that's not so great for the economy, and some of those loans -- that loan business goes to even smaller private hands, call it the shadow banking system gets even bigger. >> i would say i think you're on to something in the sense that

more banks will be regulated similar to what the largest banks are being regulated today. that i don't disagree with that being said, though, we have to remember that, you know, it's a very competitive market out there for loans, and you pointed out that the shadow banking industry has grown dramatically over the last 40 years and has taken away market share from the banks. that being said, the banks are still obviously very profitable. so there will be interesting twists and turns to this we don't have all the answers yet, but i would say that the banks are not going to roll over and just hand business over to the shadow banking industry, they're going to remain very competitive with that market as well >> by the way, how concerned are you about the shadow banking industry, meaning there is a completely sort of other business, a loan business taking place in america that is really, you know, we don't talk about it on the air there's no stocks. they're not public for the most part it's a completely different business, and i don't think we've spent enough time necessarily thinking through the

ramifications of that. we clearly haven't spent enough time thinking through the ramifications of the way some of these balance sheets at smaller banks were looking. >> we've always expressed concern. we think the banking industry post-financial crisis was de-risked by the federal reserve. they go through the stress test every year and push a lot of the risks into the shadow banking industry to your point, we don't know all the vulnerabilities there. but we do know that it's going to be a credit area of focus if we go into a real recession. obviously the shadow banking industry does not have deposits, so there's no concern of any deposit disruption, but you're right, it is an area of risk that has to be monitored very carefully. >> you look at first republic this morning, and it's still off, what, 70% i mean, it's remarkable even with this backstop by the fed and jpmorgan i hate to do this, do you recommend a stock like this? i'm sure there are people this

morning, do i short these stocks? do i buy these stocks? i always think symptom recommendations in a moment of crisis can be very complicated with that, what do you think >> i think it's a good question, and i think investors, it's a risky story. i think you have to see how it plays out today, and as the messaging gets out that their depositors are all safe and things stabilized for them, this might be a very good time to be buying first republic. so we would be very careful, we'll have to see how it opens up, how the day progresses i'm not saying you necessarily buy it on the open, but it's certainly going to be a company that has plenty of backstop, and as long as they handle it, you know, i think you're going to find that they'll get through a very disruptive period of time for depositors. >> okay. we will see about that, and we'll keep our eyes on all of it, thank you for joining us this morning. some moves just out, this is news that had been kind of

reported as potentially happening over last couple of weeks. it is now official, pfizer is buying seagen. this is a deal that's worth about $43 billion. seagen is a biotech company working on cancer cure therapies. pfizer shares off by about 2.8%, seagen shares up by 16.5% to 201.02. when we come back, we are going to take you out to the west coast for the latest on silicon valley banks' customers who are likely breathing a little easier after regulators step in to guarantee deposits at the bank that's next. plus, we will talk about regulators' efforts to contain the contagion with evercore's roger altman "squawk box" will be right back.

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breaking news this morning, regulators sweep in to contain a financial crisis

depo depositors of silicon valley and signature bank are protected the futures are on the move. we have all the market action for you. a pause for the fed, did the svb collapse put the central bank on hold for march the implications for the fed's next decision. plus, the ripple effects for venture capital. we're going to dig into what it means for companies with exposure to theba banks and ther customers. this special edition of "squawk box" continues right now good morning, and welcome back to "squawk box. we're right hear live from the nasdaq marketplace in times sq square i'm becky quick, andrew will be joining us shortly joe is off today you're going to sea rige things turned back into the green for the dow futures. dow has been in positive territory and negative territory down by triple digits, now you can see it's up by about 27.

s&p futures up by 18 points and the nasdaq indicated up by 120 bank stocks actually coming back from session lows as we've been watching all of this bank of america still down by about 3.8%, but it was down by more than 5% earlier jpmorgan chase right now only down by about 2/10 of a percent. citigroup off by 1.4% and so is wells fargo and morgan stanley off by about 1.1%. if you've been watching treasuries, this is probably the most important chart you should be watching this morning this is where all of the action is really taking place the ten-year right now yielding below 3.6%, 3.598%, it's back to 3.6% now it's below the two-year has been really interesting to watch it's sitting right now at 4.339% remember, just on thursday of last week you were still talking about the two-year yielding above 5%, so you're talking about a drop of more than 65 basis points that we've seen

just over the course of two trading sessions, and that really tells you about the flight to safety people being concerned when they're concerned they put their money in treasuries and that's why the yields have been going down oil prices this morning, which were a little bit higher on friday, you can see right now energy, wti down by just over a dollar to 75.# 67 bitcoin trading above 21,000 at $21,180. here's what else we know at this hour the u.s. government stepping in and back stopping both depositors and financial institutions that are associated with silicon valley bank the federal reserve stepped in with a separate facility that will provide loans up to one year for institutions that are affected by bank failures. regulators also took control of new york-based signature bank. it's one of the banks for cryptocurrency companies, depositors there will also be

protected, and that's part of the reason you see crypto indicated up this morning. and hsbc announcing today that it's buying svb's uk subsidiary. the bank of england helped put that deal together and that will protect the clients of uk clients. $70 billion in liquidity added to shore up its finances and yet the stock is still down by about 57% this morning we've got all angles of the story covered for you and what it could mean for your investments. steve liesman is hear. kayla tausche is in washington with the latest from washington with this story. we kick things off with dierdra b bosa. >> from the tech community from the founders that had money in the bank and they can continue to operate this week and investors, many of them had made bridge loans over the last few days to keep their portfolio

companies floating the longer term outlook, though, this is more uncertain for startups with higher cash burns and those that need to raise more funding soon, they could be facing a tighter financial landscape. the hurdle for bank loans and other debt financing will be a different world going forward. one investor tells me there's a lot of gear in the sands with silicon valley it occupied a very unique spot here, becky and a fly wheel for the ecosystem. they had services, products and a certain amount of flexibility that big banks didn't or couldn't offer and many say that that is going to be very difficult to replace jeffries in a note says that short-term volatility notwithstanding it is quite likely that svb's failure brings forward the, quote, day of reckoning with the pevb funded universe they may now have to take a hard look at their portfolios sooner they they would like

and there's some flexibility in how many portfolios can mark their companies in valuations. some individual founders and startups also in limbo after the failure. i spoke to one founder that had just raised his seed round, and he was about to deposit millions of dollars into his new svb account last week. he was about to turn to signature. now he's unsure where to turn, and who will accept money from an early stage crypto company, becky. so a lot of uncertainty. a lot of questions being asked here, for now a lot of rejoicin too. >> we want to get to kayla tow z kayla tausche in washington. >> president biden will deliver a speech next hour in response to the meltdown. the president saying he is firmly committed to holding those responsible for this mess fully accountable and to continuing to strengthen our message of oversight and regulation of larger banks so that we are not in position again. the problem silicon valley bank

wasn't considered a larger bank. it didn't have a winddown resolution at the fdic it didn't participate in stress tests and because of merger rules none of the large cap banks could buy it in the end. regulators told lawmakers their first priority was to seek a sale of the bank but a senior treasury official said shoerg up confidence in the market and the banking system was too urgent to wait until a sale was completed and not having all deposits insured was seen as impeding a sale. the challenge for the administration will be the branding in a tweet thanking secretary yellen and lael brainard for their work mr. biden quote tweeted a headline that called it a bailout despite its unique structure many americans will see funneling up to $200 billion to the banking system in the same way. certainly what we will hear from the president in just about an hour, becky, he will seek to rebrand it he will mention the fact that taxpayers will not be on the hook there are a lot of questions being raised about how taxpayers

could at some point end up paying for this. >> thank you very much we'll be back with you when we hear from the president. steve liesman is here. he's got more on the fed and the fallout from what all this means, the implications are kind of head spinning we're all sitting around trying to figure it out. >> i talked to a big investor trying to figure out what to do with dollar trades take a look at the dollar. i know i didn't call for this first in the back. weaker this morning, what does the ecb do does the ecb continue on its rate hike path, which i think there's another 100 built in that increases the differential between what the fed is doing and what is the fed going to do. let's take a look at that which is this dramatic change in the outlook for the fed funds rate becky talked about the two-year. what happened to the two-year is essentially reflected to some extent, sometimes more, sometimes less in the fed funds market there's the two-year note. do you have the fed funds chart out there? we had a couple bar charts there's one. that's the probability now of no

hike >> on thursday last week -- >> right. >> was most people or most of the probability went with a 50 basis point hike. >> what you do for the thursday chart is switch both bars to the right. so that there was a 45 -- actually, it was a little bit less at some point on wednesday after powell spoke there was like a 70%probability of a 50 that's gone, and now could you show what's happened to the peak rate hear? that's come way down what are we off, like 70, 80 basis points, in terms of what happened to the peak point they're so good in the background there 488 there. we were at 569 there's been easing into the market, which is going the wrong way for the fed fighting inflation. the other issue is what happens to housing the falloff in housing prices was supposed to be a big part of the reason why inflation was forecast to come down this year. i don't know what's happened to the marortgage rate this mornin yet. my suspicion is it went down are you going to get that

disinflation in the housing market i think it is still to come to some extent, but perhaps to a lesser extent now. >> but people would be able in theory to pay more for the house prices if they can get a lower loan rate. >> they do arbitrage themselves, i don't know if it's one for one, but the issue becomes the pickle the fed is in right now >> you're right, there it is, there's the 30-year fixed. >> so good in the back there, so good >> over the course of a week >> you probably don't have trading this morning in that too by the way it probably -- it could potentially be lower depending on the spread that's worked in there. the issue becomes for the fed, you have to fight inflation. what do you do as an investor, even if the fed takes a pause, the goldman call year is a pause in march, but still going may, june, and july >> right >> so that's still at least their call and ultimately depends on inflation and just one more complication does this banking thing we've had -- i don't want to call it crisis anymore -- does it have

its own disinflationary impulse as well. >> fortunately we have somebody who might have some answers for us we want to bring in roger altman, who is the founder and senior chairman of evercore. let me just ask you the question that maybe most people tuning in this morning would like to hear. how acci how secure are you feeling in the financial system today >> good morning, becky well, short-term, i think they have stabilized the system, and they did, given the way they viewed the alternatives, what they had to do longer term, this is a breathtaking and profound set of events here's a banking institution, which most americans never heard of, which was not designated as systemically important, and over a 72-hour period it threatens the entire financial system and financial market stability, and the banking regulators decide to

guarantee the deposit base of the entire u.s. financial system, which is certainly what they just did. now, this is testimony to a whole series of things, and it also carries very profound, longer term implications it's testimony to the pfragilit of finance in the global digital area when institutions and individuals get moved money in seconds by swiping their phone, even if they're 100,000 miles away from the bank headquarters. it's testimony in this case to out of date regulation this institution wasn't seen as systemic, obviously given the events of the week, it was and it wasn't subject to stress tests and the tighter capital ra ratio, liquidity, and leverage strictures, which the biggest banks were subject to. it's testimony to out of date deposit insurance, 80% of the depositors had deposits at

silicon valley bank, which were bigger than $250,000 long-term, there's some profound stuff here if you're guaranteeing the entire deposit base of the financial system, will it eventually lead to less discipline behavior on the part of bank managers, and if you're guaranteeing the key liability of these institutions, does it mean that there will eventually be pressure to limit shareholder returns? there are all kinds of profound questions raised by this it's just a breathtaking set of events >> to limit shareholder returns and potentially bankers' returns too because if you're not getting paid to be a very good risk manager, what's the point >> well, if the taxpayer is guaranteeing the key liability, should the taxpayer allow the shareholders to realize the benefit of that? now, i hope so, but it's -- to

me it's just a profound long-term question you know, there were a lot of politics involved in this because the bailouts of 2008, 2009 ended up being so unpopular that the authorities weren't willing to go in that direction. again, for example, as i understand it, and i can't be certain of this, they weren't willing to enter into a deal where they would give certain loss protection to a private buyer, as you saw, for example, in jpmorgan, bear stearns years ago. and whether or not that meant that there was no private sale possible, whether or not that was the key reason, we'll find out, i suppose, but it would have been preferable if this could have been sold because it would have been effectively a private market solution. >> having said that, if they couldn't find a buyer and there was no one willing to step up, was this the right decision despite all of the long-term implications that you just

pointed out? was this systemic? would it have been a huge problem if there wasn't something that was taken care of this morning >> well, when we're in an era, when an institution that most people never heard of wasn't seen as systemic can threaten the entire financial system and global market stability, then they did -- then they succeeded, i think, we'll see as the day goes on and the week goes on, they succeeded, i think, in stabilizing the system and stabilizing markets. parenthetically, i hope that the federal reserve does not or is not forced and does not choose to pause because that, to me, would be a very bearish sign we're nowhere near solving the inflation problem, and if you think this is going to cause the fed to pause in its work to get inflation down to a more manageable level, i think that's a pessimistic sign. >> roger, i just want to, i

guess provide the -- what do you call it, the superficial reality of this bank deposit, which is it is temporary for now, and i would also point out, i believe they did it in 2008, and it was temporary for a time it came off, and then if i'm not mistaken, they enshrined the ability of regulators to do this in the dodd frank law, which creates the question, which is the point i think you're really making if you're guaranteed that every time in a financial crisis when you know what hits the fan, is it de facto guaranteed forever i think that's really where we're at right now, and why you would -- >> i think it is. >> right you could have like a de facto guarantee or you could have a real guarantee, but there may be no difference. >> and if that's the case, what is the moral hazard? what is to prevent something from taking remarkable risk? >> here's the thing, i want to ask this to roger, the question

i was leading to, andrew, exactly. so i don't know, roger, how a depositor can really understand the books of the banks and the risk that's out there such that their decision to put money in bank x or bank y really enforces any discipline at all on the banks themselves because you just can't know. if svb can blow up because they didn't have interest rate -- either interest rate edge and/or they had flighty deposits, am supposed to know that as a depo depositor? i don't know it strikes me that the only way to actually do this is through really, really tough supervision and regulation >> if i'm a depositor, i'm reassured by this. i feel relaxed because i feel my deposits, whatever size are now guaranteed and look, they just guaranteed all the deposits of silicon valley bank. does anybody really think that

the next institution that no one ever heard of that suddenly threatens the financial system won't see its deposits guaranteed i don't think so. >> roger, the question is is this a good thing or is this a bad thing, and is there a different way to do it, which is to say the second you guarantee everybody's loans and or rather i should say deposits, it is a government business, and then there really is a question of what are these executive -- these are very highly paid executives there's huge valuations to these companies. if it really is a utility, it's a utility. that's a very, very different business >> well, we'll see how this evolves, but you can argue that that's where we're headed given this step. now, look, a private market solution, i think, would have been preferable. i don't know what the possibilities were, obviously it wasn't in the room but one thing the authorities decided was that they weren't willing to offer loss protection of any kind to buyers, unlike

2008, 2009, and they weren't willing to offer that because the bailouts proved so unpopular, and in light of that, the president biden administration decided we're not going near that again, which i think initiated the possibility of a private market solution >> right >> and got us to this point. >> and when janet yellen was on the air yesterday, yesterday morning, she was saying they're not going to do this. >> they're not going there, yeah. >> this will be taken over by some private entity, and that was not the case. >> krishna guha from isi, i guess you wrk with him, right? >> i do. >> he said the systemic risk may not be that great. the question is whether or not you want to run that experiment. >> right right. yes. >> an astute viewer who suggested that the fdic insure what he called payroll accounts. so basically there'd be fdic

insured accounts, $250,000 for an individual, but then you could have specialized accounts just for payroll that would be insured. >> for any size company? >> for any size company, that would be insured but all the other money not insured. that would be the quasi private market, public market way to deal with this >> interesting thing, we got to go, but there's implications for private investments, right, if all of a sudden your money's guaranteed in the bank and the bank's paying you 4, 5%, maybe you don't do other things that would have been more beneficial and optimal for the economy. >> i want to thank roger for his time this morning. when we come back, former s.e.c. chair jay clayton will join us to talk about the government's response to the collapse of svb. other news out this morning as well, pfizer is buying seagen for $229 billion in cash seagen shares are up by about

18%. still nowhere near that deal price. this is a cash offer those shares are trading at $204.40. pfizer shares off by about 2%. the futures overall have stabilized you're talking about the dow futures off by only by about 15 points nasdaq futures are up by 104 the s&p futures up by 110. "squawk box" will be right back. >> announcer: this cnbc program is sponsored by baird. visit bairddifference.com.

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everything's changing so quickly. before the xfinity 10g network, we didn't have internet that let us play all at once. every device? in every room? why are you up here? when i was your age, we couldn't stream a movie when the power went out. you're only a year older than me. you have no idea how good you've got it. huh? what a time to be alive. introducing the next generation 10g network. only from xfinity. the future starts now. welcome back to "squawk box. for more on the svb fallout this morning, i want to bring in former s.e.c. chairman jay clayton, he's now a non-executive chair of apollo american express, board member, senior policy advisory and cnbc contributor. for the purposes of this conversation, an actor, if you will, during 2008's financial crisis involved in so many of the transactions that happened

during that weekend. so let's start there, jay. are the comparisons apt, and do you look at this and say it's over, it's finished, or there's more to come >> look, i think like always there are valid comparisons and there are differences. i think the difference that we should talk about is that in 2008, we were talking about individual institutions as systemically important i think what we're talking about here is the regional banking system writ large as systemically important and what happened was you had what i would say is an isolated incident at a fairly idiosyncratic bank big to the fo fore an issue which was what do we do about excess deposits because it's above 250,000 in the event of a failure, and that caused -- that caused people to question whether their excess deposits at very solvent institutions were something that they should adjust, causing a

classic rut. so it's really the regional banking system at large, and i absolutely believe that the federal regulators were right to step in and say we need to bring a halt to that. >> but, jay, is it going to work is it going to work? is everybody out there who's got their money at a smaller regional bank this morning saying to themselves, okay, i can keep going on my day as normal, or are they continuing to keep, you know, some of the phone numbers at jpmorgan are busy because you can't get somebody on the line to open an account? >> we have talked about this before, andrew, and whether it's the government making a statement at a time of stress or a company making a statement in the time of stress, that statement is always tested by the marketplace, and that's why i applaud the statements that came out because they are, in effect, whatever it takes statements in terms of taking care of depositors and you know, depositors, these

are individuals, small businesses, of course there are some large businesses who are more sophisticated, but by and large, these are people who just want to know that their money in the bank is money good >> jay, but let me ask you this. you know, you were a republican member of the trump administration i assume you are against broadly speaking big government. this is big government in fact, i could argue to you that today all of the banking business has just been de facto nationalized, if in fact, we are going to be gauaranteeing deposits across the board. what do you think of that? >> look, andrew, big government, small government, government is an immense part of all of our lives. okay like it really is about smart government and what is government 18, 20% of the economy. our financial system is one of the most highly regulated businesses, industries in the world. government is in the financial

business every day now, on the post -- what was done this weekend was what needed to be done in the moment, and when you're acting in the moment you need to act broadly and powerfully is there a time as both rogers that you've had on said so well, is there a time now where we have to recalibrate? do we raise the fdic insurance limit but not make it unlimited? things like that definitely ask questions. but it's really about government calibration, and look, post-2008 -- let me make this point -- post-2008 we were really worried about asset quality. stress tests around asset quality, let's all recognize that duration risk was something that was on the back burner until we had this rapid rise in rates, and now we're all going to deal with it. and again, what the fed has done here with the guarantee facility is giving the market

opportunity, i think that's their aim even with this duration duration. >> now that we're guaranteeing these deposits, which i imagine also comes with other forms of regulation in terms of additional capital requirements, does more of the lending business in america go to the shadow banking system, some of which might be described as the firm that you're the chairman of, which is apollo? >> well, let's -- the term shadow banking is very funny it's a pejorative term the question is non-bank lending. there are very different types of non-bank lending. one type of non-bank lending that is not as susceptible to duration risk is match funding the issue here is that these were demand deposits you're funding your lending with short-term obligations that can be called at any time. one of the things that is happening in what you call the

non-bank lending market is that you have matched funding which in instances like this is much safer. >> jay, shadow banking just means unregulated, and that's the concern, that it can create problems that are systemic that we weren't watching, and that seems to be the case to a certain extent with what kicked off this time around, that svb, that silicon valley bank was not held to the same regulatory standards as bigger banks that are thought to be systemic unregulated banks, unregulated shadow banking institutions have even less regulation, and that's the concern, to not be able to have skroversight into things tt could be eventually putting u.s. taxpayers' money on the line. >> becky, you're right to raise the issue. this is going to be debated as we do the postmortem on this what i will note is that this failure at silicon valley bank was in an institution that was

highly regulated, had examiners and the like, and still the issue of duration risk came to the fore here. we should -- we should be looking across all of the financial system >> jay, what do you think is the -- what do you think of the argument around the federal reserve and jay powell i've seen people this weekend say this is his fault, that he raised interest rates, did it too fast and did it without regard for understanding the implications on these smaller banks. do you think of it as his job to deal with this, or do you think -- and by the way, i think that it isn't his job to deal with it in that regard, but actually, the truth is that the banks are supposed to know that, yep, it could rain it's raining today, and that they have to build a bank that can withstand the rain. >> i think chair powell has been one of the most transparent fed chairs in history.

he has clearly signaled where they've been going this has been no surprise to anyone, and i think criticisms of this being the result of a very transparent interest rate policy, well, they have no measure with me. >> jay, it's good to see you we appreciate your perspective on all of this as always, and we look forward to speaking with you i'm sure a lot, and we will over the coming days, thanks >> thank you, andrew still to come this morning, congressman josh harder, whose district has been directly impacted by the svp collapse will join us. plus, the ripple effects for venture capital. we'll dig into what it means for companies with exposure to the bank and their customers, and where they go next for banking stay tuned, u'yore watching "squawk box," and this is cnbc an ♪ to guide you through a changing world. ♪

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. welcome back, want to get over to dom chu, he's got a lock at this morning's premarket movers, dom. a lot of action, a lot of things to focus on this morning what's top of mind for you now >> so andrew, becky, as you might suspect, a lot of analysts who cover the financial institution banks are issuing

updates to their ratings and targets. so we'll start now, we've been showing first republic shares down about 65% premarket this has become one of the bigger focus given the ripple effects of the bank failures, so we've got downgrades this morning, a slate of them one of them in particular coming from raymond james, another from wolf research highlighting at least some of the aspects. double downgrading first republic to market perform from a strong buy they cited amongst other things a more diminished earnings potential given pressure from a possibly shrinking deposit base. wolfe research citing similar things, with unknowns about how many customers might move their deposits mean meanwhile, another financial getting caught up in the svp fallout, it's brokerage and bank holding company charles schwab down about 8.5% this morning analysts at citigroup say the

down state turn is buying oppory for schwab shares. they don't see a bigger risk to deposits leaving schwab's accounts and whatnot those charles schwab shares down despite an upgrade and then there's the big banks being seen as a beneficiary of the failing smaller competitors was jpmorgan chase is being upgraded to overweight from equal weight by analysts at wells fargo saying this is an example where size and scale matter in what they're characterizing as a goliath is winning scenario they will benefit ultimately from market share gains and a more diversified banking and business model becky, an interesting kind of fundamental take on just what the fallout could mean for other people in the banking business as well. >> yeah, i think this is something everybody's watching very closely today dom, thank you. joining us right now to talk more about the fallout from silicon valley bank is former venture capitalist california congressman josh harder whose district has been directly

impacted by that bank's failure. first of all, thank you for being hear re this morning. what do you think of the proposal, or the plan put together by treasury and the federal reserve? >> i think it's a very important fist step. when people hear the name silicon valley bank, they think this is about the bank accounts of mark zuckerberg or elon musk. that's not who's affected by this at all. this is folks like the craft company etsy, which pays its mom and pop merchants all across the country through silicon valley bank this is about farm workers and the agricultural and wine making parts of my district that are paid through silicon valley bank and so i think the regulators made the right first step to make it very clear that depositors are going to be held innocent and 100% protected this morning, as well as an effort to make sure that what happened to silicon valley bank doesn't spread to adjacent banks this

morning. let me just walk through some of this we were talking to roger altman and he laid out the bigger, long-term concerns this may have been the right move in the short-term when there was no buyer to be found, no private buyer how far, what has essentially been done is guaranteeing the deposits of every bank out there, basically forever no one is going to think that any bank will be allowed to fail without the depositors at least being made whole and i wonder what that means for putting taxpayer dollars at risk down the road. right now this is something that's going to be financed by the fdic the fdic, which is simply money that the banks themselves pay into, has about $125 billion right now. if you look at their balance that they've had over time, at times it's been negative when there have been big bank failures at some point is this going to mean that the u.s. taxpayer is now guaranteeing every depositor who ever puts money down anywhere, and it's back on the taxpayers to take care of that >> i think we're in a real

inflection point for small, mid-sized regional banking across america, possibly a more important inflection point than the financial crisis or the savings and loan crisis in the '80s silicon valley bank saw $42 billion of withdrawals within 24 hours, the largest bank run, the fastest bank run in history this is the digital era. it's no longer it's a wonderful life the confidence can disappear faster than a snapchat message and we're going to need stronger reform to make sure this doesn't happen faster across other banks. >> so what does that reform look like what needs to happen because as we've been talking about here this morning, barney frank of dodd frank himself was on the board of directors at signature bank, the other bank that was taken under over the weekend. >> we have to do three things. >> if that's not going to be enough to have barney frank sitting on your board, what are regulators going to do what went wrong this time, and

how do you prevent it from happening again? >> three things, first, we have to monitor the situation closely over the next 24 hours to make sure we're protecting depositors that is a continuation of the emergency measures that regulators have already made and hopefully more won't be necessary, but if it is, i hope we hear from the president a strong commitment to doing whatever's necessary to make sure this contagion doesn't spread second we need an investigation of what happened at silicon valley bank making sure that we are looking at regulators that were asleep at the wheel as well as the mistakes made by bank management, and third, we're going to need long-term reform we need to change the insurance limits at these banks. it's clear that it doesn't reflect reality right now. as you said, this is now an implicit guarantee for a lot of uninsured deposits across the country. >> but that's okay you think that should be the message that nobody ever has to worry about any deposit ever going wrong? because i do think that's more than just the banks and just the fdic that are going to have to

backstop it. that implies that taxpayer dollars at some point will be at risk >> i think we have to make it very clear that we have confidence and reassure folks that small and mid--sized banks are safe places to continue to do their business, they didn't have that confidence this weekend. and so in is a short-term emergency measure, but it does need to make sure that we enshrine pieces of this into law for the reasons you outlined. >> do you blame depositors >> i don't think depositors did anything wrong but i think there were huge mistakes at silicon valley bank and at signature and by bank regulators, we have a process -- >> nobody ever wants to blame themselves the reason i ask is here you have a group of people, specifically silicon valley bank different than lots of other banks insofar as you have very sophisticated people at venture capital firms guying their portfolio companies to use this bank to capture certain rates, to get loans at certain rates. i mean, there are choices being

made here, and i just wonder whether you think that any of these actions that individuals take matter or have we decided that we're going to protect everybody irrespective of the choices that they make at all? >> i do think those choices matter, and the moral hazard problem here is significant, and we need to take that into account, but again, most of these depositors were completely innocent these were mistakes made by bank managers these were mistakes made by regulators who were, again, asleep at the switch in the midst of this process and didn't anticipate this. but that's going to start with an investigation of what actually went wrong and how we can make sure that it doesn't continue to happen again silicon valley bank had an incredibly important role at play in the entrepreneurial and innovative heart of america. their customers were working on curing cancer, addressing climate change, building semiconductor chips to make sure that we had stronger national security that role still needs to be played one way or another.

>> congressman harder, thank you for your time. >> thank you coming up, we're going to talk to mohamed el-erian, he's going to be joining us with his take on the government's steps to backstop depositors and financial institutions he's got some very provocative ideas about what has just happened here and what it all means for the fed and rates coming up. you don't want to awhe,gonyer "squawk box" returns after this.

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silicon valley bank was an important part of the early biotech ecosystem. for a break down of how the fallout could impact investors, we turn to meg terrell >> this is something that biotech investors and people in this space were watching over the weekend. of course a lot of relief yesterday as everybody felt, but there's still concerns about risk, particularly in the early stage biotech space. of course we know the statistics that almost half of these sort of innovative tech and biotech companies banked with svb. in terms of life sciences and health care in particular, they were 12% of svb's $173 billion in deposits, and just hearing from venture capitalists, people in this space, this was obviously a very important partner for them, and so you did see the indexes, the etfs, the xbi and ibb falling on friday, and concerns about what was going to happen here they are rebounding this morning, up more than the rest of the market. i am still hearing, though, that there are concerns that, of

course, over the last few years a lot of capital flowed into this space, and it has been sort of widely felt that too many biotech companies were created, and this was sort of seen as an event by some as sort of speeding up the cleaning up of all of those companies, some of them, you know, maybe that shouldn't exist. and so we have been seeing a lot of those small companies kind of disappear already. i spoke with the ceo on friday afternoon who said this is potentially a buying opportunity for us, if companies are sort of even more distressed, you know, could we pick up some of these assets that is something to keep watching in the private space, in the small biotech space in particular as you were seeing these stocks rise this morning, becky, we have to note some of this is probably because pfizer just announced that deal for seagen for $42 billion. m&a is what drives biotech valuations a lot of the time, and that is from conversations i'm having this morning, maybe even having more of an impact than the relief over svb, just the idea that deals in a big way are coming back to biotech. >> this is one of the things i

was thinking about over the weekend because so many of those biotech companies are doing really important work, and regardless of what happens, even if they get their money back now, how is this going to be more difficult for them to be able to get access to cash down the road, just with liquidity drying up, with the bank options kind of drying up. are we going to see an end to some of the quick progress we've seen over the last three or four years? >> there's definitely a concern that access to capital is going to be more difficult, particularly on the debt side, although, you know, a lot of people i speak to in biotech think that these early stage companies taking out debt is a very dangerous proposition maybe that shouldn't be happening so much anyway you know, i think that there is a thought that good science will still find funding and that there was a period of excess in biotech where things kind of get a little sloppy when there's too much money and this could sort of streamline things. and so i don't hear a lot of concern that really good promising science is going to get left on the side of the road because it can't find funding. this is just going to drive a

little bit more discipline into the space, which i'm hearing from a lot of people is something that was needed. >> meg, thank you. men time, the collapse of silicon valley bank continuing to send shock waves throughout the venture capital community for what's at stake for vcs and startups i want to bring on the ceo of the venture capital firm, 10% of the portfolio companies are experiencing payroll challenges due to the collapse of svb good morning to you. >> good morning, andrew. >> how -- i'm sure the weekend was tough, but how kfbcomfortab or not are you now about the state of affairs and the portfolio companies that are exposed to this bank >> very grateful for the treasury, the federal reserve and fdic for stepping in i think back stopping the deposits has gone a long way the fact that they're going to be available we were all scrambling, us and many other firms over the weekend to create some loans

from our management companies to make sure these companies can make payroll, but i think now that crisis has been averted i think we've got to still think about other issues, but the companies should be fine from a business continuity standpoint >> and talk about those other issues, i'm curious now -- i mean, el-erian >> a lot of venture capitalists advise their companies they were telling all their portfolio companies do business with svb how do you think that things changed as a result? what's going to happen >> look, svb has been an important fixture for the venture capital industry they understand how to lend to a company that's very small and sven tur backed. not having them is a big loss and we need to figure out how to

stabilize the offering in the ecosystem. there are other offerings available and our companies are moving to make sure they diversify. i think the biggest mistake in the industry was we relied on them so much and the lesson learned is that we must diversify and make sure there's at least a couple of banks that are supporting these companies from the beginning >> what do you think of the incentive systems that led to this a lot of times svb would offer loans that were unavailable elsewhere, they would pat mart american hi and rates were much more attractive, in part because they were keeping their business deposits there and vb said they would give you certain loan rates if you kept all of your money there. do you think that there should

be rules against that? >> look, i think those offerings actually were -- made it really easy for these companies to do business and it was, you know, i would say i don't think it needs regulation against it. if there was diversification, it really would have been fine. i look back in hindsight with just having a similar option for these companies. i i think we move forward, this issue should go away >> i want to know your thoughts on personal spentsimilar to what happened in 2008 to those banks but the depositors have been venture capital firms and their portfolio companies, so they've been investments and therefore

bailed out what do you think about it in. >> i do giuliani on the side as because of a classic prisoner. what started happening was when we started hearing the venture tuesday and it might be low risk but take the cash out just to be safe and in this era, that can lead to a bank run really fast. >> you don't think that you and your colleagues were bailed out? if svb had not been rescued, in. your carried interest would have gone on here likely. you don't think that the

government rescued today in. >> the bank was in our part in general and good footing ma but the deposits correctly decided not to take risks and have tdm that there and honestly, to me this whole thing came about because this bank was wasn't for rapid -- >> i ask this because you have a will the of vocal venture capitalists who sort of have a libertarian streak, who don't believe in government, i it in carried st and you wonder and -- banks.

>> i first of all actually believe in the government and i think the government stepped in at exactly the right time and i'm very grateful in a it did because this would have an issue for thousands of companies and millions of people hoping to get paid this week so i don't think this crisis would are been avoided >> we very much appreciate you joining us i'm sorry you are had to go we hope you come on back as the nirpgs. coming up, mohamed el-erian joins us the nasdaq up 70 points and s&p

off just marginally. we'll explain why after this my name is brian delallo. i teach ap and honors economics in pittsburgh, pennsylvania. financial well-being to me is knowing that i can be free to do the things that i love to do. i hope when i retire someday, they say, that guy made this place a special place to come to school and gave as much as he could to help the community.

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good morning and welcome back to "squawk box" right here. i'm becky quick along with andrew ross sorkin we are awaiting remarks closer

to 9 a.m. eastern time we'll bring you those remarks when they happen but first, u.s. equity shows the dow off, the s&p up by 4 and nasdaq by 93 and treasury yields continue to come under pressure after lots of pressure last week. the treasury down to 2.05% and that is a very rapid move. the ten-year is 3.258% that flight to quality still on. >> we've had this extended edition of "squawk box." two banks closed, another reca recapita

recapitalized. >> andrew, we have replaced short-term uncertainty, especially the possibility of a banking crisis today with the medium and long-term uncertainty about the banking system, the fed and the economy with the question of how much the time we bought will solve these problems so take a look this is what david rosenberg says is it just glue? take a look at what happened svb signatures have been resolved a new fed fund has been established to finance banks duration risk reckoning has been removed but not necessarily resolved over any period of time

they're left with a series of and the impact on monetary policy, do they pause? will uninsured depositors feel safe how will banks pay for this guarantee they have been now been gifted? where were the bank regulators when this was going on and can banks fix their risk the outlook has declined dramatically here's where we are right now. this is the outlook for the peak rate, you can see how much has come off that peak rate forecast somebody do the math for me, whatever 27 and 70 is, what is it, 97 almost a percentage point. good enough for rock 'n' roll right there. two impacts on the economy,

lower rates including lower mortgage rates and higher valuesed bank collateral that's positive for potential economic activity and inflation. but the need for banks to pay higher interest rates on deposits could dampen the economy. the uncertainty could stay the fed's hand even amid continued ib flangs concerns the idea that -- i believe our next guest has the opposite point of view. >> stay here let work through some of this right now. we want to bring in mohamed el- el-erian i'll ask you a question we brought up at 5 a.m. this morning. this may be a situation where the crisis is averted but is it

mission accomplished >> well, we've changed the system i think roger altman was absolutely correct in saying we are now in a different world did we need it do all this i think given the urgency over the weekend and the fact that there was no perfect policy response, we had to make some compromises. however, it is why we are here that is important because that gives you insight on where we should be going from here. and we're here, becky, basically because we had a long period of overly used monetary policy, and the fed did not act fast if you have and then had it to hit on the brakes you heard me say over and over again when you hit the brakes, you risic financial accidents. >> is the biggest concern whether other wangs will have similar issues or is it that the feds will not

raise rate ap in a inflation continues it rage oj and maybe gets out of control in. >> one, it important to stress the positive should not worry. and there is no need to be trying to move your deposits i know there's an inclnation to do so because it's better to be safe than sorry. but honestly, there is no risk to your deposits anymore >> on deposits 200,000 and below? >> deposits are right at the top of the capital structure they are very different from bonds, from unsecured bond, from equity and the positive shouldn't be expected to be able to do the risk assessments that equity

holders and bond holders can do. i i'm quite sympathetic. i wouldn't have gone as far as they did but i understand why they did what they did and markets have basically voted already that the fed will now back away from its inflation fight and that's not good for the worng. >> there's a reach out of svb saying they're exploring and clearly there have been no buyers for it up till now but they are hoping, they say, to find a buyer of course we'll keep our eyes on this that crossed literally as you were speaking. >> it's the holding company and they are talking about exploring

alternatives for about $3 billion that's head and it is not guaranteed by the subsidiaries, one of which was taken oaf in the uncht k. today. >> part of the question is whether you want to own anything, whether you need them, need their clients we talked about how flighty their clients are been it not like you're getting them. they're not really coming. >> a regulator i talked to on friday suggested the regulators made a mistake by separating the assets and liabilities it looks like they put them back and i don't know if this release, if they can't sell it they're going to liquidate it? is that the implication of this release? >> they're distinct from a silicon valley bank. portfolio investments are owned by the svb capital funds

>> mohamed, i came up with a list in my report there about things that were inflationary and disinflationary about these events right here. you know, everybody knows you as a person perfectly qualified to make that decision heuer sitting there on wednesday but rit do you give the market a 25-point basis rate hike >> svb capital and svb securities, which is their investment bank. that's what is being looked at here >> so i would do what ferguson would do i would raise 25 basis points. i would make it it they and i

will not confuse the tools because if i do so, and that is the lesson of the last few years. every time we do so we fall in the, explaining that i had these other tools, which are really powerful as we discovered, i have these other tools that i can use for financial stability resources. >> this was the david rosenberg argument, which was that what we saw with svb was the lag effects of the monetary policy hitting the system and those lag effects are in their conclusion, whether the shoe refuses to drop >> we may end up in stagflation, which would be miserable, not

just for markets it would be miserable for those person more important. >> let me posit the banking system will be disinflationary, which is to say they're going to have to have higher capital ratios, come and that be disinflationary on the economy is that piece of the calculate, does that change the scenario? >> it's certainly a possibility. i've been encouraging people to think in terms of scenario analysis what we haven't done enough of

this morning is compare the u.s. reaction to the u.k. reaction. the the u.k. reaction took a private sector approach svb. no doubt it was smaller but the aversion is much higher in the u.k. than it is in the u.s >> could they find a priefd buyer? with a lot of the things that happened here, we talked about jpmorgan's takeover of bear sterns during the financial crisis, they were sued for any of the misbehavior when they had the weekend to figure it out and buy it that's a pruty huge disadvantage for any banks have so there's universal, no limited december p

deposit insurance and they opted for taking duration risks of the banks. those are decisions that also have side effects and unintended consequences i go back and wrote an op-ed this weekend there were no perfect solutions here this is the result of a series of policy errors that we now have to deal with the consequences and what it tells us very clearly is that the economy is more at risk and financial accidents are more likely because of all the mistakes that have been made, particularly by the fed in the last few years. i've been warning about this >> the question is do you bring the fed and say jay powell did not take these issues into conversation and what kind of personal responsibility do you think that the business leaders who put their money in this bank, uninseward, have

>> so, everything is in this blame game because pup of ultra loose monetary policy where money was cheap. there was so much liquidity floating around that everybody could get a loan and that that encourages excessive risk taking this time around it was the central bank credit factories that were producing overtime then we had a period where we could have inadjusted but we called inflation transitory and downmove fast enough so we then had to slam on the brakes. if you're sitting in the back of a car and the driver was driving the way, you would be sick, too. >> the dow is down rapidly in a

few minutes. nasdaq still up by only about $ it and take a look at the yields the ten-year at at 3.5 i think it also probably worth taking a look at oil prices which were only down by about 1% but are now off 4.7% >> this inflationary risk-off trade going down right now god bless mohammed who sat there under our grilling right now the market is at thatting let bed, less inflation. >> his argument is there tease a stagflation story. >> he says they want the fed to focus on that. no possible way to.

>> can we come back to mohammed for just a snom if the fed were, even if it warranted by inflation, the additional pressure that could put on the banks, if you look at some of these banks, there are some very big numbers of how much they would have to move at that point. and, by the way, i believe if you take any of your hold to maturity and actually say, okay, we're taking it off, there's an accounting change that you have particular, here are your losses across the board and unless you're willing to ge all of it cleared up instantaneously, there's going to be a big change to your balance sheet. you have to look deeply for some of these numbers out there if the fed is thinking that,

what's the harm in saying we're going to hold off, at that is. >> so, becky, we are deep in so that is also a possibility but then it has consequences we are just on a very, very bumpy road i want to stress a bump. we've lost that window yes, there are going to be consequences and investors face a really tricky environment, as di, there is now a 66% probability of no hike in the market, which goes along with what happened in the two year. we have baked out the possibility that and i think the fixed income market will roll

over into equity markets today speaking of volatility, let call that up, too, because someone on twitter said check out the vix back up up again it up a andrew >> coming up, we will talk about is the rescues of silicon value bank or not? and lart this hour how they took a look at stocks leading and lagging in the s&p premarket session. we looking at ill you'll in a despite help from the federal reserve and jp morgan this morning. you're watching "squauks box"

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we've been watching to see how thele markets are going to react to all of the fallout from s silicon valley bank going down and how the s&p will react there are some pretty significant moves. we had seen the market up across the board and that came as we saw treasury yields fall again the ten had-year is back. this show as flight to quality a lot of questions about what banks do with their money and what people do even though the federal reserve and treasury have stepped in and said deposits are safe at banks. >> i want to bring in a journalist who has been following the story super

closely. over the weekend she reported on number of member fund we're all trying to figure out has what the fed has done stopped things? >> i think they haven't so much stopped the run as they said they're going to fund it they didn't say every does did -- the fdic said we're not going to stop this but we are going to fund this so open the picket and -- >> the question is, do all the folks at jpmorgan, wells fargo, people wasn't to open and if they continue, we go a market but that's --

>> even with the promise >> even with the prom us and that they raised money from the new fed facility >> i'm hoping we don't have a problem but do you look at that and say we have a problem here or do you think it idiosyncratic. they're half as big as they were last week. by the way, they're going to replace thissin and it means their margins just collapsed so none of these stocks are going to trade at remotely what they traded at that the last time >> they'll just be a lot smaller than they are a week ago >> are you in the camp that this becomes disinflationary it the faengs lose deposits and have to

raise capital requirement and do other things thank thats loan which they're providing for. >> it a spoos of moan so we're massively below the market for a longtime i was talking a market over the weekend. he was coined of come paping is welfare reform be being and that we will be here tomorrow and that we're going to lose that to the small banks. the other thing is why would you have your money at this bank when there as even a short-term rs evening and they're begging for a bailout. this is a community you've written a lot about over the years. i'm thinking of everybody else who is screaming we need a

bailout, we need a bailout at the same time, west vb called for and special tax treatment and does that change do you think in the public mind's eye either the way people look at venture capital? >> there's no idealogues i agree this will not make silicon valley more positive with the rest of the country they were not mom and mop but the checking and savings account product can't realistically be expected to stay on top of bank balance sheet risks. if you push that to depositor then what are banks here for

>> politically if we turn every bank into a fully guard foon stus tgs that's the business. it just a government-owned oot >> i think that's right. >> so that's where we are? >> i think so. when you're talking about some of the regulation, you know, the cap for and it was really a community bank thing, which kind of does make sense temperature opinion if where everyone below 250 billion, which are giant banks who have muff more economy kay had had. they have to rush these things to market, these companies have been underwater for months >> 368.5 billion in unrealized

losses hold to market securities but that was as of pt. >> thanks for having me. >> when we come back, the view from the startup community of silicon valley bank's collapse what companies stood to lose and what they will gain from the government stepping in venture capitalist will be joining us first republic bank down by 65% this morning pacwest down by 61% and western align also down by 64% "squawk box" will be right back. . ♪

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. welcome back to "squawk

box. we are tracking what has been a lot of fallout in the markets over the collapse of silicon valley bank. we go to the new york stock exchange where a number of stocks are taking a pummelling this morning >> yes there was initial relief at the scale and focus nature of the government with what's been going on with silicon valley bank but there's obviously apprehension the s&p 500 is still in this twitchy back-and-forth mode. what's gone on is you've sort of surrendered whatever you had of this up trend of october we're very decidedly now in the lower part of the trading range we've been in for a while. people targeting, the december

lows obviously it's sort of touch and go in terms of equity response but still nothing too dramatic just yet it's mostly about banks still. i want to take a look at the relationship between stocks and bonds and how it has evolved i mentioned over the weekend that we have a different adversary if you're an equity investors. before it was rising rates, fed hawkishness and inflation. that meant as bond values went down, stock values went down you see a bit of a diversion here nothing's happened in the last week has been good for economic growth we're going to have banks on the defensive and the risk-reward in terms of all economic activity has been changed keep an eye on that. this is why we have dramatically lower yields today and the stock market unable to take advantage of them and go higher. outside of regional banks, some

dealers, especially charles schwab, this is not to say these are institutions in trouble but they are subject to deposit flight and they've been benefiting from very low rate deposits, cash-like deposits they weren't paying much on in their bank units and it's being swept in money markets so it creates stresses i mentioned the bond rally that is going to lessen the losses on the books of all of theseinstitutions. whatever the unrealized loss was five days ago, it's lower now. so there is a little bit of an offset there, maybe breathing room that gets created on the asset side >> mike, that's breathing room they get unless the fed raises rates again next week. does it go right back up if they do that? y been going pup and forth when

they it's radically changed the peks peck take of what the fed is likely to do now and it's very complicated by thomes numbers and if there's a 25% raise and maybe that's it for now, it doesn't necessarily take care persuasively. it's still seen as being very sticky the bomnd market is trying to sy we have to be concerned about financial stresses, oil is cracking today everything happening right now is saying that the risk of economic downturn is now superseding the inflation risk we'll see how it plays out in the decision making. there is a possibility we get a bit of a quick shakeout and it turns out it's no big deal and that would perhaps leave the fed

free to do what it needs to do but right now i think the wide range of possibilities that we're talking about right now explains why the market is back on its heel. >> the treasury is down 20 basis points if you're looking at what happened last thursday that is a huge drop. rick, how are you doing this morning? what are you seeing? >> well, we're seeing as orderly a market as one can see given all the issues that are going on you know, long and variable lags, i really think that everybody needs to repeat that a few times. i think that people that are still looking a the fed fund futures and still cranking out probabilities, really? really see, nothing underscores the movement that we've seen let me see, we're down 56 basis points in a two-year note yield. when we all talk about what price is right, the price is

always right in the here and now. but what it's going to be tomorrow, what these percentages of fed policy may actually mean, this throws a lot of monkey wrenches in my opinion first of all, we consider our first discussion, does anybody out there really think that this central bank or any central bank that's doing a prudent job would actually tighten i don't care what the inflation numbers are and i don't care how quickly this evolves or devolves, the notion that they need to pause considering what's going on, nobody calling this a bailout, yes, they're getting special treatment but their clients were super special, some of the brightest on wall street. their clients and all the krp eos we have on never really tell us where the roaches are there's one cock roach, there's

many it seems to me this bank probably has their issues of climate change and their issues more in order on things that don't really affect whether your money is safe or not versus doing good portfolio analysis. the best analogy is we all under understand about tulips, okay? this is a big whose clients are in the tulip business and all their holdings in the back room were tulip bulbs they're talking about clients who are super interest rate sensitive. the whole thing from top to bottom in my opinion is horribly mismanaged the fact that we're giving anyone a buy in this instance is so nothing to be proud of. >> we've debated the bailouts of 2008 and whether individuals should be bailed out, the bank should be bailed out

do you hold these depositors effectively accountable? >> my mom's 87 years old she still moves her money around she's very cognizant of insured up to what 250,000 means i don't suspect there's a lot of businesses that could have less than that, which means they need to do their due diligence and where they domicile their money. i don't feel sorry for anybody when i hear people are happy they've done this because their relatives have deposits, i feel they probably handle their money with more care than financers at the bank >> it turns effectively so many banks into public utilities. how should they be operated then what should executives get paid to do what they do how do they work >> look at our public utilities. you answered your own question

when we first invented cars and gasoline, they both grew up together, no gas stations, hardly had any cars. here we are trying to make evs happen overnight in an inorganic wake same thing to me when you put those words together when any entity becomes a utility, it just becomes more mismanaged when they work arm and arm with the government. >> let's go to david, who is looking at the regional banks. >> good morning, becky just trying to get a sense of things as we get to the open we'll here from the president at the top of the next hour let me start with first republic bank a big liquidity injection there and very helpful all of the government programs and two main ones that have been put in place as well nonetheless, i continue hear

that the government would like it see this bank sold, which is not necessarily something that management may or may not want to do but at this point based on the conversations that i've had, one has to believe that that is a possibility as this week rolls on, particularly given the weakness in the stock, the possibility that even with that liquidity injection of significance, you may still see some deposits move out but the question has been, as i've picked it um,p, as to whetr the government would provide assistance to a would-be buyer of first republic. that does not appear to be the case you get assistance if the fdic ever takes over a bank in terms of an actual just takeover where they would take on the balance sheet and the assets, which would need to be written down at time of said purchase, that's remains unclear. we'ring we're going to keep a close eye on first republic and others

this morning pac west or bank hawaii or western alliance nonetheless, still questions as to whether or not and how these banks are going to weather this. you know, overall, becky and andrew, i'm not sure what you guys are picking up this morning but as we get closer to the open here, i would say there's a bit of a less of a positive tone it is not quite over despite the government eav government's intervention on the dep deposit side >> by detaufault, even with the protections in place, all these banks are going to be regulated in different ways and lending costs will go up that's going to be disinflationary on the economy and make things harder but the other question, the name

which we have not talked about it charles schwab. it runs what is kind of a quasi bank i'm curious what you've been hearing on that name >> it's funny, andrew, different things i've got notes here 15 million customers, duration risk is not nearly as significant. at the same time, the government potentially holds the balance sheet. there is no doubt continued concern in some way there, whether it's justified or not. i have not heard any expectation of anything in the likes of somebody trying to make a move or anything like that, andrew. >> just to clarify, actually down about 9%. it was down more earlier >> yeah. the focus that i've heard is much more on first republic. and again, as well as what i've heard is the government was waiting for a second bank before it felt really confident in sort of moving in as it did

so when signature went into receivership, that was sort of helpful in terms of the government and again, not presenting this idea of a bailout but simply helping make sure that depositors are made whole. but we're going to be watching for potential deals this week i think, andrew. we've got to we'll see what and if large regionals want to step up here potentially if they see an opportunity. there is certainly a great deal of franchise value in the name that we've been looking at there in first republic. unclear for some of the others again, we continue to talk about these banks that had a large percentage of their deposit base uninsured. in other words, maybe a small number of depositors but those depositors representing an enormous amount of the overall number given how much they had at the bank and concentrated loan portfolios in a particular industry those appear to be still in the sights of many investors, despite the extraordinary efforts of the treasury and the

fdic and the fed over the last 48 hours >> david, thank you. we will see you coming up in just about 15 minutes as we hand things over to "squawk on the street." right now we want to bring in a prominent venture capitalist who tweeted over the weekend about the issues his firm was facing as a result of the class of silicon valley bank. alexis ohanian, i know this was a busy weekend for us. walk us through what you were dealing with over the last 72 hours or so. >> sure. i like many of my peers were spending the last 72 hours helping the founders of our portfolio, about 14% were fully exposed and figuring out ways to get them ready for payroll on monday i should also disclose that 776 was significantly exposed to svb and i stand here or sit here

feeling a sigh of relief that the government stepped up, that the fed, you know, made sure to back stop this at zero cost to taxpayers, which i think is important, and everyone can sort of take a breath after the last three days i think most folks in tech and probably finance are breathing a sigh of relief here. we're not out of the woods but are feeling relief about tens of thousands of folks being able to make payroll this week >> when you say 14% of the firms that you back were fully exposed, how many companies is that >> oh, probably around 15, 14, 15 we are -- the firm is only about three years old and these numbers varied obviously across the valley, but i do hope -- you know, i think a lot of folks saw some pretty heated tweets from the community. you referenced some earlier.

i do hope the very same folks using their platforms to spread alarm and concern are going to also use those platforms to say thank you that secretary yellen and president biden stepped up here because it was a crucial need and credit to folks going to get word out behind the scenes and actually get some work done here >> this is certainsomething whes probably not the ideal solution but it would not have been the ideal solution to let those deposits go to the wayside, too and experiment of what would happen if everything went down but i think the question people are starting to ask today is and now what does this mean all deposits everywhere are fully backed by the government if the fdic doesn't have enough money to do that, what happens next i guess those are some of the big issues we're trying to work our way through. >> one thing that shouldn't be lost either, we saw something

that i don't think has a precedent in the u.s. or maybe anywhere but social media really was the home for this contagion. it was almost this perfect storm, if you remember the diagram of people who bank with svb, entrepreneurs, founders of companies, folks in the extended business of the text community and their area and folks who are active on twitter and social media. that is almost a circle. what we saw there is something i think we're all going to walk away from a lot more mindful because you put founders, you know, in situations where within hours they were making really tough calls knowing that, you know, these are not ceos riding around on private jets the vast majority of these founders are still trying to build up companies and solve really big problems fighting cancer, climate tech and need it make sure they can make payroll under this sort of duressful

situation where the legacy of svb was for decades they found a way to back entrepreneurs when very few other banks would without maybe either some help from daddy or a personal guarantee. entrepreneurs weren't getting backing access and svb was that. i'm also curious to see what fills in that gap now. i do think the big four long term are going to be winners for companies once they've raised tens of millions of dollars. i'm in the business of being the very first check into entrepreneurs' companies we're talking of hundreds of thousands of dollars to maybe a few million at most. maybe for some of these nascent companies, they need a place to bank the big four aren't going to be home for those companies they still need a place to put their money to not do anything special other than making sure

they're paying their bills >> i've always admired your humble approach to all of this and your thank you i'm curious, you see so many venture capitalists online, screaming from the rooftops, not only asking bailout, blaming the federal reserve, blaming everybody except for maybe themselves and not necessarily taking the approach you're taking this morning and how you think that puts the venture capital community maybe in the cross hairs as people think about things like carried interest and other regulations down the line. >> look, this is i think, i hope, i really do hope this will be a chance for all of us to take more stock and more refrekz. at the end of the day, i take responsibility within my own firm of having that single point of failure and every one of us as leaders need to understand we have a weight and it's a

platform, this is going to sound weird, maybe a little surprising, but i think there are many people in tech and in vc that may not even fully understand and appreciate the impact that they have. and i think for many of us, there were a number of calm voices, a lot of amazing venture capitalists working, my friend haman at general catalyst, for instance, both publicly and privately to be a sober voice of reason for their founders, to be pushing for these things and asking for these things. but doing so in ways that don't cause more panic so that's what i would ask my peers to reflect upon. we're in an age where, yeah, this is not to blame twitter i would say social media as a whole but especially twitter in this case, can be a place for ideas to spread quicker than ever we saw folks posting, i mean, outright misinformation about some of these banks over the weekend, who also a few tweets earlier admitted they held short

positions in those same companies. you can see the receipts it is -- this is a new era for us as an economy, for us figuring out this distribution of media, and i think yes, there's a possibility borne by every one of us, especially those of us who have platforms of influence this is so much of what my team and i debated and talked about in those 36 hours, was the signal that we would send telling all of our founders, the language we would use. we tried so hard to be as careful as we could to provide the best information and support we could also knowing what we say has a tremendous impact. and it's not just the 100 companies in our portfolio it's the 100 other founders they know and the hundreds of thousands of people following on twitter who pay attention. i hope it gives us all a moment to take that stock and do better i'm one of the first that needs to do it >> just the idea of there being people who were short this thing

spreading misinformation, as you said, there are receipts if the s.e.c. didn't have enough to do already, here's one more thing for them to dig back through. alexis, right now, because of this, the way it's stepped in, all of your firms are okay they're all going to make payroll? >> yeah, obviously, everyone is still, you know, holding their breath, but i feel like we breathe a huge sigh of relief. i'm here at austin by south by, and no shortage of start-up ceos and founders who were sleeping a lot easier last night as a result and i do think there's more to come from this there still needs to be a real solution in the market to provide that kind of just simple banking for early stage companies that need a place to put their cash but yeah, as it seems right now, everyone is making payroll and ceos are able to get back to

work, and more importantly, employees of these companies know their bills are going to get paid this week >> andrew brought up points earlier i had not realized with the bank the idea if you're a founder and you put your company's money there from your shareholders, you could get a better deal on your personal loans at the bank if you promise to keep all your money there. is that the sort of thing you had heard of before and should those policies be allowed? >> well, i'm not a banking expert, but i think when we start getting really cute, we start getting cute with this sort of thing, the is where these problems emerge. i do think there's going to be another round of scrutiny around the 2018 rollbacks, but i do think at the end of the day the biggest need for entrepreneurs and for these emerging companies is a place to put their cash where they know there's nothing terribly cute happening behind the scenes everyone is taking all the right precautions. and i do think the market is going to provide some kind of an answer for that because it needs

to it needs to fill the role. >> alexis, thank you we appreciate yourtume this morning. want to get down to the new york stock exchange. jim cramer joins us now. this was dan loeb last night he said i would say all is well that ends well, but i think this story is just beginning. just beginning or did it end >> well, i think that there's something in between that. we have a number of banks that are going to have to take advantage of what the federal reserve did last night which is to be able to make it so they can take their held to maturity bonds unfortunately, i know this is obtuse and will they need capital raises i don't want to be -- i think the issue is we all know, and david knows this there are some banks that are on the wrong part of what the fed

wants, which is that they don't have sticky deposits and they're going to have a big problem keeping their deposits and their other banks, chiefly great banks. we talked about jpmorgan, wells fargo, and we're also talking about bank of america, that aren't in trouble and would be the beneficiary of this. i think it's over for some but not for others but today would be a day where people say we have the bonds going crazy, interest rates going lower. that's actually good for these banks. but it's viewed as a flight to quality. i don't know, why do we have to say all's well look, i just find that shakespeare is not as applicable as typical >> we'll see you in just a couple minutes thanks we're awaiting comments from president biden on the banking sector that is due to start any minute. we want to take a quick look at

where things stand because the futures a moment ago were down by 400 points. now they're down by 327. the nasdaq is now indicated off by almost 100 points s&p futures down by about 44 again, if you're watching the treasury market, we have been doing that too >> the ten-year at 3.464%. the two-year at 4.155 pest i think the turn here, i think there's a sense that these banks are going to continue to have some problems, and not just that, but that actually is going to get harder and harder to get a loan at an interest rate that makes a lot of sense that's going to be deflationary on the economy >> tomorrow, we have cpi coming out. that inflation number that was so important before any of this even happened. that's going to be a sharper focus on what the fed may do next week when they have to come out with a decision on whether to raise interest rates again or

not. futures have been indicating most people think nothing will be done. that's where the probability falls. that's a big change from where we have seen things before again, we have been watching all of this through the morning and we're expecting comments coming out from president biden very shortly. in the meantime, there you see the fed fund futures that's a huge reversal from last week >> our understanding is he is going to push hard, hard on the idea that americans' deposits in banks across the country no matter what bank you're at, are safe he's going to say that repeatedly and hoping those deposits stay where they are the big concern is they move again and whether we have staunched the bleeding >> across the board, you started to see things drop wti was only down by about 1% a couple hours ago now it's down by almost 5% again, a lot of this is flight to safety. concerns about where the money is going to be, concerns about

broader term what this means for the economy as well. again, got all of this kind of coming up with natural gas, which is now down. it had been positive earlier now down by 1.5% >> want to thank everybody for joining us on this special edition of "squawk box," especially if you stuck with us for all four hours "squawk on the street" begins right now. good monday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer, david faber. we're awaiting remarks from the president about the banking system after the collapse of silicon valley bank and historic moves to protect depositors, relaxing terms of the discount window big implications for the fed's rate path which the market now sees with better odds of no hike this month, jim. two, three handles to watch today. one was the two-year, the other is the vix >> right look, i think that yet to separate what's going to happen today and tomorrow by what we'll

be thinking about a week from now. and dave and i were discussing the fact it is very difficult for the fed to hike. if we knew that we would be buying a huge number of stocks that did not have any credit risk, david, i think you'll agree with me, there are some banks in trouble that haven't been solved yet. but will be solved because of what happened last night but there's a lot of fear in the system, a lot of fear also that right now, that some of the companies that need, let's say that need these pre-ipos, number of companies that need these ipos, these companies will no longer get the business. >> right >> there are biotechs that won't, some companies won't get the business, but chiefly, the tech companies that were relying on selling to these companies. >> it's a fascinating morning for any number of reasons including as you just said, if we were operating in a v