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 vacuum

right now with the move we have seen in the two-year, for example, and suddenly this consensus that the fed may be done, we would be up, i don't even know, carl, percentage wise as we watch the president. >> i'm urging panic is going to be wrong >> let's get to the president. >> i want to briefly speak about what's happening at silicon valley batch, at signature bank. thanks to the quick action of my administration, americans can have confidence that the banking system is safe your deposits will be there when you need them. small businesses across the country that deposit accounts at these banks can breathe easier knowing they'll be able to pay their workers and pay their bills. the hard working employees can breathe easier as well last week, when we learned of the problems of the banks, and the impact they could have on jobs, some small businesses, and banking systems overall, i instructed my team to act con

quickly to protect these interests. they have done that. on friday, there fdic took control of silicon valley bank's assets, and over the weekend, took control of signature bank's assets treasury secretary yellen and a team of banking regulators have taken action, immediate action, and here are the highlights. first, all customers who had deposits in these banks can rest assured they'll be protected and they'll have access to their money as of today. that includes small businesses across the country that bank there and need to make payroll, pay their bills, and stay open for business no losses -- and this is an important point -- no losses will be borne by the taxpayers no losses will be borne by the tax taxpayers. instead, the money will come from the fees the banks pay into the depausive insurance fund because of the actions of that -- because of the actions that our regulators have already taken, every american should

take confident their deposits will be there if and when they need them. second, the management of these banks will be fired. if the bank is taken over by fdic, the people running the bank should not work there anymore. third, investors in the banks will not be protected. they knowingly took a risk when the risk didn't pay off, investors lose their money that's how capitalism works. and fourth, there are important questions of how these banks got into the circumstances in the first place. we must get the full accounting of what happened and why those responsibility can be held accountable. and my administration -- no one is above the law, and finally, we must reduce the risk of this happening again. during the obama/biden administration, we put in place tough requirements on banks like silicon valley bank and signature bank including the dodd/frank law to make sure that the crisis we saw

in 2008 would not happen again unfortunately, the last administration rolled back some of these requirements. i'm going to ask congress and the banking regulators to strengthen the rules for banks to make it less likely this kind of bank failure would happen again. and to protect american jobs and small businesses look, the bottom line is this, americans can rest assured that our banking system is safe your deposits are safe let me also assure you we will not stop at this we'll do whatever is needed. on top of it all, let's also take a moment to put the situation in the broader context. we have made strong economic progress in the past two years we have created more than 12 million new jobs more jobs in two years than any president has ever created in a single four-year term. unemployment is below 4%, for 14 straight months. take-home pay for workers is going up, especially for lower and middle income workers. and we have seen record numbers

of people apply to start new businesses, more than 10 million of them, more than 10 million applications ovthe last two years starting businesses. now, we need to keep the program and this progress going. that's what swift action that my administration over the past few years is all about protecting depositors, protecting the banking system, protecting the economic gains we have made together for the american people. thank you, god bless you, and may god protect our troops see you in california. >> what do you know right now about why this happened and can you assure americans there won't be a ripple effect >> should all depositors be protected at all banks >> that's the president, no questions, speaking for a shorter amount of time than perhaps some expected but reiterating depositors will be protected. management to be fired, investors not protected. and then again, as gensler this morning suggested, those who are found of any wrongdoing will be

held accountable >> i thing it's difficult to find someone who exercised their absolute right to be able to invest anywhere on the curve from being considered a bad actor. i want to get that off the table. >> silicon valley bank made a choice with that infuse of deposits to put it into longer dated securities i am sure they hadn't reached for those 50 basis points. >> do you think a competent bank would have said you have a lot of risk here because you really are far out of the curve given the fact the federal reserve is going to keep raising rates in. >> that would have been a fair point, and listen, it wasn't a big secret to many in the marketplace they did have a bond portfolio was under water. of course, it was in a maturity portfolio where that did not have to take a hit, and

obviously, if the deposits had not left, they would not have had to the margin would not have been looking particularly good, but ultimately, they would have moved through this in fact, many people want to point finkers, as you know, even at the action last week, wondering whether in fact given they seemed to be there the wednesday before, based on what i heard. was there really an opportunity for sill vaughnicon valley banka better job before this whole thing blew up? >> once everyone knew they were in a jam, it was unable to do the deal the question is, did goldm man have to make it so everybody knew >> they had time i'm talking about what would have been two weeks from this coming wednesday where they at least had one key investor could they have gotten something done this is all obviously looking back now we're trying to look forward here in terms of what we can expect not just today but the week ahead

we are seen an enormous shift in rates in the last 48 hours whatever you want to call it >> theoretically, it's easier to sell right now i mean, they can borrow -- i never want to use that part, but they have an easier time of borrowing right now against their held to maturity position that is under water and don't have to declare losses they can get money from the government, but the problem is, carl, they will be tainted and i think that we have today runs with so many different banks that frankly should not have runs. >> it's amazing how much this rhymes with prior eras we have been involved with there is stigma in participating in that window and is there a way to get larger safer banks to also play to reduce that stigma. >> we have this restriction on

how much concentration you can have think about what jpmorgan did this weekend to help out first republic i don't want to say any bank would close if it didn't have help, but jpmorgan conceivably would say you put that bank in receivership, we'll buy it providing it's not a bear stearns situation. >> as i have been hearing from any number of people who have been involved in various conversations with the government, the government might or does perhaps want to see more consolidation, including the likes of a first republic, but will not offer assistance. and so if you are looking at one of these banks that is under capitalized, at least for the current moment now, has pressure on its net interest margin because of decisions made re briefiously, if you buy it, you have to fill that up it might be worth it for certain banks because they have incredible franchise value, but at the same time, maybe you

don't want to take that step if the government is not willing to offer some assistance. and of course, the government assistance is helpful only when, as you say, when the fdic takes one of these things over then you don't have to write down the assets either, which is also helpful we just have to watch and wait here in terms to see what people choose to do, even though there doesn't seem to be any reason at this point, jim, to take your deposits out of any of these banks. >> no, but i think at the same time, because it's so easy to take your deposit out of the bank, you might be inclined to say, you know what, it's so great they're guaranteeing it, but i'm worried anything over $250,000 might not be guaranteed i think we have to be responsible right here i can tell you that there's a lot of people who i felt were irresponsible. i don't want to bother with finger pointing. you can take the whole show about finger pointing. it doesn't help anybody at home. >> we'll get to that in time

>> you have to look at what to do today so the market is down. who has no credit risk and no exposure to these banks? that's the drug companies who could have exposure to the clients of silicon valley and not be able to do as much business that's the techs what does this have to do with campbell's soup? i'm saying if you decide this takes down every single stock, well, there are some that will be bought tomorrow and i don't want to say this is something you should join. the ones that we're picturing right now, you could argue why are we picturing them? because they might not have enough sticky deposits, sticky meaning retail, to be able to make it so they don't need to do a capital raise. >> you're talking about the chart that they published yesterday, just explaining what an outlier it was. >> he is a friend of mine. we did go fishing together in panama, but he does a fantastic thing called eye of the market

which is read by a lot of people cnbc, by the way, on our site we have it. he put together an actual graph that has most of the banks we're dealing with jpmorgan is in phenomenal shape. wells fargo is in great shape, but there are banks -- what he did is look at the loans plus securities as a percentage of deposits and what's on the far right, let's say you don't want to be there. on the far right lower now, citi is on there, and that's a little bit -- they don't have sticky deposits >> a little misleading >> it's a big bank and i don't want to put it in there, but if you notice next to it is spny, which is closed. >> i wonder pnc, u.s. bank, are they potentially in a position to acquire here? it's unclear to me that jpmorgan, they would need the government to say okay, we'll let you get even bigger.

what happened over the last few days, the big have gotten even bigger we don't know the numbers, but it has to be many billions in deposits they have taken in. >> look, is it not in the interest of the federal government to keep community banks and smaller banks, which of course are the financiers of the small and immediate sized businesses that the house and senate always want to protect? what happened this weekend is that the money went from the companies that are regionals, no doubt community, into jpmorgan and a couple other banks they feel are safe. so that's not in interest of our country, but it doesn't seem to be the case that if you have, say, $400,000 in the bank, that people are keeping that there. >> are we going to expect anybody who deposits more than $250,000 is going to look at the portfolio of every bank and go

through their securities >> i wrote down the quote. fair to ask about the underwriting discipline of vc firms that put the vast amount of their security -- >> if you look autoanother chart, the impact of unrealized security losses on capital ratios, again, michael is a visionary. the one that is way too low is silicon valley bank shares on the bad is usb, which i think i trust. again, we as a news organization - >> you can see these are not large market cap banks so to speak, but they're considered, now, they're mucked in with this group that is undercapitalized and has pressure at the interest margin at the least,you can question their earnings power and obviously you're going to do perhaps more than that

>> people will look at schwab, asking whether they have too much of this what's known as durational risk. meaning i'm going to simplify that, meaning they bought a lot of bonds that aren't government bonds. not nonsense, but government bonds, but they may have bought them at too long on the yield curve. >> the fact that svb did not get anyone to buy, even to come in for the assets after it was put in receivership by the fdic probably not the best sign either >> no, but again, just to make sure the people realize, they were bad at both >> they were >> i think there had been an expectation based on the conversations on friday i was having, saturday, that somebody might show up here and they didn't. >> pnc kicked the tires.

now, is pnc used to this particular kind of fray? no if i believe if jpmorgan were given what's known as a wamu kind of takeover ability where they would not have a lot of risk, they would have done it. but they're not allowed to >> they're not allowed to because -- by the way, also the litigation that they got has certainly put them in a position where do we really want to go down that road again >> we would love it. i think that the actual technical risk of buying a very good bank like say first republic makes it so that any bank that doesn't is going to be actually suspect i think that's a big part of the problem. it would be terrific if, like, let's say jpmorgan were indemnified against lawsuits and losses, but that's a tall order, too, right >> yeah, and that sounds more like a bailout, which is what this administration is trying to avoid. >> and right, they certainly did

make it clear that right now, no taxpayer money is involved if the fdic bails you out, there will be -- >> it's not as though -- by the way, we keep showing silicon valley bank. it's a zero. >> equity and preferred owners how is that a bailout? >> it was held, so it's not going to trade again and so the bond holders are obviously also at risk that's not a bailout >> what about the broader notion that banks in aggregate are going to face enormous eps risk, as they have to be more attractive to keep people from taking out money markets, lower their fees, make their product better, expenses go up that's the story now for '24 >> i'm not going to disagree with that. my travel trust owns morgan stanley and wells fargo.

morgan stanley does not appear on the chart i don't think they have too much risk i can't declare because i don't know when it comes to looking at wells fargo, one of the most overcapitalized banks in the world. at the same time, do i want to be buying that stock today let it readjust. i do think that if the federal government were to in any way say we're going to let all these banks come in and we will make it so that they're indemnified and we'll charge banks, it's still going to lower the p.a look, what does this have to do with the price to earnings ratio of bristol myers >> very little the c-gen deal might have more to do with that than this. >> just talk about everything that's going to go wrong >> at some point, we'll get to a $43 billion takeover by pfizer

>> i think the s&p, the futures are going to take that and then we'll get what is not going to have any risk to the banks. but it's also going to be, people are going to say wait a second, we have to shoot first we don't know how bad hpq is going to get hurt because the start-up world has collapsed at the same time, let's look at the biggest picture. i felt the big issue going into wednesday was is the fed going to do 50 basis points? if that the case, that's even more powerful than what will happen in the banks in terms of worrying about the stock market. now the question is, will the fed move at all? i cannot suddenly say that's negative when i was praying for it last wengz. david, you know there are many more stocks affected by that than pacific west, western alliance >> without a doubt >> but why aren't we talking about them >> right now, we're focused on

what without government action would have been an all out crisis this morning without a doubt. and the fallout still from what was without a doubt necessary intervention by the government in terms of securing these deposits >> and you can't have every bank wiped out. >> and i think people, i mean, kept saying what's going to break? jamie dimon, right, we kept giving him a hard time, but he kept saying something's going to break. something did break. >> we're not necessarily done, are we are you thinking about hedge funds that were short treasuries, for example? >> well, it's not a day for the treasury, certainly. if you ask me what the single biggest risk is, we only have an implicit guarantee that other banks have been protected over $250,000 we need explicit guarantee we only have implicit guarantee. >> let's get to kayla tausche, more news out of washington. hey, kayla

>> reporter: hey, carl the president was asked whether this effectively means all depositors in the united states have a backstop. he did not answer that question, but in those remarks earlier this hour, he sought to really drive home that message that is so important to the administration, the taxpayers will bear no cost of this rescue here's the president earlier this hour. >> all customers who had deposits in these banks can rest assured, rest assured they'll be protected and they will have access to their money as of today. that includes small businesses across the country that bank there and need to make payroll, pay their bills, and stay own for business no losses -- this is important -- no losses will be borne by the taxpayers >> he also said that the administration would be looking at changes to regulation to make sure this doesn't happen again it remains to be seen exactly how thadicate be done. whether banks would be required

to hold more of their capital in cash rather than reinvesting it in treasuries because of what happened here and whether the administration would be willing to relax that rule that prevents any bank that has more than 10% of the nation's deposits from acquiring deposits through any other deal there are three banks that qualify under that umbrella. jpmorgan chase, bank of america, and wells fargo would be precluded under current rules from doing any deal that would allow them to acquire more deposits as you rightly mentioned earlier, they have grown organically in the order of billions because of the money that has been flowing out of the very community and regional banks that the administration has been seeking to promote with those regulations, and certainly that is an unintended consequence that you can imagine the administration is going to try to rectify >> kayla, appreciate that. kayla tausche after the momentous weekend of news in washington we'll stay on top of the fallout from svb, keeping our eye on the

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the break, sbny signature bank closed by regulators opsunday. this is now the third largest in u.s. history had made a big bet on crypto, jim, which barney frank today said was the new element in all of this. >> well, i think there is a sense that you crypto, they don't want banks to handle crypto now, coinbase stock is up. and i think that the crypto people seem to be immune to anything and that's somewhat counterintuitive given the fact that you wouldn't have closed signature if you didn't want the

$250 million that coinbase had it's pretty obvious, we don't have a t.a.r.p. situation, but there may need to be a second round. what was said last night is not enough >> maybe, by the way, barney frank, a board member of this company, interestingly, as carl said, quoted in the journal in number of ways i mean, this fit the profile, though, of course. and my understanding over the weekend was its balance sheet did not look as bad as a number of other banks in terms of real capital holds, but very concentrated in one particular industry deposit base that could move, well, any deposit base these days can move quickly. this has also changed the whole game in terms of how people can do a run on the bank >> right >> and look at twitter and say uh-oh, that doesn't look good. there's a line at that bank, i'm getting out, and two minutes later, they're out but signature did fit the

profile overall, again, in that sense. and so it no longer is around. it's gone. and it was, my understanding is it was sort of what the government needed to feel like it had to commit it wasn't enough to just have silicon valley bank go to the fdic they wanted one more before they could feel comfortable coming with the programs they did to insure uninsured depositors as they have. as you continue to say, jim, and we have been reporting it's still unclear whether the reverberations are done. >> right look, let's understand that i have to tell you that you have to question the examiners on silicon valley bank because the ratio of what they had, david, you know this, of what they had in their bond portfolio is pretty shocking. at the same time, they have very

few sticky assets. those sticky assets, what you're looking for are assets that won't flee >> assets or deposits? >> deposits. what i'm concerned about is when you see all these banks are trading, you may need to have more assurance than we're getting right now because there are a lot of banks that truly did not have the right mix and we're discovering that today. and we had a lot of balance sheet growth from 2019 to 2022 so these banks put money to work some of them at the wrong part of the yield curve, and because they did that, they don't have enough capital they are really wildly underwater >> if their deposits don't flee, they have no problem and you would expect that given the government's action, that they have stopped that fleeing of deposits. therefore, you're never going to have to sell the assets under water to meet those depositors'

needs. >> i think, carl, what we're looking at is it's so easy to transfer money to banks that are, quote, not in trouble we have to deal with something which says you cannot move, period, end of story so it's not over i do want to caution that if you have money in some of these banks, well, they're obviously going to punish you. we don't know which ones are which, obviously, and i don't want to cause any run. it is easy for any of us to cause a run at this moment >> yeah. saw that on friday in sharp relief there's the opening bell and the cnbc real time exchange. ireland inc. celebrating annual ireland day. st. paddy's coming up focused on investment connections between ireland and the u.s. a nonprofit ranking america's most just companies.

breadth pretty weak here it makes you wonder if the action in the two-year is about sort of savvy bond traders betting on the fed or bank withdrawals just moving into bonds. >> i think it's the latter i think people just realized, wait a second, i have my money in the bank. why not just own treasuries? this happened, by the way, in 2008 you saw that short end spike and people even pulled their money out of jpmorgan and bought governments. >> yep wait until the debt limit crisis a few months from now and they'll go, gee, i'm not sure about that >> maybe i have to move my money back to jpmorgan and get paid nothing. >> what's the title of - >> that's what you did, right? >> i did >> goliath is winning. he's referring not just to jp but to the giants. >> yeah, what's happened is there's a new chart.

this is michael. he's a strategist from jpmorgan. he has a chart of uninsured shares of customer deposits. and you know, signature was 90% uninsured share of customer deposits then silicon valley bank, and then the aforementioned first republic and then after that, i hesitate to say which ones, but there are a lot of regionals and the only reason i hesitate to say is because there are other things going on that make so it's not a problem. they understand why they had to go after sbny, which was kind of an insane level. when i look at these, i wonder, carl, if i'm a bank examiner and saw the insured share of customer deposits, i would probably say, guys, come on. you have to do a capital raise that did not happen. i think one of the reasons why, i want to point the finger at

that because i have looked at these decisions before where i did not realize the uninsured share of customer deposits was so high, but you have to understood these banks need a second round of financing. >> some of this was not news to regulator. some of these advisory reports in december were looking at unrealized losses and the risk it created and the san francisco fed, for example >> which will have to account for itself i think there was a false sense of security. remember, they are treasuries and governments, so as long as they're not junk, we're okay and then remember what happened in the -- the fed raised rates the fed told you to buy treasuries in 2019 there was a big spike. you went and bought treasuries then the fed decided to make it so, well, frankly, the loan bond goes to zero or close to it.

the banks who listened to the fed are now being crushed from listening to the fed i think there's a certain amount of belief that those that are buying good paper, you didn't have to worry. and that turned out to be false. i'm surprised the examiners weren't more concerned about the held to maturity >> it also turned out to be false because of the nature of the deposit base of certain of these banks. >> true. >> these were unique silicon valley bank is unique. >> first republic -- but silicon valley bank is such an outlier >> yes, but they are somewhat unique in their approach, in terms of who they serve, the clientele they serve, who they loan to. and so it's not necessarily a broader indictment of so many other banks. >> but i think fed chair has to be saying, this is a wildly deflationary event in many ways if the fed got this without a crisis, they would say

okay, we have won. because there's going to be a lot of layoffs, obviously a lot of worry, not a lot of spending. so i think it's worth it for jay powell to say, maybe we wait and see. we had been saying that we didn't know the impact of these rapid rates. now we're seeing it, and we don't want to be in a situation where we cause any more institutions to go under >> well, we're in the blackout window so we won't know whether barken is open to 50 the way he was on friday, or if mary daly or these hawks -- >> to be fair to them, they were dealing with the same information we all were. just arguably -- >> they didn't know this was coming >> no, not full picture. >> gary cohn last night made some good points on our special, which they said that the fed is very much aware. if michael is aware of it, the fed is aware of it >> if he's aware of what >> what the situation is the only one i'm finding -- i

can't find schwab here >> right >> i don't know what their situation is >> i haven't done enough reporting on it to understand it fully either i know there was concern we know there continues to be some amorphous concern overall about -- >> we did have some calls on it on friday. >> you can see what's happening. the stock has gotten absolutely hammered in the last two trading sessions >> the tale on friday is their deposit growth hadn't grown nearly as much as svb's, since covid. >> sticky deposit, but apparently, they have -- no one has as bad a bond portfolio in terms of its held in maturity and what it's worth right now. >> it may also be that they were perhaps not sweeping people to money funds as quickly and therefore just having balances sit there. they were able to take advantage of those days are over.

>> apparently they did buy too long of bonds. i think what david said is what you're going to hear from a lot of venture capitalists on the air today. this is terrible, they won't be -- it's going to be much harder for them to get money there will have to be layoffs. they can make payroll because of what the fed haas done, but i think the problem is that there are going to be people who say get out now. things are really terrible and i don't want to say that now, people can say, wait a second, jim, you're way too rosy but with interest rates doing what they're doing and with the fed maybe on hold, there are many stocks you would want to buy, just not the ones on the screen >> i was going to say, to jim's point, we listen to ed gar denny, who said the ability of tech to get funded will be severely hampered. and that in his words, it could be somewhat reminiscent of the dotcom implosion of the early

2000s. >> i'm not going to dispute that we did have the incumbents all go down, too very interesting, you look at the stock of apple which is really a bank. >> wasn't he worried in the yea 2000, wasn't it him? >> y2k takes me back. >> i think he was, right wasn't it him? >> i am no one to be able to say he got that wrong. because there are many mistakes made but i do want to point out, before we go completely nuts, is that the dotcom explosion actually made it so that rates went down. we're talking about right now about companies that haven't been funded. i have continued to say that you must not buy any of the newly minted companies that don't have money, because they're not getting money. >> right well, that went back to silicon valley bank and the problems they faced in that those companies they were helping to f fund or that were keeping their

deposits there were running them down because they were paying payroll and they did not have the ability to access the capital markets. >> your left is saying the deposit base was shrinking >> inability to go public, hence you're drawing down your deposits, that's part of what the issue is >> also, by the way, european market, if you need capital, you're probably going to come to our market because their market is down. david is right there was a drawdown the venture capalists are actually pretty solid, but we don't know what they're going to let die and how many companies will not make it to the ipo, but that was the whole crisis with silicon valley bank to begin with you had to give them all of your deposits, apparently, which is why they had such a ridiculously high over $250,000 -

>> it was a club >> it was. now y thought the club had survivability because it's been around for 40 years. but this is a unique time. >> in the midst of all this, guys, we do have one sector that is doing quite well this morning. that's pharma. the drug, and that leads usto what would otherwise have been one of our leads today, which is an enormous deal pfizer, i like the headline on their press release, pfizer. pfizer invests $43 billion to battle cancer. all right, pr people you're earning your money today. an interesting one >> c gen does have unique formulations for cancers >> they're buying c-gen. merck had been in talks to purpose the company, but the anti-trust implications of that deal got in the way. the idea that merck would at the very least need to perhaps pursue some divestitures to satisfy regulators on the

antitrust front prevented merck from getting to the finish line. and to pfizer and a willingness to do so and at a higher price than we would assume merck was willing to pay >> merck makes money on this >> yeah, but for pfizer, it's sort of that need to fulfill what their ceo has talked about in the past, a $25 billion hole by 2030 in sales this from drugs that are going off patent and therefore reducing in sales. so they have said listen, we want to make up that by 2031 an additional $25 billion in sales. this will go towards doing that. only $2.2 billion in sales for 2023 so we are talking about a 20 multiple to revenues right now >> right, but -- >> they see them getting to $10 billion by 2030. >> they have got some formulations which people believe could solve the most

difficult cancers. >> this adc technology, which kind of brings the payload so to speak specifically where it's needed and has lesser side effects is a key bourla is going to be joining us later. >> could be good for brain cancer, kidney cancer. >> you may have seen some of the other stats associated with it this may be the largest deal in history for a company that has never earned money never turned a profit. now, we have had deals, larger deals for companies that lost money ultimately, but had made money previously this is the largest deal that's ever -- the largest number that's ever been paid for a company that has never made a profit >> remember, fwe got a note from

schwab >> not diabetes. excuse me, hep c >> so the headline in this one, unlike that one. schwab puts out a very normal schwab report, activity highlights they say schwab's business continues to perform exceptionally well about $5 billion lower than january, 80% of their total bank deposits fall within the fdic insurance. we wish it was 100%, but it isn't. >> 80% of the total bank deposits fall in the fdic insurance limits okay >> they believe they have upwards of $8 billion in potential retail cds and $100 billion in access to liquidity including $100 billion in cash what they're saying is something, david, you know that if you have to say you don't have a problem, we know that typically wall street is

skeptical and says they do >> they go on to say their bank's loan to deposit raceio is 10% and they're overcollateralized these are the loans where this is related to the unrealized losses and what we have been talking about, the held to maturity portfolio banks typically have two one is available for sale, that means you have to keep it marked where it would be sold at any given moment inother isaturmaturity, unless you sell it, you don't need to mark it. if you bought it here, it stays here >> schwab's stock has been holding. i understand >> they did need to come out with something to reassure the market >> they had to >> i do think, again, if we say it doesn't work, then it's our fault. >> the point schwab is making is

the point that many other banks would have liked to make as well they do this at the end of their press release. focusing attention on unrealized losses in the held to maturity portfolio has two logical flaws. first, the securities will mature at par. that's true. if you hold them, they will ultimately pay out and they say given our significant access to other sources of liquidity, there's very little chance that we would need to sell them prior to maturity they also go on to say that by looking at unrealized losses in the hold to maturity securities but not doing the same for trudekzal banks' loan portfolios, it penalizes firms like schwab that in fact have a higher quality or liquid and more transparent balance sheet there again, i'm quoting from this release from schwab that we just received a few moments ago. >> what are you hearing about the cost of borrowing that banks will have if they go and deal with, get par, be held to

maturity >> i'm not following the question >> you have to go -- you have to go to the fdic >> you're talking about the new facility that's been put in place that you can pledge your government securities against? >> yes >> you're going to get 100 cents on the dollar. >> what are they paying on it? i don't know >> this is kind of like the first snl crisis where they had the same problem they were trying to figure out how to deal with the mismatch of what banks owned versus how much they needed to put up. so i think there's always a negotiation. i think that the banks that are selling down may be selling down because they want to buy other banks, maybe selling down because there's a flight to quality. but i do think in a few days it does calm down as we realize that there will be a lot of banks that just get to borrow from the fed, they have time to

do it. there's no need for any of the banks on that list to do a deal today and raise capital, but people are saying that probably will happen. you know there's no shock button in these guys' heads right now there is a longer term >> we'll see, of course, if first republic gets bought this week >> that's a tough one. it's a much coveted franchise, but again, no bank, carl, wants to be able to say, i'll buy that they want the bank to be declared bankrupt, which they're not, and then they want guarantees because what happened is so wrong. that was the washington mutual otherwise, if you're jpmorgan, you say let me watch this unfold >> meanwhile, the rest of the street looking at other sectors. and i would argue in large part reporting minimal exposure, for example, jpmorgan looking at big

tech although we're going to watch roblox, i assume >> they'll be able to get their money out because they were particularly with that bank. don't you think it's odd that mark zuckerberg takes another whack -- >> at the employee base. >> maybe as much as $1.1 billion in savings that's a mistake >> you continue to think he should be rewarded by these continued focus on efficiency, as he likes to call it >> maybe a different word besides rewarded >> his company, not his bank >> you're rewarded for whacking people yes, david, that comes out as still one more headline. that was a radical action, carl, and if that -- we would be talking it if weren't for -- there is a particular decision by zuckerberg to be as probable as possible.

for his stock to go down today is really more a function of people being fearful of everything >> other stories we would mention otherwise today with a big buyback. >> here you have the problem of, well, is the president going to say we can't sell -- we can't sell very good capital equipment to china lam research was downgraded this morning, saying things were mostly good in 2024. i want to hear what the president says about where they're going next remember, nvidia a week from today reveals what his long term vision is. david, i had to mention jen-hsun huang because it was almost 10:00. >> we have to mention him. >> i'm glad you did, and even on a day like today, i would expect nvidia to come out of your mouth. i didn't believe it didn't until the 49 minute mark of the show >> you're one week away from da

vinci talking to us. >> that's not going to be an unimportant speech we should be focused on it again, any other day, i would have us talking about ai and i will again very soon because it's everywhere. >> gm today, this the interviewt ins install chatgpt in new models it's in everything, chatgpt. >> i think it's fair it will be in everything. we have to remember, there is a hint -- cost of funding can go up for everyone. >> yes. >> we don't know whether jpmorgan could eventually be hurt on interest margins >> could be. although they don't have to pay anything they're like, you can pay us to be here in our fortress balance sheet. >> jpmorgan. >> yeah. >> you want a bank, you can pay

us give us a little something. >> want to solve the problem right now, say we're willing to have concentration up to 50% and against what alexander hamlin predicted. >> many other countries have far fewer banks. they have the giant -- look at canada two national champions. >> why can't we be like canada. >> the canadians. >> the dow positive 70 points thanks in large part to defensive names, amgen, proctor, ibm, coke, leading the list. >> i think a lot of people who work at first republic are drinking a lot of coke in a few hours. >> there's a reminder you can always get in on the cnbc investing club with jim. days like today remind you how much value is embedded - >> multiple -- >> i'm well aware. thank you. as the s&p down about 9. don't go anywhere.

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let's get to jim and stop trading. >> let me talk about what people are buying they're buying eli lilly, stock up big, an upgrade from wells fargo, talk about now the risk of maybe not doing well in its alzheimer's formulation, is now in the stock but what's not in the stock is mun garr ro, the diabetes and weight loss drug, weight loss has not been approved yet, it's just a matter of time. if you get the weight loss, then that's what i have been saying, makes it the biggest possible biggest drug of all time take it once a month covered by insurance i believe that doctors do not have approval yet to write the script, but if we all believe that obesity is the single biggest cause of death, then mun

jar no, i don't want to say it ends obesity, but you lose 15% of your body mass, muscle and fat, if you take it. >> you've been talking about it for some time now. >> it's -- we can't lose weight. it's hard. you can't lose weight through dieting, but this is a -- this makes you like everything less including alcohol. >> helpful too. >> right. >> they're doing tests for that. biggest drug of all time and they stumbled on it. it's a diabetes drug david rich knows you can't talk about it yet because the fda hasn't approved it for that yet, but they will. >> definitely watching it. jim will stick around this morning as we monitor more reaction from the fallout of svb. dow up 46, financials down 3.5 on s&p don't go anywhere.

good monday morning. welcome to another hour of "squawk on the street. i'm sara eisen with carl quintanilla, david faber, jim cramer, thank you, sticking around for the top of the show it's one of those days live from post nine at the new york stock exchange. take a look at the stock market. we were down as low as 284 on the dow and have rebounded up

110 now. the s&p 500 is flat and the nasdaq is up a quarter of 1% it has to do with the exposure of the financial system here check out some of the bank stocks we've been glued to it all morning long some of these regional banks under severe selling pressure. first republic still down 65%. western alliance, charles schwab, pnc financial down 7.25. president biden speaking last hour about the collapse of svb financial -- silicon valley bank and the need for regulation into during the obama/biden administration we put in place tough requirements on banks like silicon valley bank and signature bank, including the dodd/frank law to make sure that the crisis we saw in 2008 would not happen again unfortunately, the last administration rolled back some of these requirements. i'm going to ask congress and

the banking regulators to strengthen the rules for banks to make it less likely this kind of bank failure would happen again. >> president biden just speaking in the last hour there guys, last night when the fed the treasury and the fdic stepped in with these emergency measures to guarantee the uninsured depositors, something a lot of people thought was necessary and the fed's new emergency lending program people thought this would stem the bleeding i had conversations with people that were saying, this is what they needed to do. it seems like it hasn't happened yet with some of these regional banks this morning. >> we're discovering that the uninsured shares of customer deposits is very high at a lot of banks, including ones, including western alliance comerica i think that these are -- some of these, as you know, sara, are very good banks and franchises and some of them are good franchises, but not very good

banks. meaning that if you take a look at first republic, until today, there are a lot of banks i think would have coveted them, but they were large banks, and they're not allowed to buy them. do you think that the federal government has to wave the rule that the large banks can't buy some of these banks? or do you think they just end up in receivership? >> i think that if the -- it's going to be up to the government if what the market wants is a deal for the banks, couldn't get that for svb, i reported the pnc financial was in talks and expressed interest and then backed out after some preliminary due diligence a few days ago from the fdic, look, the question is what happens to the regional banks in europe there's only six big banks. they don't have the regional bank problem it's political and a lot of -- >> focused on a certain bank that, again, has very high percentage of uninsured deposits, asset side focused on a particular industry or couple

industries obviously, that also may have gone out on the yield curve at an inopportune time prior to the fed starting to raise rates aggressively i don't think we can say broad brush it's the regional banks. >> first republic they have a $180 billion loan portfolio, 75% in mortgages under water. >> first republic is a very specific example and one reason why i was reporting the government would like to get -- see it sold. >> right. >> that said, the government is unwilling, as far as my reporting has indicated, to help any buyer stem any capital hole that might be there if they were, in fact, going to step in and buy it so we'll see whether we get a deal there or whether there's a need for one to your point at the beginning of the show, though, sara, many would have thought that the government actions last night would have stemmed any need to remove deposits from any institutions because you don't need to worry your deposits will not be there. >> the problem is they weren't clear.

they were clear that over 250,000 at these two banks that closed is protected. they need to come out today -- what would have ended it, if they said we'll make available all liquidity that's needed and left it like that. because what you're asking people to do, you're asking -- you have to give these banks time if they had said all they need, playing the guessing game about whether it's explicit or implicit guarantee from the fdic above 250,000. >> you think they should have said all uninsured deposits in the banking system would be made whole? yeah otherwise we're going to have good community banks fail and our policy in this country is to make it so those banks exist and we don't have a situation where we just have three or four banks. that's bad for business. >> the price action could reflect concerns about deposit flight or it could be pricing in a new era of regulations for

banks that got a roll back in '18. >> we know there are very good banks right now that didn't think were going to be in trouble because there is so much ambiguity. i came in this morning and said are they going to make it clear that there will be no problem at schwab the answer is they weren't clear. david, you know they weren't really clear about who has forbearance. >> no, but the availability of these facilities where you can pledge securities -- >> help -- >> right. >> and get the money, and the other liquidity facilities so to speak, would seem to do enough to reassure people. >> but do people - >> didn't solve the duration problem, the - >> they didn't - >> assets and liability -- >> to schwab's point in its press release, the case right, if you have something in the held to maturity portfolio,

those securities wilma tour at par, and i'm quoting from schwab, given access to our liquidity, very little chance we need to sell them prior to maturity that is what charles schwab is saying the stock has come back since they issued this press release 25 minutes or so ago but to your point, there are concerns about other banks that continue right now, sara. >> right i think, sara, that we're in the peculiar situation, schwab says it has access. so we're supposed to stop selling schwab if everybody issues a press release like that, then i think people are going to say wait a second, not everybody has access jpmorgan came to the rescue of first republic. >> first republic put a press release out. >> everyone did a very good job of not disclosing that jpmorgan was involved. >> it's like everyone says we're not greece spain is not greece, italy we're not silicon valley. >> carl, we have an imperative in this country to make it so small and medium-sized banks exist, and that imperative should lead to the idea that it

would be much better if the federal reserve said all liquidity will will be arranged. you don't need to take yours do its out. as david said, i'm going to go -- i think it's kind of ironic -- you're held the maturity portfolio will be able to be to be at par what do people not understand? held to maturity be able to borrow as if they're par and par. so david, people know par as something that's on the golf course, right. its means you can keep your medicine until the expiration date borrowing against these, borrowing against what they all had junk in the portfolio. not true the fed presumes that 340 million people really get it. >> well a lot of them don't have 250,000 to have in the bank. >> that's true. >> and to that point, i mean, if one of the variables is the

stickier retail deposit, what explains wells today right. i know it's not as much as some of these other banks, but is that about earnings risk and expense risk >> i guess so. i think wells trades at not tangible but below book value. i think that wells has the most capital of any bank, but that's because they weren't allowed to -- wells is the safest. i will argue because they haven't been allowed to do anything in five years. >> buffet owns a lot of bofa. >> who do you think will fund this for the fdic, the inunsureds do its? higher fees for the banks. >> i want to you come to on the bigger story, not bigger, but a big part of the story today which is the huge turnaround in the bond market, yields where they are, take a look at the 2-year where it was and the idea that the fed is done, which i've heard numerous times this morning from market participants >> i don't think we can say that until we get the inflation report this week

agree, jan hatzius, which is funny, he was on, the chief economist at goldman friday after jobs saying four more 25 basis points hikes and we're going to get one in march. what a rethink this last week they thought 50. we knew they couldn't do 50 in light in the banking crisis. it's a tough call whether they can do 25 or 0. >> this is a deflationary event, four months powell may say i moved too quickly, we have to wait. >> 100%. remember the long and variable lags this is what that is. >> i agree. >> jay powell in a difficult position because he did say over and over again that there may be risks we didn't count on we got one. >> maybe he broke something. but sara, we started saying the fed is done. >> market rallies, right. >> the market is rallying. not as much as you might expect that was a lone headline. >> the dollar is weaker pricing out the fed hikes. if there was panic and fear the

dollar would be stronger the focus is on the fed doing less and that's positive look at the market. >> positive for apple, first national bank of apple. >> is it weird to be hiking, let's say they do 25, as you're doing what some argue is de facto qe. >> that's what the bank of england did. >> is that where we are? >> that's where we are plus, there's things that are unintended consequences like bitcoin being up today when it's clear that federal reserve does not want bitcoin at banks, right. it doesn't want it the bank was closed down in part because of the coinbase position i do think that -- there was a bank silvergate which we've forgotten. >> like three failures ago. >> i know. we have to distinguish, sticky deposits from the deposits that move and jpmorgan is really sticky deposits. by the way, they also have very

low unrealized security losses, so sara, if you were a bank examiner and looking at say ubs or pac west or key, would you be saying to them, look, guys, i think that, i don't know, maybe you ought to do something about the fact that all of your bonds are -- i'm just picking those -- >> they weren't susceptible to the same requirements as the biggest banks, particularly on this issue when it came to how they classified holding capital. >> right. >> that could change and that's going to be painful for the regional banks. >> they're not - >> put it this way they don't seem to be great bargains this morning. it may turn out to be otherwise if jpmorgan is allowed to do a wamu being that they -- you buy something with no risk. >> right. >> i mean -- >> which doesn't appear to be the case right now. >> which suspect helping confidence right now. >> wrote a great piece this weekend sara about pnc taking a hard look -- >> hard pass. >> hard pass hard pass. >> nobody came in for silicon

valley. >> nobody came in. there were banks that would have liked to, perhaps, buy others. david, why did jpmorgan make a run at first republic? >> because they're a big customer. >> big one. >> yeah. >> so you're -- wouldn't the first republic client base be something that jpmorgan -- >> of course there's a great deal of potential franchise value there. the question is how big the hole is and what the write down is and the assets you would be acqu acquiring and do you want government assistance to do it or is there a number that works? the other part with jpmorgan is can you taking take on those deposits given that you're bigger than we want one bank to be and getting bigger by the minute. >> i think that we're stuck with the best opportunity to save the situation are the banks that can't save it. >> guys, we want to bring steve liesman into the conversation and talk us through what we're

seeing in the bond market, steve, and some of the concerns that the fed is facing right now, this dual problem of a systemic banking crisis and high inflation. it's a tough call. >> yeah. it certainly is. there's a lot of questions right now about what all this means for fed policy i think you twguys have it right the fed did a lot, but it's limited. i think the way to think about the two things that happened, one is that they guaranteed the uninsured deposits in all of the banks and a couple that were in question so that reduces the incentive to take your money out. the new fund they created and the liquidity, the better terms they provided of the discount window, what they are is a backstop to the first one. if people take their money out of the banks and banks have a need for liquidity, they provided extra sources of that liquidity. so it's a one-two step to stop something happening now.

in the sense what i believe we've done is traded short-term uncertainty, we got rid of that and opened today, talked about not opening, there was talk about limit down on the dow, we traded that, that didn't happen. there's some uncertainty out there, for medium and long-term uncertainty, what happens long term to bank earnings and when they end up having to pay higher deposit rates and later on when this program runs out to uninsured deposits and later on to their unrealized losses and gains and ability to get that liquidity if the program were to shut down? that's conditional on i think things being in better case. that's one area of uncertainty broadly about the financial system and then if you look at the fed funds market, what's happened is a dramatic rethink of what the fed is going to do and i can't say if that's right or wrong because there's different impulses here as david i think was saying earlier, this is sort of a quantitative easing aspect to this, you've created more

collateral that can be financed. on the other hand you have a banking crisis, this kind of uncertainty out there, there's a severe disinflationary aspect to this and as sara said, you have an inflation report tomorrow that will be very important for the fed to figure out what it needs to do. my personal opinion, i don't think it's unthinkable the fed could take a pause here, take a look around. there's a notion out there that what we're seeing is the lag effects of anaggressive monetary policy and that's one of the precipitating factors for silicon valley if that's true, perhaps there are other shoes to drop among those lags. >> always happens, steve, right. and the fed knows this always happens. they've been warning about the lags, especially lael brainard at the white house has been warning about potential risks from fed tightening. if we get another strong inflation report, and they pause, doesn't that -- suspect that -- doesn't that hurt their

credibility on the inflation fight and signal that the fed has deeper concern about the risk to the financial system >> it could. but remember, sara, in the matrix of thick that -- the order of things that the fed worries about, inflation, unemployment, the stability in the financial system trumps them all. so that's where they're going to make a decision based upon concern about financial stability. you're 100% right about the potential signal value here if it does more, but i think that will not matter as much if there are real concerns. what's happening now, by the way, i think you talked about this as well, helping out the banks, the decline in yields is raising, obviously, the price of those bonds, reducing the unrealized losses and gains, perhaps providing some banks with an exit opportunity here from the long end into the short end. that could explain some of the trade that's happening today on the other hand, the fed will have an inflation problem. we'll get some inflation

expectations coming out at 11:00 and we're going to have to watch, carl, what happens tonight during the day today, whether or not some confidence is reinstilled into the banking system here. >> yeah. thank you, steve i just spoke with jim herbert, the ceo of first republic. and i asked him, what are the outflows today he said it's business as usual i'm speaking to the ceo. that does not mean jim cramer says it's business as usual. they're not that -- not that many liquidations above 250,000. it's pretty much the same as you would expect the jpmorgan funding is working. trying to make it so the situation is stable. now, david, i want to ask you, when a bank tells you that there's just the outflows are business as usual and no liquidity problem, that does not mean that we're saying there's no liquidity problem.

>> no. listen, i've been reporting on my share of financial crises, when a bank has to tell you that, it's always a problem to begin with. >> right. >> but, but we have to listen, we have to take them at their word conceivably it's never a good sign when they have to even reassure anybody. >> i pestered him, so let's give him credit for calling me back. >> okay. >> they said there wasn't deposit outflows >> business as usual not any sizable number of people wanting money. >> i mean, there were. we know there were. >> on friday and saturday. >> i don't know what deposit base looks like versus last thursday. >> there was no -- >> he said no comment when i asked how much went out. so i just -- i'm not trying to save the bank here i am trying to report that they're saying it's business as usual. >> how are you going to synthesize this for tonight? >> a tlot of time until tonight. >> we have to touch on

everything i will touch on how i made a mistake, of course, about thinking that silicon valley bank was better than it was. i think that i have relied on public figures and a lot of bank examiners which indicated things weren't as bad that was wrong it was a bad call. because i have yet to own up anything any judgment but i will spend time trying to figure out whether there isn't something to buy because there is always a bull market somewhere. >> i've heard that somewhere some wise man once said. >> thank you very much. >> we'll see you tonight. >> thank you for the extra time. i don't like to intrude. >> i'm glad -- >> i'm going to do my club call now. but the network is a joy to work at because we can help. >> see you tonight "mad money" at 6:00 p.m. market has gone red mildly on the dow. to mike santoli for more. >> yeah, carl. unsteady reaction i think. the real takeaway is, you know, the regulatory actions last

night closed off one immediate avenue of sort of head-long panic in the short-term on the depositor side but what the market is doing now is removing money or valuation from consumers of capital or areas of the market that might need to raise more capital and handing it to those generators of capital, the more stable capital bases. the s&p essentially revisits the lower end of the range for this year wouldn't it be surprising if we didn't retrace the early 2023 rally in the s&p which we did as of this morning's lows, given everything that's going on right now. i'll also point out this is the way it goes with maybe an abrupt potential end to a fed tightening cycle doesn't always go according to the projected script the fed has done a great job of managing our expectations something above 5% is nest we don't know except in retrospect what the correct rate is the market is rushing in the

other direction to say that immediate issue is everything that's gone on in the last week, is a detriment to growth g to make banks no matter their health, less likely to be extending credit to an economy right now than they were a week ago, and you might actually have some interruptions, you know, in terms of capital market flows. m mortgage spreads and things like that final reminder and i do not think, of course, this is anything like an '08 situation, but the entire time in the first half of' 08 when oil was above $100 a barrel you had people saying how can the fed be cutting. inflation is the problem you had richard fisher dissenting down as they were cutting rate noose the first half of that year because of where the inflation picture was. i want to point that out because it's never a clean call when the fed has to turn its direction of travel >> yeah. thanks for that quick history lesson as well of course we do continue to

watch the financials, in particular, close up today, given that collapse of two big banks. let's get over to dominic chu at hq. >> david, the conversation you, jim cramer, carl and sara were having about where people are trying to find opportunity a lot of analysts who cover these bank stocks are working overtime to figure out, update clients on which ones are still buys and sells. so we'll start with the slate of downgrades over at first republic bank. no surprise there. right. it's become a bigger focus given the bank failures we've seen among the downgrades we're tracking one from raymond james and one from wolfe research. downgrades first republic from a market perform to strong buy, cited a diminished earnings potential given pressure from a shrinking deposit bank wolf research downgrades to pure perform from out perform and cited things with unknowns about how many customers might move their deposits to bigger banks a lot of that uncertainty is playing out. pac west also one of the ones

caught up in the sell-off in banks tied to svb, lost three quarters of its value in three days trading volatility and halts this morning worries mounting over how safe or sticky its deposit base is. analysts at d.a. davidson think it's gone too far from the downgrade, upgrade the stock from a buy to a neutral, cited funding program from the fed right, the program there, also a valuation that is a steeper discount to pac west tangible book value that's a valuation metric. the shares down, but possible buy rating there we'll end on one of the regional players, truist financial shares are getting up to outperform from neutral at baird saying that they don't believe the larger regional bank industry is as exposed and the customer base, in truist home footprint of the southeastern united states is one of the most attractive and stable in america and they also say some regional

bank valuations are the most attractive levels back to the pandemic market low, sara, of march of 2020. there's a sell-off going on right now. the question is where is the baby and the bath water, that sort of thing. >> and then where the fundamentals really. thank you. dominic chu. for more on the svb fallout, let's bring in here post nine great guest, former barclay ceo bob diamond led the bid to buy key assets from lehman brothers following the subprime mortgage crisis and founding partner and ceo of atlas merchant capital. how much deja vu are you having right now? >> you know, it's a bank run bank runs are scary. it was, you know, i think the actions that have been taken by the fed were appropriate i think when you just get to the narrow issue of a bank run, which was the action that was happening, you know, banking and deposits are so much about confidence and then if that lack of confidence gets momentum today and tomorrow and the rest

of the eek, we would have been in a different position. so i certainly applaud the actions that the fed and the treasury and the fdic have taken to kind of stem that, and i think they've taken appropriate measures. >> it doesn't fully appear to be working, though. if the measures were in an effort to stem confidence and ensure uninsured depositors, why are we seeing first republic down 65% >> so i think you're looking at the equity and people are starting to project what's the business model going to be going forward, but i don't believe that regulators in this case the fed, treasury and fdic, will allow other depositors at other banks to lose their money. now, they haven't said that, but the president says we will do whatever it takes. it echos mario draghi of the bank of italy when they were in such a terrible situation, remember, it was after the crisis in 2011 when capital was coming out of the banking system, so i think - >> when he led the ecb. >> job one

right. job one is to stem the bank run and to calm depositors, and then i think there is a step about what are the other actions it will take in the medium to long term but for the weekend, job one i think was accomplished and i think -- i have no doubt that if there was a similar situation at other banks today, tomorrow and wednesday, that they would take the same actions. >> clearly, you know, there could be some overlaps with '08, but there we were talking about a vast number of assets based on a faulty asset, the fact that people were going to pay back their mortgages when they had no ability to do so but, you know, i wonder, something else that has changed is the ability to get your money out, digitalization, you know, is far more than it was 15, 16 years ago. i'm curious to your thoughts about anything we may have learned here in terms of watching something on twitter and saying, that's all i'm going to take, i'm out. >> i don't follow social media so i'm more reading about the

actions of social media, but i'm sure people will think about that going forward and i've heard stories about the percentage of deposits that were moved via the cell phone, for example, but to me, the biggest issue having been, you know, an active participant in 2008, wufds things that the regulators talked about is, the strategically important financial institutions and while nothing today is systemic in the way it was systemic then, there are other proud issues today even before this happened, over 50%, david, of the deposits in u.s. institutions were in four u.s. banks and who thought in 2008 when the regulators encouraged a broader financial services industry, less concentration in the big banks, less, you know, systemic risk, that we would have a far more concentrated banking system in the united states of america than we had then that's the reality

i think we have to be thoughtful here about the value that small banks bring to so many business industries we're not trying to go back to standard oil and jpmorgan. we think one of the great attributes of the capital markets in the u.s. is the diversity, the liquidity, the number of participants, and so we have to balance both of those things i think the role that thousands and thousands of banks in the united states play is very different than what you would see in many economies in europe and i think it's a huge strength of our economy and access to lending for so many small businesses i do think we have to be focused right now on the here and now and stem a bank run, but i think we have to be thoughtful going forward about the implications of more and more concentration on two or three or four banks with the deposits in the united states >> argument was made over the weekend that some data that we don't really normally pay a lot of attention to, commercial bank

deposits, the next rounds will be important to watch. >> yeah. >> how much is on the line on those and what numbers are important? >> so, you know, there's a lot of lessons here. if you go back, carl, and look at early days of covid what's happening? interest rates go to zero. people are taking money out of treasuries out of money market funds an putting it in bank deposits. the bank deposits earning zero and the banks in the case of svb are buying securitys to earn some kind of a spread. those yields were low, maybe a half percent or 1.5% with duration significantly longer than the deposit then rates go to 4 or 5%, and since the banks aren't raising the deposit rate, you know, any consumer who has a deposit is going to take it out and put it in money market fund, treasury securities, something like that. at svb you see a dramatic decline in deposits, but that portfolio of securities was available for sale and more

sticky so this didn't happen in one day. what actually happened, and i think it's another lesson we have to look back on, is that gap, that loss of earnings or the losses, if you will, was growing since the fed began raising interest rates. >> they also moved it from the afs to the held to maturity portfolio so they didn't have to market. >> questions should we be marking these to market and they are marked to market, i'm pretty sure, from a regulatory reporting point of view. >> that's the question i get your point about how we need to have smaller banks and regional banks and they serve a fundamental purpose. and, in fact, a lot of the last few years have been about loosening the nooz around their banks to keep the regional banks vibrant. we end up with risks like this the big banks aren't facing those risks because they have been less regulated the smaller regional banks how do you square what should happen as a result of this president biden is talking about more regulation. >> it will lead to more

regulation, one. i think banks are becoming more utility like sara, i have been saying this since 2008 the larger interconnected banks are more interconnected with government and public policy. we saw it. keep in mind one other thing that hasn't come out yet, and i'm surprised at is, dodd/frank implemented specific rules around capital levels and leverage they were the most aggressive for the larger interconnected banks, but they were also quite strict for the smaller banks svb and many other banks, you know, claimed that they were too tough on the smaller banks, and if you recall during the trump administration they were rolled back we have had a period where had we nod rolled those back, maybe we would have seen higher capital levels and less leverage at some of the banks that are under pressure today and i think that's gone unnoticed. >> we may see some banks choose to try to make an acquisition here or step in for some of

these struggling banks i'm curious, given what you went through with barclays and lehman, whether you give -- what kind of advice you would give in terms of those who would be looking at those assets at this point? >> this is a very serious situation over the weekend and today, so i don't want to belittle that. it does echo, you know, the thoughts back then as you never want to let a good crisis go to waste. if you are a strong bank and you see an ability to grow your institution, if you look at the value of the lehman brothers acquisition to barclays franchise it was phenomenal. and it's allowed them to be the only non-u.s. bank that's truly a -- bank today. it is important for people to look at opportunities that this presents and i do think there will be select opportunities where businesses fit together very well. at the time, david, as you remember, we were primarily a fixed income and derivatives

platform at barclays capital we had not really built the m&a business or the equity business because it was so dominated by the u.s. bulge bracket, so when lehman became available it felt a perfect combination of what we were building at barclays capital and what lehman's strengths were i would say, don't go out just buying things, but will there be opportunities here absolutely. >> one last question on the fed. those who argue that this deserves a pause or maybe a cut in the near future, is the fed thinking to themselves that forces have been unleashed that will slow employment growth and wage growth? >> the challenges here were not caused by the rate increases this has been very well signaled and should be managed by financial institutions having said that, the fed is going to be very conscious to kind of all the variables going on here. the way i would think of it, it's not going to change where the fed is looking at inflation and their role in this

directionally, but if they're right now debating 50 basis points, 25 basis points, then their a going to probably err on 25 basis points. on the margin, they can pause a little bit or they can go a little bit more slowly, but i don't think it will change the direction of travel at all. >> we have to ask you about circle before you go i was going to go there. $3.3 billion it held with svb and then the stable coin that it manages broke below $1 over the weekend. you were going to take this company public as of december? >> yeah. >> and you really believed in this >> yeah. still believe in it. but i think i would ask anyone that's interested in this space go on the website and see what the company has been very transparent over the weekend, very open. what i would say, are we going to have a digital version of the u.s. dollar? absolutely are we going to learn from the power of blockchain technology in terms of allowing commercial transactions between businesses to be faster and to be cheaper

absolutely. >> are we going to do it in a safe manner where stable coins can maintain their stability >> absolutely. and i really encourage you to get on the website it's full of good information. >> thank you it was great having you here today. >> good to be here thank you. still to come, we're going to complee, we're going to checn with two ceos who had their money tied up with svb hi, i'm katie. i live in flagstaff, arizona. i'm an older student. i'm getting my doctorate in clinical psychology. i do a lot of hiking and kayaking. i needed something to help me gain clarity. so i was in the pharmacy and i saw a display of prevagen and i asked the pharmacist about it. i started taking prevagen and i noticed that i had more cognitive clarity. memory is better. it's been about two years now and it's working for me. prevagen. at stores everywhere without a prescription.

i'm frank holland. your cnbc news update. president biden went before cameras this morning to reassure americans that the nation's banking system is safe after regulators took control of silicon valley bank and signature bank he says there will be consequences for people running those banks. >> there are important questions of how these banks got into the circumstance in the first place. we must get the full accounting

of what happened and why those responsible can be held accountable. my administration -- no one is above the law. >> silicon valley bank's holding company svb financial group says it is looking for a buyer or buyers for itself, and its vc arm and investment banking unit separate from the bank itself under fdic control. after shares of charles schwab dropped this morning, the brokerage says clients are not taking out more cash now than they were last month with many customers reallocating a portion into higher yielding cash alternatives within schaub shares down 18%. back over to you >> thank you frank holland. let's give you a live picture from outside silicon valley bank, at least a branch, there it is in santa clara, california the fdic said today or late yesterday depositors will have full access to their money when the bridge bank opens, that is

to bridge what has been seized, take it on and then we'll have regular activity two ceos whose companies had money in the bank. joining us ceo stefan call be and allison greenberg. thank you for being here stefan, start with you, it appears you had more at stake than allison did how worried were you over the weekend and how relieved are you now? have you gotten access to your money yet? >> yeah. i should say this weekend was intense. i thought it was going to be, you know, a nice relaxing weekend with my wife and the kids it turned out to be something very different i have been checking all morning in terms of my e-mail seeing if there's anything from the fdic and silicon valley bank and just a few minutes before joining the show, we just got access we had wired our money out on thursday, but that wire had not been honored by svb. and so we just reinitiated the wires right after i get off the

show i will be clicking a refreshing and see and make sure that money has gotten out of the bank. >> and what, if any, lessons, so to speak v been learned here in terms of from your perspective as a, you know, using that bank as your main area of deposit >> yeah. absolutely a couple lessons the first one, we had kept all of our cash in silicon valley bank because of the agreement that we made with them on loans, right. they basically make you keep all of your assets in their bank when they loan you money we now have, obviously, had decided that we will not make that kind of agreement again with any bank. we will diversify. and we will keep a good portion of the bank in what we call very secure banks i assume silicon valley bank was very secure, but our new bank of choice is jpmorgan chase but we will diversify across multiple banks. >> there's that market gain for jpm.

allison, how did the weekend play out for you >> our story started on thursday my co-founder and i were informed by an investor that implosion was impending. my co-founder and i really just acted as fast as possible. we did withdraw as much as possible from our svb account so what was left was under the fdic insured limit and thank the gods we had a second account, so we actually had a clear place to transfer the money that was our mercury account we have also set up a jpmorgan account. it was a terrifying time and one where swift action was the only way we felt like we were going to secure payroll. >> why did you make that decision on thursday to pull the money? >> i think we are focused on our patients as a maternal health start-up and our employees, and our employees are across the country. they live not just in new york like i do. they live in minnesota, in north carolina, in washington state.

we took the money out because they are our first priority and we do not take risks with our people. >> stefan, what happens now with growth plans and what happens with expansion plans and head count? how much risk do you pull in, even assuming you're made whole here >> yeah. listen, we weren't taking risks before this is a deposit in a bank account. we're assuming that this was going to be kept safe. so we're still on board to more than double the size of the company this year and that's full-on expectations now i should say that late last week i had fears we were going to have to reevaluate and make some really tough decisions and potentially actually have to shut down this week, right but we don't have to we're back on track. i expect everything to be worked out this morning and we'll have access to our capital and i won't have to shut down the company by the end of this week. >> what about you, allison what would happen if you didn't get the access >> we potentially would not have

met payroll and, you know, thanks to having a second account, we would have been able to continue business but, you know, i think payroll for a lot of people sounds like a minor issue, but for us, it is everything it is a contract of trust with our employees. it is our fiduciary responsibility as an employer and what happens now is we say thank you to the fed, thank you to the biden administration, and to yellen. they have proven that they don't just bail out big banks. they bail out entrepreneurs like myself and they save our employees who may be living from paycheck to paycheck, from missing a meal. >> they don't want to use the word bailout though. >> for sure. >> stefan, let me end with you you know, i guess i've asked you lessons learned here, but is any of the sort of criticism of tech

warranted here that you were taking undue risk? >> yeah. this is why i'm frustrated by what was going on over the weekend. it's -- there's this blame that was coming on tech, on crypto. this is not a tech problem this is a banking problem. this is the fundamentals of how our economy works. we expect from a business to an individual to be able to hold our money in a bank and that's a safe place i think the biden administration did absolutely the right thing this weekend this is what the government needs to stand up for. is that when you expect to keep your money in a safe place, we're not speculating here we should be able to have access to our money we need to change the narrative around that. tech makes big bets. in this case, we're good stewards of our cash we're running a good company and we need to expect that we can hold our money in a safe place. >> yeah. hear from both you have. make sure you have at least two account, one may be at jpmorgan. stefan and allison, thanks to you both. >> thank you so much. >> thank you a lot more ahead on svb in

the next hour of "squawk on the street." we've got some good names for you. we're going to talk regulation with congresswoman maxine waters ranking member of the house committee on financial services, also from 43rd congressional district in california plus a check on the regional banks, tim spence will join us as the group faces a lot of selling pressure quk t s anywhere. "sawonhetreet" back in a moment dow up 53 points lomita feed is 101 years old. when covid hit, we had some challenges. i heard about the payroll tax refund that allowed us to keep the people that have been here taking care of us. learn more at getrefunds.com. 92% still active? seems high. seriously? it's just a bike.

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markets not far from the flat line as investors work through the impact of svb. let's bring in bob pisani to talk about his take on the markets. >> the -- i had a book out in october and you know you're in trouble when your best sources call you and ask you what's going on i have not had so many calls from my best sources saying what's going on n a year i want to show you the level cluelessness of the market and it's a sign nobody is sure what's going on. we moved 130 points in the futures overnight from 2:00 or 3:00 in the morning to 8:00 in the morning, 130 points. we actually opened with the s&p going negative on the year and you can see we bounced a little bit, but that's a clear sign of cluelessness the vix was 19 on wednesday. it almost hit 31 this morning.

that is extraordinarily sharp moving and those of you who don't follow this, 20 is the average for the vix. when it gets above 30, that gets into panic levels. you're starting to head towards two standard deviations a little unusual and often buying opportunities in the past. i don't know if it is now. that is an extraordinarily fast move in a short period of time then the 2-year yields moved 100 basis points in a few days i had people like my mother calling me up yesterday saying robert, can i still buy 2-year treasury bonds she's loving these at 5% yields and concerned about that i think the market is trying to signal the rate hike signal is coming to some kind of end or we're going to have some kind of rero recession. people asking the same question this morning then the large regional banks, you asked the right question, never had so many questions from people saying bob, why on earth is zions, key corp, fifth third down 30% the deposits are not at risk at all. can you, plain this?

you can pull out lower net interest income, that's a concern, concerns about the deposit flight risk. one person speculated to me that the stickiness of the deposits was an issue here and the issue is, if you have clients that are big corporate clients or high net worth corporate clients or high net worth individuals, they can move stuff very quickly, much quicker than depositors who are saying -- my mother, for example. that's one plausible explanation. the ipo business, we should talk about this i'm getting all sorts of calls saying the knock-on effects are bad for the ipo business vix at a five-month high and a lot less liquidity for the markets for the second half of the year >> the inability of the clients for silicon valley bank to go public and add to their deposits as opposed to take them down played a role in this. >> absolutely. >> thank you still ahead, don't miss pfizer's ceo

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pfizer announcing its plans to buy cancer drugmaker seagen the price tag, $43 billion. meg tirrell has a special guest for us >> thank you very much albert bourla, the ceo of pfizer joins us now great to see you $43 billion, a huge price tag. tell us why seagen is worth it for pfizer >> cancer is one of the biggest therapeutic areas. right now 1 in 3 people in the world are going to have cancer in their lifetime. unfortunately, the numbers of people affected are larger if not patients, they will be affected as husband or wife, they will be affected as a daughter or son, even worse, father or more seagen is having one of the greatest technologies to battle

cancer they are super charged guided missiles that are targeting the cancer cells and can make a huge difference i would say this is something like the mrna for vaccines but this is for cancer we think it can make a big difference with this technology in our hands and provide relief to the world at the scale that has not been seen before >> you also expect this could contribute something like $10 billion in revenue for pfizer but 2030, contributing to an overall goal you've set, that you've been trying to meet through m&a. tell us what the financial impact on pfizer will be >> it will be very positive, the financial impact on pfizer we should be able to field the gap between 25 and 30. this is where what we're facing,

and 25 billion through m&a until yesterday we had 10 billion, now we have another 10 billion more or less we are 80% towards this goal, that tells investors that our situation in the year, 25 to 30, it's pretty good on the other hand, there are specific things about this acquisition. we can add value to what seagen is bringing. it's more or less a situation like when mrna was in our hands. with our scale, with our capabilities this is the same here. we can achieve tremendous revenue synergies and cost synergies by being able to implement things at scale. the financial terms for pfizer will be very good with relatively low risk profile target >> is this the last large deal we can expect pfizer to do for

some period of time? >> clearly it's a sizable one and we are 80% to the target. we maintain financial flexibility and capital to do other things clearly we have more than enough to complete the remaining 5 billion of acquisitions. we're not picky but picking the right targets. still we can do other investments including our growing dividend that will continue to be a growing dividend and do other things with our capital in the next 12 months we'll focus quite a bit on closing and integrating this company into pfizer so that the success on day one will be given. >> merck was going to acquire this company but feared pushback from regulators. i'm curious what your

expectations are from the antitrust regulatory review here for this deal. >> we think we have a clean case i don't want to comment on merck, but in our case, there's no overlap that should close regularly. the environment is always challenging and we're preparing for it, but i don't expect issues >> albert, how are you looking at the impact on the biotech industry from the fallout from svb? some of the conversations i've been having with folks suggest a lot of the consolidation we've already been seeing in the private biotechs and smaller biotechs may be accelerated by what we're seeing happen peer. is that something pfizer is looking at will that facilitate dealmaking for you going forward? >> look, at this stage, the biotech community will survive this is not about us getting our hands around them, but i'm concerned if a lot of them face

difficulties that were unforeseen i'm waiting to see how these will be resolved i don't think that these types of situations are affecting the imminent targets or acquisitions, or very few, if any. if anything, it will affect science and companies that are not targets for acquisition right now. that needs to be resolved. >> albert, thank you very much for joining us very big day for pfizer. appreciate it. >> big day for cancer patients >> importantly sending it back over to you, david. >> yeah. one reason why they titled their release, pfizer invests 43 billion to battle cancer we're keeping a close eye on first republic, down 75% the broader market

why up banking crisis, hopefully averted on one side. still a concern. on the other, lower rates maybe. two-year, we see the move there. not to mention at least some market participates believing given what they broke in the banking system, the fed may be done at least done for now. let's get over to carl and sara on the floor >> session highs for stocks. i'm sara eisen here with carl quintanilla. we are live from the floor of the new york stock exchange. today, fifth third bank ceo tim spence joins us as regional banks try to avoid the fallout from the collapse of silicon valley bank. and thomas hoening and the federal reserve stepping in. and robert greifeld about the contagion in the markets the president this