from the swiss national bank we take you live to zurich moments. the white house looking to ban tiktok if they don't difficdivest virgin orbit looking to furlough most of the staff and looking for a lifeline. it is thursday, march 16th "squawk box" begins right now. good morning welcome to "squawk box" here on cnbc live from the nasdaq market site in sometimes square i'm kelly evans alongside andrew ross sorkin. joe and becky are both off >> welcome to the show. >> welcome to the -- >> the early alarm how did it go?

>> i thought you were talking about the banking system >> that's the other early alarm. >> how did it go i was going to ask you >> we have a couple of alarms. >> let's check on u.s. equity futures. dow under pressure by 100 points after that and the s&p closed off session lows you remember the dow down 720 points nasdaq finished higher here we have the set up this morning. here is the look across the treasury volatility ha been 2-year treasury at 4.007 rebound above the 4% level still below 5% from last week. the 10-year treasury below 3.5%. just going green on the session. bitcoin. if you told people a week ago what would take place with liquidity and banking runs, i would think bitcoin would be in the red.

it is in the green up 23% this week 24,000 and change. let's talk about describe. it is raising new funding amid the craziness. the payment processor ranking eighth on the disrupter list the company is saying it does not need additional dam to run its business -- additional funding to run its business. this was a big question mark over stripe in large part because of questions going public more importantly, options and tax issues if they didn't in terms of exit of sorts for some of the early employees including the founders this gives them a little bit of room the question is how long is the breathing room this gives them time and they can wait for the quote window,

ipo window tell me when you think it is coming >> i thought it was open for a few weeks and then closing they were talking about ipos >> i don't know if there is a crack in any window for a long time different kind of crack. let's get to the banks credit suisse shares surging in swiss trading and u.s. pre-market after borrowing $53 million from the swiss national bank we say surging up 5%. overseas trade is 21%. here in the u.s. -- it was below $2 yesterday let's get to steve liesman and then geoff cutmore who is in zurich geoff, i hope all is well. we will catch up another time. what is the latest >> reporter: this is an incredible story shares up 40% in europe trade

from the start of trade. we have seen some of those early gains dwindle back we are still into positive territory in terms of the european trade on credit suisse shares let's talk about the snb before i talk about the central bank stepping in with this $54 billion lifeline, let's mention the saudi national bank because the snb saudi national bank is an anchor investor in credit suisse and bought into the bank as part of last year's major restructuring announcement now, in part, the selloff we saw yesterday was about the fact that the saudi national bank chairman was asked about providing further support for credit suisse. he said a couple of things he said no, we're not going to do that for regulation reasons

holding is below 10% if they lifted it, it triggers regulatory oversight from the swiss authorities which they don't want he said no, we're not going to take a further stake he also said he didn't think it was necessary. it was unwarranted in his terms because there was no problem with the balance sheet of credit suisse that is the conundrum here we know credit suisse at the fourth quarter which i was in zurich to report had a ratio over 14% the liquidity capital ratio, if you like, about 150% no hole in the balance sheet this is a different story from svb. but markets are fragile and people are nervous obviously, as interest rates rise, liquidity is sucked out of the system and they are looking for weak hands credit suisse, because it

doesn't seem to get out of its own way, looks like one of the weak hands i have to say, this lifeline from the snb really should draw a line under the recent jitters, effectively the central bank now backstopping what it says is a ce systemically important bank for switzerland. interesting to see what the trade looks like in the near term going forward here now that the central bank put the backstop in place. back to you. >> geoff, is there any talk of what would happen to credit suisse laanalysts in the u.s. ad they have a big presence here. any talk about what the future of that could be >> reporter: there's constant chatter about different credit suisse businesses because the

restructuring program which was announced by the latest set of management -- and i've been covering this story for a long time -- it almost feels like there is a revolving door for the c-suite because of the series of errors and problems and scandals they experienced over the last decade or so you know, the bank is in the process of carving itself up anyway with the boutique investment banking business spun off and security products business being sold. then the key focus now on investment and wealth management a big focus on trying to get a hold of the high net worth in asia and latin america and other parts of the world here. you can argue in the short-term although the story now appears to be somewhat settled by the snb getting involved and providing that credit line, the

longer term conversation will continue about whether this is a standalone bank and credit suisse continues to exist or whether ultimately there is another buyer who comes in and takes parts of the business down the road for the time being, that is not the focus here in zurich >> geoff, thank you. andrew, it is interesting to hear everyone try to figure out what happens the problem being here in the u.s. know your customer and anti-money laundering. these are big hurdles to u.s. buyers of the components which is why -- >> i don't think the country, by the way, is selling the bank the reason why they are backstopping the back is, to them, this is a national treasure that is not going anywhere fast.

what is interesting is and we will talk to steve about this in a second how do we think about the counter party risk which goes away all of the european banks that were nervous about -- i want to talk about this with steve were people nervous about counter party risk or something else in terms of the other banks. credit suisse and all of the other european banks now is this the all clear? i don't know >> right is it just a coincidence that banks are under pressure across the globe? obviously not. >> steve, let's bring him into the conversation steve, what do you think >> i think it is a different dynamic across the u.s. banking system remember in the financial crisis, it was bank-to-bank. the counter party risk discussion is depositor to bank. the question here in the united states is the fed's recent

program made people confident. let's talk about the lifeline from the swiss national bank to credit suisse. it put the fed rate hike back into play next week. if you look at what has happened to the march hike next week by the federal reserve. the likelihood rising to 69% we have a graphic here which is priced in to the futureses ma -- futures market at the most anxious moments yesterday, these numbers were reversed with the markets betting on a pause not the case any more. the outlook remains in very dovish territory more so than a week ago. increased risk in the banking sector a market which had been priced for a 5.50 rate is now below 4%. i have never seen 150 basis points of easing put into the

system in a week whatever the fed is doing next week is looking to undo it in the next couple months the fed could take its cue from the ecb which releases its decision in a few hours and a press conference from christine lagarde. what about the ecb the market had been confident of 50 basis point hike is now 60/40 in favor of the 50 it could be anything different right now, as i speak, it is all about how lagarde and fed chair jay powell play the confidence game do they keep hiking to suggest nothing to see here or stop because maybe there is andrew >> that'ses what we have been talking about, steve we said is badnews really considered bad news? you have to keep hiking to suggest the news is not actually that bad >> i think the reality on the

ground is really what determines it, andrew i'll come back in the next hour and put together what i think is powell's list. his hike/don't hike list we will have a nice list available that i think will be the thinking of the fed chair trying to figure this out. one of the things is the signal it sends it is very important on the other hand, they will have information and data we don't have is money coming out of the regional community banks we don't see that. the only proxy for that, andrew, is looking at the regional bank stocks. >> tease with one piece. the one i want the tease with is how much credibility of the fed matter we heard from a number of guests the last few weeks >> i'm biting my tongue. >> can i throw that -- >> don't shoot the messenger >> i want to throw that back on you. that word credibility. >> i don't get it either

>> no, no. >> to me, credit built is forestalling a credit crisis and making sure the recession is not deeper let's go back to any -- obviously especially 2008. was anyone worried about credibility in 2008? keep it from blowing up. isn't that the only job? do we care pause. what's the big deal? isn't caution more important >> kelly, to be fair, you are talking about a different kind of credibility other people when they talk about credibility mean credibility when they fight inflation. the other credibility is whether or not they have the ability -- sorry, kelly >> the break even. we can show the 5-year they did go up >> that's the point. that's the point when i think about credibility, i look at the longer run inflation heexpectation.

through all of this, longer term inflation expectations remain contained. my knowledge is that's what they only care b.about. has the market traded that the fed would win the inflation fight? if you put up the 10-year treasury, that is the most important sign of credibility out there which is that over this whole process, the market never traded with much belief at all that the fed was going to lose control of long-term inflation expectation. i give you an example. if you look at the 4% yield on the 10-year treasury which is now 3.5% if you thought about a 2% inflation rate mentioned means you have 2% real it was a good buy. that credibility and i could show you an inflation expectation chart. that is the credibility that

matters to them. you go back and you look at what happened to the market before the fed began cutting or hiking and made clear it was going to hike, markets went up. that credibility of we will follow through and rates will rise that's the credibility the fed cares about. the other stuff? a different story. >> steve, you have a lot of credibility with me. we will see you in a little bit. thanks when we come back on the other side, new comments from the chair of the saudi national bank after the interview with sparked the selloff. he said he was surprised about the comment he made to cnbc months before. we'll discuss. later, we hear from congress member ro khanna on the collapse of silicon valley bank you are watching "squawk box" and this is cnbc >> announcer: this cnbc program is sponsored by truist wealth.

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know, it is panic. a little bit of panic. i believe completely unwarranted for credit suisse or the entire market we did have a failure last week. that's nowhere -- nothing to do with 2008. this is an isolated incident regulators cut off the contagion and any possibility of spillover. >> for more on this, i'm excited to bring him back. chief economist and chair of the risk council simon, thank you for waking up early again to talk about what is happening here. is this a one-off event as you heard or is there more going on here >> oh, a lot more going on, andrew i think this concern about what is on the asset side of the bank balance sheet and hold to maturity category which is how silicon valley bank got in trouble. there is plenty of hold to

maturity on the european banks >> when you look at the credit suisse situation as we are trying to revolve that, the government is backstopping that and taking the risk off the table. how concerned are you about the other european banks with spillover? that is something we heard about and the second piece is spillover contagion here obviously, the con damage i don't know -- the contagion we have here already spilled over there. >> the situation in the u.s. is under control at the moment. andrew, the fed's window with the negative haircut is intervention they have done enough to reassure depositors and reassure insurance. the key question is what the euro central bank does the swiss national bank is off the table. you have to prevent it from failing. what is the attitude within the eurozone

this is the obvious fault line in the recent past, andrew this is the concern for the days and weeks. >> help me understand thispiec of it. when you talked about it in the united states and you felt pretty good about where we are with deposits and preventing deposit flight we have implicit and not explicit guarantee on deposits do you think that will get tested >> yes, i think it will get tested testing is the right word. we will see how the authorities respond. much better than the ex-post implicit guarantee which people don't pay. you should have something with proper deposit insurance which covers all individual money and all corporate non-financial sector operating cash. that was cornerstone of the fear of the real economy.

>> how will that work? who with ll pay for it? by default, smaller banks will pay into some insurance program and some larger banks have to do that, i imagine, as well there is a lot of bipartisan support for the bailouts and rescues. a lot less bipartisan support for regulation and the like. >> we can get through regulation at a separate topic. this is paying insurance with $18 trillion is getting a free ride that is not making sense everyone who has a demand deposit should pay insurance the insurance should be the same across everyone. the cap of 200,000 doesn't make sense. we found that out on friday and monday >> how much is the insurance, simon? it is ironic to watch business

catch a-- cash and corporate cah blow up. i moved to a money market fund it is better than getting 50 cents back on deposit. is there a better way of dealing with business cash in this country? if we start charging for deposits, how much do we wcharge does that move the problem instead of dealing with it >> that is a very good question. we under charge for demposit insurance in the country $100 billion backing $10 trillion it is a good deal with insurance premiums of s premiums you are asking the right question for small companies, you want to keep it simple for sophisticated, you hope to

expect in a money market fund or treasuries or daily suite. i think we need to realign it is unfair to give post insurance to the big guys where the little guys have to pay the deposit insurance. >> simon, in 2008, we had shotgun marriages orchestrated by the federal government. i get the sense from the behind the scenes with first republic and the like, there are efforts to try to shore up some banks and some uncertainty around. the question is who should be doing that whose responsibility is that do you think it will happen fast enough this goes to the issue of testing. whether we want the system to be tested or prefer for banks that might have any uncertainty around them that it gets shored

up overnight >> right i think the private sector wants to do deals with concerns, they should get on with it. subject to concerns of the concentration, of course i really don't think the government wants to get into the business of first loss position backing the merger, andrew the fed opened the window. the negative haircut they will lend more than the government bonds worth there is as larry finke said a slow burn. this is monetary policy. this constrains the ability of the fed to demonstrate credibility. that is the key parameter. >> simon, great to see you let's continue this conversation you have to come back. the other question i have is what will happen if all of the deposits are insured, are moral hazard to be continued. >> if your deposits are safe,

the incentive is to make money on the spread sdp >> bingo was his name-on the biden administration is looking to threaten a tiktok ban. we will have the details next. the dow implied lower by 35 points my name is brian delallo.

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the biden administration is demanding the tiktok owners sell the stake in the app or face a u.s. ban that move is a shift in policy for the administration which has been criticized for not taking a tough stance tiktok pledged $1.5 billion to safeguard user data and content. on the news, shares of meta and snap are rallying. meantime, virgin orbit furloughing nearly all employees

and ceasing operation for a week the furlough is unpaid, although, employees can use pto. the last mission failed and the rocket adid not reach orbit. the ceo canceled an appearance in washington at the conference this week. you are looking at one of the spacs on the list. now 57 cents >> it is worth pointing out. when people talk about bankruptcy these are the stories where it is happening where the capital is evaporating. for sure coming up, looking at the dow and s&p and nasdaq up. we talk technicals after the

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good morning

welcome back to "squawk box. here live from the nasdaq market site in times square right now, dow is off 88 points. s&p is off 5 points. nasdaq is up about 30 points. let's get a closer look at technical levels in the market everyone is talking about the 200 days and chris verone is here with us welcome. it is good to have you here this morning. now we can show the 200-day moving average which is fun for everybody. what is not fun is people who don't follow the technicals, follow the 200 day did the s&p close below that yesterday? >> it did. it emphasizes the point that life in the business is difficult when you are below the 200 day. not only is the index, but 60% of stocks are. it is reminiscent of the churn

in it 2001 and 2002 and 2003 that is the story here i think as long as the market is below the 4050 neighborhood, proceed with caution >> it is interesting to draw the attention to the early 20 02000 which is after the dot-com crash. are we heading into the big event or has that happened >> we think about the last 30 or 40 years, the evnduring thesis encouraging liquidity from the fed. i think we need to question whether that thesis is relevant in today's world when we are dealing with inflation at 5 oo or 6 this is a unique environment i'm not sure the old regime, financial crisis, good for

financial assets is how the market will interpret this year. >> where do you land with the credibility issue with the fed what does it mean with the fed >> andrew, it is not what i think. it is what the market thinks gold is answering that question for us gold will make a new high here. >> is there a point in answering the question for us? >> i'm skeptical of the move in bitcoin. i get it i'm not there. i get it i'm in gold. i think we get a new all-time high in gold 2,500 should be on the radar we are almost off the lows. >> is gold the indicator or the 10-year treasury >> i say it is the 2-year treasury 2 is 100 bps below funds ma markets are screaming. there is a tendency to say that

is a good sign curve is deepening no, that happens late in the cycle. think about the example of nikkei in 1991 or nasdaq in 2001 i'm skeptical of the idea that cuts down the road is a panacea for everything else. >> the question is if jay powell says we are just putting our pens down. do you think the market says that is fabulous and i'll rip on that or will they say this is ter terrible if he is stopping, it must be so much worse than we know. >> i think the short-term response is the former that you get some relief rally. i'm reminded when fed paused in late 2000, you got a big rally for a couple of months it was the fed cuts down the road that got you in trouble again.

i think the pauses is viewed as bullish. i think the cuts are another problem. we know the history of fed cuts and markets. you don't really want to be over your skis long when the fed cuts >> goldman is how we gauge the appro proxy. they had been bullish. outlier on the street. they had the optimistic call only a 25% chance of recession this year. that put them out to the upside. i like to translate that what powell may be thinking what do they do? they are up to 35% they are catching up quickly looking at the leading indicators again, from the markets lens, is that pricing in higher chance of a pause and we have to raise the question what comes after? >> the action of small caps over the last week, i think it is suggestive that the generosity of strangers and easy availability of access to credit will tighten here in the

smallest most marginal companies have been weakest. that is a change if you remember when rates came down in october, november, december and january, the marginal stuff rallied that is not case a lot of the weak consumer stuff. small caps i think the market is saying your odds of recession are to go up because of the availability of credit is burned. >> that is why the credit bu ability question with. inflation is going to react with a 12-to-18 month lag. >> absolutely. it goes back to the message from the 2-year treasury. the 2-year treasury calls the shots in the business. at best, pause then what is on the other side >> the credibility piece is what muh muh muhamed el-erian says all the

time. >> i don't think the market cares if the fed is right. tell us what you are going to do >> by the way, i am somebody who believes in transparency you think i would argue in favor of tell us what you will do. i don't know the policy of tell us what you will do is like the last call from a decade. ben bernancke. i have my own questions. >> i'm with you. >> we look at the dots and say we followed the dots and we blew up. >> it is encouraging risk taking you wonder if that is the best approach the only asset class in the world about to make a new all-time high is gold. that should tell you what you need to know. >> good to see you coming up, the money moves the wealthy are doing to protect their money. talking about where they are taking and stashing the cash not under the mattress robert frank has a breakdown of

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welcome back to "squawk box. more fallout from silicon valley bank we told you about the limits of fdic insurance coverage. maybe with the implication that everything is covered. robert frank is here with the money movers that the wealthy are making with accounts over the $250,000 limit robert >> andrew, investors and family officesmaking moves after the svb fallout. shifting money out of the smaller banks and out of cash balances they are asking advisers a lot

more questions about their cash risk >> the questions that i was getting directly on saturday and sunday from clients was how is my cash? how is my cash deployed? what is it in? from very sophisticated investors and families who never thought about that question before >> advisers say big investors were moving cash from checking and savings accounts into higher yielding treasuries and money markets. that exaccelerated this week sic those are not on the bank balance sheets and not at risk they are moving money away from banks and into custodial accounts schwab saying clients moved $2 billion a day of net new assets into the firm this month custody accounts avoid the bank risk and allowflix flexibility

you can read more about where family offices are putting money in our latest family office investor interview which is out today on cnbc pro. andrew >> robert, you mentioned at the tail end here about folks keeping cash in some of the banks as a requirement or a gentleman's agreement or contract to capture lower interest rates on mortgages and other loans. do you think that practice is going to change either because there will be a business pressure to change that practice or regulatory pressure >> i think it is going to change and it is because of client pressure you mentioned earlier in the week the practice at svb where the vcs were getting and

managers were getting getting preferential treatment a lot of clients weren't aware of the risk of that quid pro quo until this weekend now they are aware and push back and realizing they can get low interest loans, not as low as a year ago, but from many banks. 4,000 banks eager to lend the wealthy money. they will push back more against that requirement. >> what about the regulatory issues around it i'll give you an example maybe this is the mark zuckerberg example corporation has an ipo has business the bank that underwrote that ipo says, on a personal level, we will give you a better rate on your mortgage whether those two things shouldn't be connected, but are.

>> yeah. i think unless it is a requirement. a contract requirement as part of the role and incentive as opposed to keep a balance here it will be tough to regulate >> robert frank. thank you for the report when we come back, former four-star general stanley mcchrystal advises companies on managing risk. what he is telling his clients right now. we're back after this. with models that fit any lifestyle. and innovative ways to make your e-tron your own. through elegant design and progressive technology. all the exhilaration, none of the compromise. the audi e-tron family. progress that moves you.

welcome back to squawk box our next guest is a retired four star general i want to bring in general stanley mcchrystal right now served as commander of the u.s. forces in afghanistan now founder and ceo of the consulting group mcchrystal group.

i'm curious what you're telling your clients amid the risk on the business battlefield, if you will. >> thanks for having me, an trt -- andrew i've been out of the military for 12 years now and had the privilege to work with talented ceos across all kinds of businesses they're worried. they're worried about things that are unpredictable they're worried about pandemic this week a banking crisis maybe war in asia. cyber attacks. accidents. you name it, they worry about that but when i talk to them, there's something that's deeper that they worry about and that's a phenomenon where they can operate themselves as a leader, or businesses as well as their predecessor did or as well as they did a year ago. and yet the outcome isn't the same it doesn't work like it used to.

that's frightening and upsetting. and it's because the operating environment in which we have to function is fundamentally different. we found that in war and finding it in every specter of business. look at silicone valley bank they failed because they had questionable depositor base and investment problems. but the interesting part to me is, once the word started about the bank, how quickly the run went it was empowered by digital technology >> and so what do you tell them? you're right, the battlefield is a different battlefield but it's still a battlefield nonetheless, it seems like. >> you can't just field ground balls. you can't just respond to crises you have to prepare to respond and that takes a little bit of foresight and some investment in time and energy and sometimes money. it's things like getting your organization to communicate all

the time, like your firm's life depended upon it, because it does do things like question your assumptions, there are drills you can go through, war games you can conduct. do detailed after action reviews after things so you're focused, instead of the threat over the horizon that you can't predict and you don't know what it's going to be. strengthen your own organization because your ability to respond is what gives it a capacity to deal with the range of things. >> i'm fgeneral, i'm going to me this complicated because every company is trying to grow growth is life when you have a finite amount of resources and everything is coming at you. you have to say do i want to prepare for the worst outcomes and spend lots of times putting together plans and preparations and other things that for some people may say this would be

inefficient because i have no idea if it's going to happen or not. or if i have this finite amount of resources i need to throw it at the business as of today of what we're trying to do because i'm trying to get through the day, frankly, and how you're supposed to balance the two things, the i need to grow desperately versus i need to protect? >> on the one hand there's the idea i will focus on the business and hope that things don't go badly and if we win, we win big. on the other hand there's the idea you prepare for the worst case you have to have a balance my argument would be you have to run your business and you're always going to accept risk. but the reality is, if you strengthen your organization's ability to respond, their confidence to adapt, their communication, they're going to be much more responsive when that crisis does come. >> is this advice -- do you give the same advice to a start up

ceo as you would a fortune 500 ceo that might have large hr departments and lots of people around, maybe too many people but people that can do the work to do the preparations is it a different calculus >> it's a different conversation not a different calculus, a big organization you have a tremendous amount inertia. you try to turn the battle ship it's hard to turn. so the leaders give direct guidance, focus, these are the priorities i want you to go at they're relentless they don't dilute their message talking about 15 different things. >> general, thank you for your advice this morning and also, of course, your service to the country. >> thank you. coming up greg fleming joining us on the volatility in the banking sector

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♪ good morning welcome to "squawk box" here on cnbc live at the nasdaq market site at times square i'm andrew ross sorkin becky and joe are off today, but that's not stopping up, look at what's going on. the s&p off 2 1/2 points, the treasury talking about the credibility of the fed and what they're going to do next with everything we've seen in the banking sector here in the united states and europe, we'll talk about credit suisse in a moment that's moving markets here thand there. the two year screaming at us the two year at 3.995. look at crypto, talk about risk on, risk off looking at bitcoin back at $25,000. meantime, just mentioned credit

suisse shares surging right now in swiss trading after the company said it would borrow nearly $54 billion from the swiss national bank. it comes as shares plunged to an all-time low yesterday when saudi national bank said it wouldn't pump more cash into it due to regulatory restrictions now the supervisory authority saying in a statement that, quote, credit suisse meets the capital requirements on important banks. so has the tide been stemmed and janet yellen is testifying today before the senate finance committee later this morning, making comments about the health of the nation's banking system in written testimony >> good morning, janet yellen will offer comfort to americans that their banking deposits are safe in testimony today before

the senate finance committee in just released prepared testimony, yellen has this to say. i can reassure the members of the committee that our banking system remains sound and that americans can feel confident their deposits will be there when they need them. this week's actions demonstrate our commitment to ensure that depositors' savings remain safe. now janet yellen is going to be testifying on the hill today this is part of an ongoing budget committee hearing on the president's budget plan. that's not what we're expecting to hear about we also expect janet yellen to say she credits the biden administration stepping in quickly last week, pointing out customers were able to access all of their money in their accounts on monday morning and emphasize no taxpayer money is used or put at risk here because the money is coming from the deposit insurance fund which

raises money through fees on the bank still, yellen is sure to face questions today from senators about the prospects for additional contagion and drawn in whether the overnment's action was a bailout or not. this hearing, at 10:00 a.m., is about the president's budget proposal you can expect at lo of questions about the politics of the biden administration's spending priorities. back to you, andrew. >> we will see what she says and what happens next. thanks now for what it means for the fed. let's turn to steve liesman. we have the break even charts this morning. >> yes, we do. the lifeline from the swiss national bank puts the rate hike back into play yields weren't sent higher across the united states though they remain in stress territory. the probability of a hike next week by the federal reserve

ridesing to 75% this morning 25% chance of no change at the meeting. some of the most anxious moments yesterday these numbers were reversed with markets betting on a pause. jay powell could take his cue from the european bank, they're having a press conference in a few hours, the market seems to be backed in pricing expectations for a 50 point bases. here's a guess of what factors powell may be weighing next yeek week why hike inflation is on the line monetary policy and financial stability should be separate things in the fed's mind they want to handle them in different ways don't hike, credit retraction

usually inflationary, a pause would give time for more stability to take hold he'll worry a pause signals to markets that things may be worse than they believe. the last hour, inflation fighting capability. do they believe the fed is hitting the 2% market? even when inflation surged near double digits, look how flat expectations were by the university of michigan three year horizon, they remain relatively anchored but close to 3% the fed could enact what you might call a hawkish pause to maintain credibility pausing to give the markets time to stablize with a firm call to resume. >> hawkish pause we'll see if our next guest agrees steve, thank you very much. >> for perspective, i want to

bring in greg fleming. president and ceo of rockefeller capital management the former president of morgan stanley wealth management and was in the middle of the 2008 financial crisis at merrill lynch when he helped orchestrate that transaction with bank of america. good to see you. >> good to be here >> where are we? what do you think where we are in this crisis right now if we are in one. >> people ask about deja vu on multiple topics. and there are some things similar to '08 and then there are major differences. i think at a macro level, '08 was a much bigger event with the credit problems and ultimately hundreds of millions of dollars written off on credit assets on the credit side of the equation, before that was up and this is not that this is more -- i mean, we have a fed that has raised rates at a record pace, historically and

the amount and that's created this asset liability mismatch at different banks. that's what's going on now it's da it's a different game this time. when i get the deja vu question, no one knows this more than you because you had the treatise on the book you read. when we built rockefeller we wanted it around the advice. i remember the town halls when i'm talking to advisers and people at the firm talking about trading and derivatives and risks. rockefeller we're not a bank, we are a safe haven for clients and assets and that's different for me. >> having lived through it and seeing what the fed and treasury department has done, do you say the dominos have stopped do you think this guarantee on deposits is implicit/explicit, won't be tested/will be tested

is going to work what's going to happen here? >> the government and administration did a good job last weekend with what they needed to do to start to get through this there was the whole tiktok around the weekend what was similar to '08 everybody in the know wondering will the government act and go far enough they did a good job stepping in on monday on insured and uninsured deposits and the banks at issue for me i'd like to see it go further now and maybe they need congress for this and that becomes an issue. >> you think they're going to need congress for which part >> we have 17 or $18 trillion in bank despoits across the country. the cap is $250,000 per account. i think that what should happen from a legislative standpoint they should insure deposits. >> across the board. >> across the board. >> corporate >> you might have a vceiling bu

you could top it if i feel from an fdic standpoint if you go there, you won't have bank runs, the fdic won't have to be tapped -- >> but then you add into the equation how do you deal with not just the moral hazard but the potential risk taking by the banks who say to themselves, i have no risk anymore >> but let's talk about the moral hazard for a second. whose is it? many if there's moral hazard, isn't it the bank with all insured deposits that would have the greatest incentive to take risk that's not what happened here. what's also similar to '08 is the hunting in the market for who's the most weak next and the proxy is uninsured deposits. you can price the deposits, if you have a model that seems to be more aggressive from a bank standpoint the fdic can say

we're going to charge more we have a higher percentage above a million dollars, above ten, you could set a ceiling but the bottom line, what's happening to the banks today and the rating agencies jump in, you have deposit risks so now the institution has bigger challenges that was another parallel to '08. >> you don't think you have to regulate the smaller and regional banks in terms of capital ratios and the like more similarly to what worked, we call the big banks and therefore if you do that, they're going to scream and holler and say look, the cost to us and therefore to the consumer are going to go up immeasurably because if i have to keep more money sitting on the balance sheet, i'm lending less out, therefore the interest rate the big banks will hardly loan you money for a mortgage as it is. >> first of all, i would extend the regulation i think both politically and the bank regulators themselves i

bring it back down and set the threshold lower. whether it's 50 billion or maybe you treat community banks differently. but big regional banks should be -- >> should we treat community banks though we all put these community banks in this special category as if they're a privileged universe. >> but who else is going to extend credit to the community. >> i get that. >> it depends on the business mix. if it's a very different model maybe you treat them differently but by and large you have regulation -- this is back to too big to fail, the phrase you copyrighted now. out of '08, where are the deposits going now to the big institutions regulated tightly, the stress tests are real that these institutions go through. nobody knows that more than you all. that's the government. >> 100%. >> do we want a country with ten

banks? >> i'm desperate to keep the community banks? how do you keep the community banks and regional banks healthy but also in a similarly regulated way so we don't have potential runs. >> you insure all deposits or most deposits and price different. you can have property insurance on a $250,000 apartment, ten of those, but you can't have it on a $2.5 million house we should price the deposits according to the model so you cover all deposits and stop bank runs then. then you extend regulation, as you said it could be across the landscape. i look at community banking models that don't need stress test. >> do you think there would be bipartisan support we have great bipartisan support every time we need a bailout in this country but every time we need to pay for it or deal with the regulation, it's like, you

know, a massive fight. >> it's hard to argue that the regulation that came out of '08 for the big banks hasn't worked. you can look alt it in this situation now -- >> i don't disagree. but you remember the fight it was a two and a half year battleground. >> either party saying today that the big banks aren't appropriately regulated? i think everybody is happy there's less risk in those institutions or perceived risk so i think it would be a fight now, no question everything in congress is a battle these days. i think if you took these two steps, it would take the pressure off the regulators too. so they want to see this stabilized, the contagion stop. >> there's a handful of banks, first republic being one, someone on the west coast, smaller banks with uncertainty, especially the last week or two, do you marry them together, with

others do you think there's a push behind the scene -- >> first republic is back to a $22 equity because now they're sending these confusing signals to the market how it's involved in some kind of -- >> let's go back to '08 again on a fair parallel. remember '08 bare sterns sold to j.p. morgan. >> yes. >> and a sigh we took care of bare sterns. i remember in a meeting in may of '08 with treasuriry leaders and other ceos and presidents of these organizations. they say it's okay, the economy is okay we're through it and boom everything happens, you have the market that hits the low. my point is, these things bleed. you can set up a buyer for one institution or another you need a broader solution. the underlying economy, there's a lot of positive here, this is not '08 but you need a broader

solution to this thing >> i don't disagree with you i think part of the problem, if you remember, was, you know, baresterns happened and then lal leman was out there lingering and everybody dragged their feet dn -- >> we raised capital at merrill but the assets m kept coming down behind the scenes, they're prodding these organizations to take steps to get to safety, whatever those steps are. >> if you had cash over $250,000 in a bank that wasn't j.p. morgan, bank of america, what would you do >> well, we sweep our deposits through our custodian fidelity and take advantage of 250 per bank up to 10 banks then the

overflow goes to siffy banks but the reality is there's no reason to be there with broader insurance from an fdic standpoint you can take this risk out of the system forever deposit insurance started at 2500, 5000, 20, 100, 250: would you invest in the smaller banks today? if your clients called you up and said these things look like they're the greatest fire sale of all time. is it the greatest fire sale or -- >> you get down to business model right away and you want to look at the business model of a bank no reason for a bank that has an otherwise good business model to be at risk because there's a run on deposits that's driven by fear and people being uncertain. a lot of people are uncertain about how much am i covered by how widely understood is this 250 cap, is the count --

>> if there's no risk why should there be a return? why are we creating a model there's not a risk but the banks are going to go make what they want to make there's all these unrealized losses sitting in institutions it's the trigger of deposit, maybe commercial real estate next why should bank executives be compensated what they are, and equity, which then goes to zero -- these institutions seem unsound from that point of view. >> you keep the risk to the shareholders and the executives in the system. they have done that here they didn't bail out the stockholders and management. >> they're not calling anything back, though. >> they may get to that. >> when you have contagion, this is another analogy to '08 and you have another fear in the system you get behavior that's irrational you can have deposits coming out

of a bank when you look at the business model, the risk isn't here as long as there's not the deposit follow on. but the contagion and the fear that causes the flight, destabilizes an institution that otherwise has a business model that is a good business mod. you see that, kelly, if any of the banks have to get sold, there are buyers for a lot of these banks because they're good business models and solid banks, away from the fear induced by the contagion. >> i'm curious what you think of two things the customer base, mostly venture capitalists and the like who screamed fire in a crowded theatre last week and what their responsibility is or isn't i made the argument this entire thing was one of the most remarkable unforced errors of our time there was a marginal amount of smoke in the corpner of the theatre that could have been doused with water and yet the

whole thing imploded because of a lot of mistakes made along the way. >> if you listen to what becker said that day when he said we don't have anything to worry about unless everybody panics. what happened then, '08 we heard speeches like that and institutions were at risk. everybody is saying i'm not going to panic i just want my money what happened to them was the unforced error that's been in history for so long. asset liability mismatch this is not about a major credit hole like '08. this is asset liability mismanagement. >> assess goldman sachs as the adviser on one side and the firm that bought the assets on the other, how do you feel about it? >> there's a lot that's going to be said and looked at about this situation historically there could be another andrew ross sorkin book on silicone valley bank. many errors on the part of

management and on the part of a lot of people associated with this let's talk about, this bank served a part of the ecosystem it's an important part of the eccsew ec ecos ecosystem. they weren't dealing necessarily directly with the institutions they were reaching through the to the capital companies these firms are building that's part of the american capital story so somebody has to step into that now. >> greg fleming. if the thing in finance doesn't pan out he has a chance in politics as well. >> or tv. >> i'm staying out of both of those. >> great to see you. still ahead, shares of facebook and instagram are growing on the report the president may ban tiktok other social stocks are on the move meta gained about 2% right now futures, taking a turn lower we showed the stress across

regional banks "squawk box" will be right back.

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the u.s. unless bytedance divests the stake. snap is up 7%. meta up 2% right now alphabet fractionally positive let's talk about what this can mean with mark these gains they're ho-hum should they be larger? >> there should be gains how large they are is hard to tell you also had a bump up last week in snap stock by about 15% on this news. i think the assets that would most benefit from a tiktok ban would be youtube shorts and instagram. i think snap may -- i know there's a huge amount of demographic overlap between snap and tiktok but the use cases are different. snap is a communications tool whereas tiktok is much more of an entertainment tool. that's why it's more instagram and youtube shorts but it's probably good for these

stocks it's an unfortunate development but good for these stocks. >> there's been a lot made of the fact that tiktok today is not what it was a year ago how much is it done? is that organic because people had their fun with it and perhaps are moving on, if that's the case, are they moving on to youtube, reels, and the others >> i don't think there's clear evidence that people moved away from tiktok. it's just that the growth sort of plateaued in terms of the number of users and the amount of time people spebtnt on tiktok three yearsing, people were spending the same amount of time on tiktok as facebook. then it went up. and facebook continued to rise but not at that level. so it had the huge spike and plateaued off the spike. and in the meantime tiktok introduced to the world, short

form video, which is highly popular, entertaining, and somewhat addictive i think what meta did with reels is captured that snap did it with spotlight, youtube with youtube shorts. it's worked well for all three platforms it's boosted engagement across all three. people like short term video. >> even as they're fighting, perhaps winning this round, mark, much has been made of the fact that a lot of top down loads, and other chinese apps that i'm less familiar with, what do we do about other chinese popular apps do we need more disclosure in the app store where the country of origin is, to make it clear to people, do they raise security risks, is this atiktok situation or expect more to come? >> this has been a generous case this is the first time we've seen a media asset that's potentially right.

no other assets have been banned out of china just for the record, going the other way, u.s. media companies have had very little exposure in china. largely banned you can recall the controversy when google was essentially kicked out of china 15 years ago, now this is an interesting reversal. i don't know about other assets. tiktok was tiktok was -- has been extraordinarily popular it's rare to see an asset like this come out of nowhere and reach that 1 to 2 billion user level. not too many assets like that. they've been banned in other countries like india i think you'll see similar actions -- >> as we speak the uk is begbeanning tiktok from government phones.

>> but tiktok came up with a change, an offering that people liked. and it caught these companies like facebook, google, snap unaware. but they have repivoted, come back and it's been good for their business models. >> mark, do you think and do you believe, there's a way to separate the businesses meaningfully some people say separate it. and other people say they don't trust that it could be >> i think technically it would be very hard to do that. so i get the concerns there. you pretty much have to force independent ownership, and even there you have to wonder, we're going to get some testimony next week and that's going to be a grueling session i wouldn't want to be the ceo in that session i think it's very hard to separatethem the political and the national security risks underneath this are very understandable. >> mark, is there any backlash that you are imagining as a result of this for other tech companies, u.s. and western tech

companies that effectively could get the receiving end of this from china >> i think they have gotten the receiving end of this from china, over the last 15 years the inability, go back to yahoo, e ebay, the inability for these companies to succeed in china is limited. amazon, too, companies that just misexecuted in china but for the media companies where there's the greatest social and political sensitivity, i don't think these companies had a chance to meaningfully succeed or compete in china so this is a turn around of what western media has experienced for the last decades. >> thank you, mark we appreciate it >> thank you, kelly. coming up, ken rogoff and julia coronado joins us to talk

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the european central bank still leaning towards a half point hike later this morning. the fed has yet to indicate whether they'll continue their plan or pause following the collapse of silicone valley bank joining us is ken and julia, welcome to both of you ken, do you think they should hike or pause here >> it's a knife edge call. i probably think if it was right today they should still hike by a quarter point.

but obviously they can say we're going to wait and do more later. you can call it either way >> which would be a hawkish pause as steve liesman said. talk about the contagion risk here do you see it? have authorities stopped the problem in its tracks? p. >> not at all. i think we're in a world where inflation is higher. real interest rates are higher china is not going to be the growth force that it was it's not easy to have a soft landing here it's just surprising something hasn't happened earlier. so i think they did a good job in preventing bank runs, and credit both what the swiss national bank and what the fed did. but, you know, they can't necessarily fix the deeper problem in some bank's books it's not just banks and the economy more broadly

we're in a situation where things are going to break. >> ken, i'm trying to figure this out in my head. if you guarantee all the deposits, implicitly, explicitly, whatever, do you think there's the political will to regulate it on the other end at the smaller banks and do it in a way it doesn't cost those banks their livelihood in the end but not create the moral hazards that everybody would therefore take >>i think the answer to that is -- >> i think they're in a hard place. >> go ahead julia. >> julia and then ken. sorry. >> i think the answer to that is yes, you can be sure all the feds are checking in with the banks they size, having conversations about the stability of their deposit base, the hedging strategy for their

portfolio. we're not talking about a credit problem broadly. with most banks this is just about book value -- market value losses and their held to maturity portfolio that's a manageable problem with liquidity and supervision. a tighter bank credit is an outcome of this, part of a nonlinear part of monetary tightening that's shown up with a lag -- >> just to kind of clarify, do you think they should pause next week >> look, i think, given the positive market reaction to the swiss national bank's actions. if markets -- that's a big if -- if they remain reasonably calm over the next several days, i think it would actually be reassuring for them to move

ahead with the 25, not a 50, a 25 basis points rate hike. which is a sense of normalcy we know they need to get rates higher the data have been telling them that's the direction of travel still. so i think it would actually be, potentially, more confidence enhancing than a panic pause >> ken, what do you think? i want to come back to you about this issue of how you actually would manage both the moral hazard, the risk taking, and what kind of bipartisan support you might need for regulation for this to work properly? >> i think what you said, andrew, captures it. it's hard to do without ultimately putting the banking system into a coma yeah, you can have more supervisors, more regulation there's a balance. i think in a perfect system you do have these crises sometimes

after all, silicone valley bank massively screwed up, nevertheless, for decades had helped support innovation. so there was a supervisory failure there, a management failure. and i agree with julia you can do better. but i think it's pie in the sky to think you can really fix things the whole idea that they were going to manage a major bank default in some orderly way. they couldn't even do it with this bank. i think it's a difficult balance. and as i want to say, there's, you know, even if they stop bank runs, there's a lot of potential losses out there on the real side of the economy that are going to commercial real estate, other places, they're going to fall on some bankbooks there has to be problems ahead it's amazing more has not happened yet. >> have to leave it there. thank you both appreciate it. when we come back on the

other side of the break, congressman ro khanna is going to join us we'll talk about silicone valley bank, it's in his very state you don't want to go anywhere. we're coming right back. ip will be one of partnership and trust. i am a fiduciary, not just some of the time, but all of the time. charles schwab is proud to support the independent financial advisors who are passionately dedicated to helping people achieve their financial goals. visit findyourindependentadvisor.com

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let's look at regional banks first republic bank off a 25%, looking at pretty much across the board some negative numbers there. pacwest in particular, off 15% european banks off of what's happening, credit suisse, credit suisse now up about 5, 5.5% after the national government there putting up 52, $52 billion to support that firm congressman ro khanna is joining us his district the heart of silicone valley. we'll talk to him right the break. and more on the credit suisse lifeline and what it could mean for banks here and abroad. "squawk box" coming right back at morgan stanley, old school hard work meets bold, new thinking,

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welcome back to "squawk box. our next guest represents the heart of silicone valley and is calling for more bank regulation in response to svb's collapse. i want to welcome ro khanna from california nice to see you, at the table no less. >> r good to see you in person. >> we've been talking all week about svp and what needs to happen next. before we get to the regulator side because there's a lot of finger pointing. i'm curious where you think this lands. i've taken the position, you can disagree with me at some level this entire episode was this remarkably unforced error mistakes made by the management,

and no sympathy for that but at the same time, this was like a little -- i don't want to call it a fire there was a little bit of smoke in the room, probably doused with some water but people screamed fire in the theatre and the everybody ran for the exits. >> i put most of the blame on the bank management. they didn't hedge the long term bonds didn't have the financial sophistication that a lot of banks in new york have and they were vulnerable to very large deposit holders. bank of america, for example, has millions of accounts and many under 2500,000 this had a few accounts that were a concern susceptible to a bank run >> what do you think about the venture capitalist and silicone valley community that is talking about personal responsibilities and switches gears when they need help? >> well, that's not a

consistent and that's why i think the depositors need to be protected. i was joking with someone saying now they're advocating for a guarantee of depositors, the next will be a guarantee for health insurance and turn them to advocates for medicare for e health insurance this shows that the libertarian philosophy does not work there are times you need government involvement >> at the same time, if we do guarantee all these deposits, what it does for the type of risk taking as a result of these guarantees is that the unexpected or unresolved issue on the other side of this in. >> here's why i think we needed to guarantee the depositors. you didn't, you'd have four banks in this country. everybody would be pulling their money out and putting it where it is more or less guarantee

we have about $10 trillion in this country that is under fdic, we have about 8 trillion that is not. the question is how do you raise bank premiums in a way to fund that 8 trillion and not have that fee fall on the ordinary deposit account holders but have a fee on larger accounts i think that's something we need to work for. >> so up could charge people a little bit more to keep their money in the bank. they might not even if you charge them that fee, if you guarantee it, you don't solve the issue of how banks are going to run their companies. even in this case they could have bought bills instead of longer dated bonds i don't know how you change that mishap >> look, svb lobbied not to have

stressed tests and liquidity tests. they need to be open to more regulation, to have basic stress and liquidity tests. let me guarantee up there is no one at svb in the executives who are thinking great, i got away with this. that are going to face investigation. rightfully their careers are rund i think most regional banks are not going to want to go bankrupt >> first republic is down again. it's it's around $23 a share. there are reports about it potentially being involved in a sale can you comment on what it and wouldn't be appropriate. >> i believe what secretary

yellen and powell did was extraordinary and i do think it going to i wish they had gotten there saturday but they got there in time on sunday evening they said if you have a trebry bond, we're going to value it at luck wudity. i do you this that that's going it be enough to stop some of the bleeding and they deserve a lot of credit in how they've handled it. >> why isn't the market giving them more credit this morning? first republic shouldn't be down another 25%. >> on monday it came back up and people are anxious you had silicon valley bank collapse, signature collapse there is a an understandable anxiety. >> should the guarantee be expanded to, for instances are municipal bond are we going to have to see this

guarantee expant as the types of assets that are pri rb attic >> i think everything has to be on the table my sense is this should be enough mile-per-hour view seeing how secretary yellen and secretary powell took action is they will expand when necessary when someone is having an emergency, what you have to do is stop the bleeding everyone is saying what principal but ultimately you got to stop the bleeding >> i was the person one in the problem is we've become a nation of bailouts and at the same tim we're unwilling to pay for them. so we socialize the losses, we privatize the gains, the folks who are making the most money

ultimately don't pay for it on the other end and then we sit around and say we don't have enough money to do anything. until you can until you get to a point where the pop. >> i think it fair and i think are a lot of people that share your sentiment we need to make sure clearly hear that the shareholders and executives know there's a claw back of the executive's bonus. the second thing is we have to have more regulation we can't have deregulation. third, have a higher premium on the higher premium accounts. companiescy they will pay more to make sure they have more insurance. >> but go, tiktok. what do you think? >> i'm pleased they've given the chinese companies a choice,

either sell and what is the relationship between u.s. and china as a function of this decision >> i just led a delegation it taiwan we need to make sure they have the defense but at the same time need it affirm the status yet. >> and dope it apple, in your state, we have a problem here. this isn't. >> they can't. i wish they had more focus on their domt production, they're so this is starting to rebalance

things >> and i'm assuming your constituents like mark zuckerberg are very happy today. >> why is that in. >> if tiktok gets shut down or sold, who is the winner? snoo ib hop. i mean, there could be a new entrepreneur ready to pild that. independent going toful you on instagram and twice tw. coming up, peter krause, global banking fierce, we'll break into it. and housing, import prices, we get it all the 8:30. "squawk box" will be right back.

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good morning credit suisse shares the day after the tumble they say they'll borrow billions from the swiss national bank and coming up, we'll speak with a former fed governor.

and tiktok's time in the u.s. could be growing short reports say the white house is demanding their owners sell their stake or the app or face a possible ban details straight ahead as the final hour of "squawk box" begins right now good morning and welcome to "squawk box" right here on cnbc. we're live at the nasdaq site in times square take a look at u.s. futures that the hour the dow off about 100 points, the nasdaq down, s&p 500 up about 6. treasury yields, that's what we've been focused on the past two weeks, maybe the past two, three years even >> the latest on credit suisse,

which has come under renewed pressure investors cheering after credit suisse said it will bore up up to $54 billion from the swiss national bank. in the last few hours, he said he was surprised from the fallout from his comments, said they weren't new and said the market was skittish. extended hours trade, ccs shares up about 6%, coming off a 70% decline over the past year >> meantime the white house want the chinese owner of tiktok to divest their shares or could face a ban in the united states. this is in response to the chinese foreign ministry saying the u.s. has not pro viewed that it is dangerous but it went add

and since it's already working on a third-party monitoring system, it's something they've been working on for quite some time >> i mean, forever >> they say it's a different algorithm, it's all very separate the question is do you believe them i want to get over to mike santoli. what are you watching? i think i know >> it's kind of interesting with all that's going on that you just ran down, the broad market has been somewhat resilient, actually up in the s&p 500 although that almost entirely the mega groups are showing themselves again here is the wear and tear of the etf of this ranges that been here since last may let's say.

ten months ago is where we've been locked in, 4,300 at the high in august, 3,500 at the low. you take a zero off and up get the etf price and 3,900 is right in the middle of it. we've used up moegs of the cus -- most of the cushion, if not all of it. a lot of folks pointing out still at december lows european financials, this white line here, vastly outperformed in the last few months as yields in europe went from negative to positive and they averted a recession, really rebuilt a little bit of a head of steam and will outform the u.s. financial. the xls would look even worse without berkshire hathaway the pure banks themselves have really suffered here and not

made any real ground in a couple of years take a look at a couple of different types of bellwether. now freeport mcmoran this this greater run, this is mostly copper and gold but essentially have given it all back whereas amd a little more cyclical, disinflation-type story has now ramped -- almost made it up here. i call these the sistine chapel ceiling charts where the fingers are reaching out to meet each other. >> i'm glad you noticed the copper angle people were watching the spread by copper and gold, which got kind of wide point being we heard it from our

technicals guest last hour >> it's completely kind of flipped. before it was non-gold, kind of industrial commodities, kelly, obviously copper but also the steel stocks. the materials area is very sensitive to slight changes in expectations for the economic pace globally. >> yesterday at the lows the worst performer was energy, materials and then the financials mike santoli, thanks >> good morning. we don't like to see these regional banks under pressure. what's your reaction to that >> it's been a complex environment not to saythe leas and you've been discussing it for the last hour. i think that the banking sector worldwide is going to be under

some pressure until there is some clarity with regard to liquidity concerns and in europe with regard to both counterparty risks and is that net interest margins that european banks earn on dough posits is shrinking that's having a very negative effect on equities in european banks which had a significant increase in the last six to nine months. >> right by the way, some have argued the european banks are in better shape on that front. long story is the structure there more favorable toward safer and higher earning banks, or is that a laughable idea >> well, it 's not laughable

the banking system is complex. european banks have a relatively stable loan pook and a pretty large whole sale book that sits on top of that some p that's made up of dough posit and whole thereto sale borrowings that's been new for the bangs in the last nine months and nas been driving them that's lookly going to lo slow doun p -- that's likely going t slow down. in the us you don't have that structure, you have citibank and jpmorgan and they run much more industrial-type businesses where they're lending, borrowing deposits, some wholesale funding but their capital requirements have actually moved them away from lending and are margin

buying securities and producing the same arbitrage that's why capital has grown as much as it has >> what does it mean for the future of lending, extending loans throughout sort of the small and regional bank customer of america who else is going to serve these communities? when people have tried to start a business in sort of -- if you try to go to chase and open a business account, good luck to you. there's a reason why the big five, they can't serve the entire country if it comes down to that and that's all that we have, there is going to be a knock on gdp effect >> kelly, you need regional and large banks. we have those. we don't want to squeeze regional banks out of business, we don't want large banks to take over business because they won't service the community.

what the fed did this weekend i thought was exactly what their tools provided them to do and exactly how it was designed to deal with it we are not going to guarantee uninsured deposits, that's a moral hazard and we're going to wipe out equity and note and bond holders if the bank management does a bad job. we need community banks and we don't want to merge nominee large bank we probably need better regulation -- not regulation but testing. but it not going to -- >> think i what the government was trying to do was create an implicit guarantee that deposits were safe and effectively were guaranteed the $10 trillion may already be guaranteed, the 8 trillion is

not. implicitly they said it is >> andrew, they did exactly what they should have done. they learned from '08. you sat there, i was in the meetings they did exactly what they should have done they said for uninsured deposits, you can get your cash, which meant that the fed was going to stand by the bank in regards to liquidity and if need be we'll go further but this edi - they did not say they were going to insure uninsured deposits they did exactly what they should have done and they are keeping the bank system standing if you listen to yellen's comments, that's exactly what she said that's what we should have you cannot have this moral hazard where you insure everything if you're a manager of a bank and you tell me i have a guarantee, i can raise the interest rates

that makes no sense. >> that's what a lot of people think we have right now. appreciate it. >> coming up, we're going to look at the health of other big ll sbas. foowquawk pod on your favorite podcast we'll be right back.

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welcome back to "squawk box. financial markets trying to find their footing.

we look ahead to a fed meeting next week or the fed meeting >> hey, andrew bank failures show it's time for the fed to pause, maybe even cut rates. the whole point of raising rates is to cool things down and get less money gushing through the economy. one way to do that is to get banks afraid to lend silicon valley bank took in a ton of deposits and locked that money up by buying too many bonds that take years to mature. then as the fed quickly raised interest rates and the economy slowed, depositors had a lot more money to put into the bank and pull out a lot more, which was a problem because the bank didn't have it this the safe so we got a bank run.

rate hikes are pressure on the company. if the fed raises rates again wednesday, more surprising cracks will probably appear and it might be the kind you can't fix with weekend rescues, andrew >> hold on can the fed in your mind just pause the rate hikes just because banks are feeling pain didn't powell say that pain was part of all this and isn't his credibility at stake >> well, andrew, on the other hand these bank problems aren't a reason to stop hiking. maybe it would go a quarter point next week but not stop because the banking system overall is healthy are there educations that looked bad in a tough fed world yes. what did we expect, that every institution was perfectly disciplined on the way up? there's a certain group of stock investors saying the stock was going too far since the first 75-point basis hike.

tight market suggest maybe the fed has been a little fast and furious but not quite thelma and louise a couple weeks ago we were heading for a soft landing nobody likes pain. this is what jay powell said this is going to hurt me more than it going to hurt you. he said higher interest rates will bring some pain to households and businesses. these are the unfortunate costs of reducing inflation but a failure to restore price stability would mean far greater pain >> what do you really think? >> i really want to know from folks are we already seeing a tightening in the availability of credit to small businesses, right? because that's the signal, i think, on whether financial institutions are doing the fed's job for it that's my question right now if we can start to get a gauge

on that -- and i'm sure the fed has access to that kind of information. just we don't. >>. >> thank you >> coming up, are banks outside credit suisse safe and healthy and more on the federal reserve rate hike decision with dan tarullo, all coming up stay here on cnbc. every day, millions of things need to get to where they're going. and at chevron, we're working to help reduce the carbon intensity of the fuels that keep things moving. today, we're producing renewable diesel

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welcome back to "squawk box. some of the other regional banks of near overnight lows as for treasury, it's been all over the place in the past eight days, is it? it been a long week. the 10-year yield 342. the two-year back under 4% at 3.9% bit coin about a 2% rise is the latest >> credit suisse and first republic bank sharply lower this week in the wake of silicon valley bank's collapse joining us is chris whalen that's the question of the morning. how much should we be concerned about these other banks, chris >> well, it really depends on the institution but basically

the fed has caused a large unrealized lost to be embedded on the balance sheets of many banks, and i think they are going to have to go back to the drawing board and understand that they can't raise rates much more you know, when you have a bond market and a mortgage market that is concentrated as much as it is today because of quantitative easing, you can't raise tlrates that much or you make everyone insolvent. this is bond market 101 but apparently the board in washington did not see this. so now they do >> so you point the finger at the fed for this >> oh, yeah. you can't manipulate the bond market and change the terms of interest rates and raise interest rates 500, 600 basis -- >> to think this was not coming, a lot of people are very angry at the fed, i don't understand why people are more angry at the

fed as they are at the leaders of these banks who knew it was going to rain and didn't bring umbrellas. >> you can't blame the bankers >> you can't blame the bankers >> no, because the government is manipulating the market. the bankers have to manage their institutions mostly in a shorsh short-term sense i'm not talking a silicon valley bank that was a hedge fund in drag. >> hedge fund in drag. i like it. why >> why did they go mortgage backs? they knew the company would have a bad year they said the fed is going to pivot, let's load up on mortgage backs and hit one out of the park that's not the way you're supposed to run a bank they deserved what they got. then you look at signature, reputational risk, crypto, the whole bit, started a run

very different sort of situation. but for most banks, they did the right thing, they bought risk-free securities and then the fed buried them. i think elizabeth warren is absolutely right to slam powell. she's absolutely right. >> let me ask you about first republic bank this morning because even though other banks see modest gains, first republic is down almost 30% and we have these reports about a possible sale what was the problem here? and what is the solution here and what do you make of the response by authorities this week and to some extent dragging this out >> first republic again, different story, big muni book, number one it's not a particularly strong performer in terms of profitability. it's high touch, high expense asset manager. i think they will get bought the u.n. they have, the client, is very attractive the bank itself is to me one of the examples of a business model

that flourished over the last ten years during a period of benevolence from the fed, but these business models may not do so well. >> what is the probably limb wit - problem with the muni book we're talking about muni bond prices that fell less than 10% year to date we had for selling pressure last november why would their muni exposure be problematic here >> when you buy maturity, you buy them for credit. you're not going to hedge it the muni market has been trading very strangely over the past couple of years, as you probably know again, banks make choices about assets but i think the real reason that first republic's in trouble is they're just small and the short is focused on this many. that's really the bottom line. it it's not a strong institution compared to others they're in the asset management

business you may see jamie dimon or even schwab take them off the table. >> if you had more than $250,000 in cash at a bank that wasn't one of the biggest in the country, what would you do with the rest of it >> at the moment depending on what it was for, if it was for my business, for payroll, i would look very hard at moving it this is the problem. these little banks got a lot of business from companies over the last few years because companies want service they want someone to talk to you would be surprised how many mortgage companies are using signature for things like escrow payments and things like that. they're fine signature is operating today under government control but everybody else at that size is at a disadvantage because businesses are taking their money to jpmorgan. >> chris, we'll talk to you soon >> have a good day >> up next, macro, jobless claims we're focused on.

they had that big pop last week. was it a one-off and we'll talk to dan tarullo. very much looking forward to his appearance stay tuned you're watching "squawk box" on cnbc

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welcome back to "squawk box. s&p's trying to go green looks like that's where the future are, up a fractional. most importantly jobless claims, housing starts, import prices and more, the dow is down about 42 points in anticipation of that nasdaq has been leading all day with a gain. let's get out to rick santelli at the cme in chicago. good morning, rick >> reporter: good morning. as you put it, there are a bunch of numbers let's start out with initial jobless claims last week we popped back above 200,000. not to be this week. under 200,000. 192,000. that is the lightest since the last week in february and it does underscore how tight the labor market is. and if we look at continuing claims, they popped above 1.7 million last week. back under it, 1,684,000, and we

could see import prices d down 1/10 of of 1% and strip out petroleum, down 0.4 of 1%. that's the biggest month-over-month negative change since july of last year. if we look at year-over-year import prices, they were down 1.1, exactly as expenses and export prices up 0.2 year over year export down over 0.8. starts have been negatively effective interest rates this month already started the improvement, 1,450,000 on starts, seasonally adjusted annualized units

it's much better than what we were looking for 1,450,000 actually is the best number going all the way back to september of last year permits 1,524,000 much better than the 1.34 million we were expecting and philly fed now here's an interesting one. we have six negative consecutive month over month changes in a row. this makes it seven officially, minus 23.2, minus 23.2 and last month was 24.3 it still unrevised after all of that, kelly, we haven't seen much movement on the interest rate soud -- side ten-year note hovering at 344 and the jobs report was february 3rd. if we look at preopening stock futures, they haven't budged

much either. they're down a bit on the dow futures. i expect we'll have a big day. with the time change we haven't seen what e.c. garden is going to do and that's why i think the markets are so tame at the moment back to you, kelly >> holding our breath. looks like the increase in claims might have been a one-off of teachers who can draw claims while not working. philly fed leading us one way, jobless claims leading us the other. what do you make of it >> the job market won't quit kelly, what i'm thinking about this morning, you know that phrase how the impacts of the interest rates on the economy are long and variable? i think the story is that they're variable within industries they hit different things at different times. the manufacturing sector it seems to be hurt by it they same time you look at the

housing sector and it's in and out, up and down there's all kind of things happening. and now we get the variable lag of those heights hitting the banking sector i'm interested this morning to the textent to which it seems t me, kelly, the issues we've had at the banks are all about maturity mismatch and not about the underlying collateral and that the government i believe is in a very good place to solve that maturity mismatch in the banking system so that credit suisse, for example, can go to the swiss national back with good collateral and do that maturity transformation whereas if there were questions about unde underlying collateral, that would be a greater save for the

government >> joining us is former federal reserve governor daniel tarullo. before we hit the question of what the fed should do next week, i am curious whether you think the current banking system today is safe and how it compares to the period that you were regulating back in 2008 >> andrew, i don't think there's any question that the foundations of the banking system today are much, much safer than you reported on and i observed in the fall of 2008 there's obviously questions about earnings potential in a number of banks for a number of different reasons, but in terms of capital levels and the overall soundness of the institutions, it really is just a very different ball game than we faced 15 years ago. >> and so if it is a different ball game and you're the federal reserve, how do you balance and think about both whatever you think the credibility of the

federal reserve is in regard to raising interest rates but raising those rates relative to the position ability of putting the banking system under some more strain? >> well, i think, you know, the report you just got from rick i think underscores the dilemma that the fed is in for next week on the one hand, they were leaning 50 it seemed to me based on what had been public live s pu publicly said, the incoming data and the like on the other hand, what has happened just in the last several days is i think going to produce a significant tightening of financial conditions. and so in some sense what's happened is the equivalent of a federal fund rate increase and thus i would think that the fed could be in a position certainly to only go up by 25 but actually to justify a pause not because of anxiety about the stability of the banking system but in

recognition of the fact that we have had some tightening and that tightening is probably going to play out in the future. you know, the data rick just gave us is backward looking, not forward looking. >> how much responsibility -- you've seen a lot of finger pointing >> dan >> go ahead, steve >> oh, thank you andrew, sorry to cut you off there. dan, i want you to wade right into what is an increasing political battle over bank finances and bank regulation the bank policies -- you put out a research paper yesterday that said that silicon valley bank would have passed the stress test that it was exempt from under the changed banking regulations in 2018. does that mean that it is not an issue that those regulations were loosened or is it an issue in your opinion? >> well, steve, i think that the debate that's raged in the press and in the public about whether

you can trace particular changes to silicon valley's particular situation misses a bit of the point. i understand why it's relevant but, look, the 2018 legislation was premised on the notion that banks between 100 and $250 billion are not systematically important. well, what did we just see this weekend? i think we saw the government essentially saying that as a group they are systematically important. the potential for depositor runs is the classic systemic concern. also, if you just look at the real economy, that group of banks accounts for substantial portions of commercial real estate lending, of consumer lending, of residential mortgage lending. the premise of the 2018 legislation i think was mistaken >> that's a fair point, dan, but yet it seems to be true that the tests the government would have

run would not have found it, raising the question are the tests flawed are the tests really looking for this issue that arose at silicon valley bank, which was that they had this immediate demand for cash that their safe securities could not fulfill? >> i think that's a different question, steve, and a very important one. if -- i'm fully prepared to believe that had silicon valley been the actual test last year rather than the dry run that it would have done fine but look at the test the stress test over the last four or five years has become increasingly predictable the stress test was pos tu lating a big decrease in interest rates because that's what a severe recession would bring on there was no alternative scenario looking for an increase in interest rates such as was done seven or eight years ago. so i think you're probably right that the stress test would not have singled out silicon valley,

but that's this stress test. and it may point to -- >> that seems like regulatory malpractice. here you are at a moment where the one thing you can predict is interest rates are going to go up and you don't stress the banking system for higher interest rates >> i think all of this underscores the importance of having a non-predictable stress test and one that uses multiple scenarios because we don't know what the source of stress is going to be on the system a year or two away from where we are right now. and i think, you know, i notice that the fed this your is moving back towards using a second scenario it doesn't count, in quotes, but they are moving in that direction and that's an important change i think >> you've seen just the finger pointing all over but in

particular at the federal reserve arguing that it is the fault of the federal reserve that the banks went down and at least some of these smaller banks are challenged do you buy that? >> most of the time when the bank fails, principal responsibility lies with the management of the bank weep need to start with that proposition. the supervisors cannot -- even the best supervisors cannot be a shadow management for the institution. having said that, it does seem to me like there was very likely a supervisory failure here i mean, the supervisors are supposed to be looking at the liquidity profiles of banks outside of the specific rule that they're intended to meet the liquidity coverage ratio when you see a very high proportion, 85 to 90% of your deposits are uninsured and thus

runable, that should be a warning sign the biggest warning sign, i think, is the quadrupling in size of this bank to $200 billion over the course of just a few years. you know, historically and any time a bank rapidly increases its activity in a particular asset space or its overall size, there's a pretty good chance it's outstripping its risk management capacities and i think we saw that here not with the asset side of the balance sheet but with their funding. >> steve >> it's an issue of whether or not -- talk about this issue of whether we ought to be insuring deposits greater than $250,000 kelly had this interesting idea if we raise the costs of insuring the deposits, we drive them out of the regulated system years ago i raised my hands at a press conference you were at and i said, dan, we put all these

rules in ap rules in place and what's going to happen and you said it's going to drive out the capital >> do i this nk this is going t be an issue but people are going to have to start thinking about the business model of these mid-size reasonable until baba -- regional banks it become clear that diversification and economies of scale with digitization are becoming more important. that puts a squeeze on the general business profile of a smaller regional bank. so either they're going to to find, as some community banks

have, find niches that allow them to prosper without the economies of scale or we're going to have to ask ourselves is this sustainable business model? and i do think that the issue, the potential for insuring deposits more broadly ought to be on the table but that's going to be a difficult discuss because, as you already indicated, it's not going to be something that's done for free, as it were there would have to be some compensatory change in regulation and those who want to go down this road are going to have to think can we have sensible regulation, somewhat more that we have now, while still giving banks some assurance about the stability of their deposits >> it's not idiosyncratic to silicon valley 50% is the number of deposits. it's just the way that it is quick question first republic, pac west, wednesday alliance, these are live wires right now, dan.

so there is an opportunity right now if there were mistakes made over the weekend to try and resolve them first republic shares down 33% again, a new overnight low and what then is the takeaway for people who might be working on resolving these issues that are still live wires, so to speak? >> el well, if they're live enoh it's very hard to do certainly in the short term. how are you going to change a funding profile in 72 hours? that's going to be difficult i think a little earlier in your program you were discussing the availability of fed liquidity and i think that's why the fed set up that special facility over the weekend >> you think it will broaden out? >> the facility? >> yeah. >> the facility i any ithink isg to be available to anybody that wants that term funding, has the collateral and it pretty attractive in the sense that you can put forward your collateral and get funds at par, even if

the treasuries you're holding are depreciated. i do think that -- and i gather today we're going to see the first report on the usage of that facility. >> and other collateral that has so far not been covered, do you think that's the next step here? >> more like normal discount window collateral? >> yeah, reminiscent of pandemic era programs >> that's going to obviously depend on what transpiring, you know, where things go, how many banks are under stress and i think importantly whether the profile continues to be, you know, some combination of heavy relines on uninsured deposits, a non-market to market sale portfolio and probably some business concentration to this point the banks that have been truly under stress meet that profile. the banks that have seen equity price declines are much broader but i think this is an occasion

for everybody to say what else is going on in the banking industry that may impair earnings over the next six or seven quarters >> yeah. >> dan wiel, steve, i want to thank both of you for helping us through this morning >> bloomberg is reporting that some eu banks could be vulnerable shares of credit swuisse rebounding back to over $2 a share. jim cramer is coming up with his first take on the trading day still ahead. stay tuned, you're watching "squawk box" on cnbc ♪ to guide you through a changing world. ♪

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the fed won't be raising rates because it's on the other hand, if the fed raises rates even in the face of this by 25 basis points and says we still could raise more, then that's, like, wait a minute, you're sort of caught between a rock and a hard place. financial conditions have really tightened, but you still have inflation. it's not clear either move is good >> that was investor steve eisman made famous by the book and movie, "the big short. jim, in light of what we heard now from this bailout, effectively, from swiss national government, really, how do you feel about european banks? how do you feel about american banks this morning >> well, look, i think the european banks are all -- they're very, let's say, they're

not systematically important they are these countries we have 5,000 banks. they have just a few banks per country, so i think every one of them is a candidate to have maybe a tarp even. i'm not worried about those banks, if only just because they're national banks i thought that credit suisse would get a bailout. i shouldn't say i'm not worried, because i'm worried about everything, but they have federal money. everybody early -- there were a huge number of people that came on air the other day and loved first republic because it was a great franchise in the '50s, so i think this is one that is a marquee name they do have a lot of good clients. they did lend against securities that are not public. they did get that big line of credit this weekend. could the comma be crunched in a deal i think that's what people are saying i think that's extreme but this would be -- i don't know how many you're going to crunch before you realize you have to protect the depositors >> what about jay powell

jay powell next week how do you put all this into the mix for what he should be doing or not >> well, i mean, i think that the wrap is that if he doesn't do the quarter point, it looks like he's panicking, so i think he can do a quarter point and say, at this point, we do have to wait, because we don't want to be the unintended reason why more banks go under. i think that people would like that >> okay. jim, we will see you in -- >> it's to the upside for people who are short right now. risk is to the upside. >> jim cramer. >> i think this is a very important moment, but it will be a clearing event for everyone that's so scared >> we will see you in just a couple minutes "squawk box" coming right back with what you need to know ahead of the opening bell.

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welcome back here to talk more about potential bank fallout from the collapse of svb is julie beal from cane anderson it's good to have you here this morning. markets waiting on the european central bank for sure. we're stepping in front of that a little bit, but as you survey the landscape, see some regional banks still under pressure, but the nasdaq holding up relatively

better what are you you thinking? >> overall, this is a time where investors need to take stock of their holdings and think about, do i have the right quality names to weather this kind of a storm? it's very unclear to me how this bank fallout is going to reverberate. i think, obviously, our largest banks have been amply stress tested, but the regional banks, it's a little bit less clear you could have pockets, i think you could continue to see pockets where they have been impacted by crypto or certain types of lending, and that has me concerned as an investor, i've never been very interested in banks it's really hard to differentiate if you're a bank, and you have this mismatched duration, which is really starting to hit right now, and frankly, i'm just -- i'm too dumb to read those financial statements i'm a cash flow gal. >> it raises the question of, can anybody really get to the heart of the complexity? i think someone yesterday on our show was highlighting that morgan stanley is trading at the same price it was 20 years ago, so it's not like you've really missed out either by focusing elsewhere. so, what is that elsewhere right now? where do you feel with looming

recession probabilities, like i said earlier, goldman up to 35% this year, where do you feel more comfortable >> what's been nice is you had a selloff in some of the higher quality names and they've been for various reasons so if you think about the covid fallout, i would think of a name like west or zenta that benefitted from covid revenues, but this core business is still really strong, unlike, say, peloton so, i think there's opportunities still in quality businesses you just have to be really picky, and i would focus on companies that existed in the last financial recession so that you can look at what the historical financials were >> interesting that kind of removes a large segment of the market, actually. what about energy, where this was supposed to be one area kind of benefitting from supply-demand imbalance, russia war in ukraine, china reopening, all the rest of it, and yet crude prices have been disappointing. >> it's been interesting because it's not just the story on the

demand side but also the supply side for us as investors, we're long-term investors, and so it's really hard to get excited about anything in energy when so much of it moves based on g geopolitical events that you absolutely cannot predict. for us, that's not a space that's very interesting. >> and we have the fed coming up, which casts that shadow across all of the markets. weigh in, if you don't mind, on the whole debate should they or shouldn't they hike next week >> i think it could spook the markets if there's no spreainterest rate increase. we thought we were going to be up 50, so i think a 25-basis point increase makes sense something that wasn't reported yesterday, the gdp forecast out of atlanta rose to a pretty healthy level and the labor market just isn't cooling in the same way they would like shelter is still very hot and will take time i think chair powell talks a lot about the crude tools they have, and i think they have to use them

they can slow down some of the quantitative tightening, but other than that, i think they need to hold the line. >> i'm looking at andrew i want outrage i want him to say, no, julie, no, that would be -- >> that's what i can't figure out. are we raising interest rates just to raise interest rates because of our credibility, and if we say we're not raising interest rates, everyone says, okay, then something really bad is happening is this like a pretend situation? where we pretend these things are happening that aren't really happening, or is that the right thing to do? >> i think if you think about the fed, there's a dual mandate, and that's towards employment and inflation, and inflation is still running too hot. it's uncomfortably hot, and i think we all kind of understood that it would be very hard -- it would be easy to get from 10% inflation to about 5% inflation. it's going to be hard to get down to the 2% inflation, so i think the risk of stagflation is really present in their minds, and so, for them, they would like to have as much ammunition

in terms of interest rates to quell inflation and then have the ability to cut i mean, they've certainly been very good at cutting in the past >> okay, julie i want to thank you for joining us this morning, appreciate it very much. we've got a quick check on the markets before we end and pass it over to the guys on "squawk on the street. dow off about 140 points i want to thank you for hanging out, more than hanging out it's been fun. appreciate it. make sure you join us. "squawk on the street" begins right now. ♪ good thursday morning, welcome to "squawk on the street," i'm carl quintanilla with jim cramer and david faber. futures a little wobbly overnight with the ecb on deck in a few minutes the snb lifeline to credit suisse, yellen on the hill, goldman raising its recession odds and a mixed bag of data today. our road map begins with credit suisse, the embattled lender receiving a lifeline from the swiss national bank. >> the