sure that the reason -- >> yep chris -- >> the regulators were able to say it's going to be okay because they probably had bids in hand for the bond portfolio >> chris, i want to thank you for joining us we're up against a hard break. got to hand it over to our friends on "squawk on the street." thank you, though. >> markets are lower, lot of angst going into this weekend. join us next week. "squawk on the street" is next ♪ good friday morning, everybody, welcome to a final show of the week for "squawk on the street." i'm david faber with sara eisen and mike santoli we are live from post nine at the new york stock exchange. jim and carl both have the morning off. let's give you a look at futures. of course, as i said, as we get to the final trading day, 30 minutes from now, is when we begin, and it looks like we're going to have a lower open our road map this morning does start as it has all week with the banks. first republic getting that $30 billion deposit lifeline

svb financial files for chapter 11 bankruptcy. plus, treasury helping organize the first republic deal in a meeting with jamie dimon, ceo of jpmorgan, we're going to discuss what the deputy treasury secretary, wally take a look at fedex surging ahead of the open. the company hiking its 2023 earnings forecast boosted by ongoing cost-cutting efforts we're going to start with the biggest u.s. banks moving to rescue first republic, $30 billion in deposits, a somewhat unusual plan in the sense of, it's not about providing more capital to the bank, which it may well need it's not about buying the bank or its bonds or anything else. it's simply about putting more money in, in order to create more confidence, and of course, many saying, sara, this is simply deposits that, in fact, fled from the likes of svb or

first republic or some other regional banks, went to the biggest banks, and now are finding their way back but a significant sort of vote of confidence from those banks and a nice reflection of the willingness to cooperate to try to put first republic on firmer ground we're going to get to the research in a minute, because a lot of it is still questioning whether, in fact, that ground is firm enough for this important bank that obviously does do so much in the mortgage market for high net worth individuals and the like >> a kumbaya moment for the banking industry that inspired confidence for the entire market yesterday, but that doesn't have appeared to last and we're getting into this familiar pattern where it's another day and another sort of innovative way to -- i don't even want to use bailout, because that's strong. rescue provide some rescue or troubled lifeline to the troubled bank du jour >> we may not be done with any of them.

the two that continue to be the focus are first republic, symp stock of which looks like it's going to be down again, after battl rebounding as much as 40%, and then after reports on this so-called rescue plan, was up 12% or 14%, but given the research this morning, i mean, you got wedbush saying there's no residual value in either distressed m&a sale or receivership you have atlantic equity seeing the need for a $5 billion capital raise should they want to get become to the tier one capital ratio typically of 8%. these guys borrowed $109 billion from the fed discount window at one point last week -- or this week >> so, the deposits gave a buffer you know, all it really enables first republic to do is to deliver the withdrawals that might still come in other words, it doesn't -- first of all, it's not a scalable response. if there are other institutions, you're not going to have a consortium of other banks come

and, one-by-one, start to redeposit the money. it doesn't speak to the equity value that might be left here. you have svb filing for chapter 11, so there was no transaction that fore sstalled that eventuality. >> i think that's an important point, because nobody stepped up for the so-called franchise value of svb and now it is essentially going to be selling itself in pieces or however it can, but the fact that they did choose to file bankruptcy as opposed to finding someone to step in, even for a dollar a share, or even taking after the marks were done is -- >> why is that because the government didn't want the big banks to buy it and get bigger? >> no, it's because clearly, after you take the marks, there wasn't enough value there, and so that's not a great sign in that you didn't see anyone step up i'm hearing, you know, signature bank may end up being a different situation in terms of at least people looking at that. kind of don't talk about that one as much. it's significant, obviously, a

move by the fdic to take that into receivership on sunday. but on svb, it's sort of an important point to note that nobody did step up they are in bankruptcy now what that means for the likelihood of any other banks being willing to do so should there be other failures is unclear. >> i think the problem, mike, is you get notes like this, you mentioned the wedbush notes, the deposit infusion will not solve the long-term woes maybe it will stabilize deposits, but the bottom line is increasingly, these solves, these rescues from governments, central banks and fellow banks, are looking like the band-aid solutions. when we came in on monday, you might have thought this would stop the bleeding, the fact that the fdic and treasury guaranteed all the depositors, but they didn't do it for all banks, and they didn't do it explicitly, and so there are still questions about whether something's going to have to get done. it does make you wonder when

we're in this period of turmoil, the weekends are very important. work all weekend, trying to figure out what's happening behind the scenes. not sure what we're waiting for this weekend, though, because it's not like there's another domino that's waiting in the wings, like first republic was last week, although there is still a lot of nervousness >> there's a great deal of nervousness. there are real questions, again, about the ability of a bank like first republic to come anywhere near the earnings power it once had is certainly in question and whether it has to raise capital given the hole in its balance sheet that we have talked about previously this weekend, guys, the one name that i think is actually in focus is not in this country it's cs, it's credit suisse. hard to get a lot of information, at least for me there was a decent flow coming, and it sort of stopped, which may be indicative of something but will the regulators take more control there, i think, becomes the real question, and will it be soon?

you have the swiss national bank, obviously, come in with the potential lifeline, so to speak, in terms of over $50 billion in liquidity, but you know, i do know for a fact that banks across wall street are trying to get the advisory business for whatever's going to happen there, because you can imagine there's going to be a lot of different things coming off of that, so a lot of potential advisory work, but you're probably calling on the swiss regulatory authorities as the potential payer of those fees we'll see where we end up there. credit suisse, not going to fail it will never be allowed to fail, but will it be absorbed, continues to be the key question, mike >> yeah. i think the big issue from a marketwide perspective is you can't prove with any level of confidence that there isn't going to be another name that pops up tomorrow so, until you get a stretch of time where it seems like deposit flight has slowed down, and you're not having people reach for liquidity this way, you're going to be a little bit

twitchy, and i think the market is not going to be able to necessarily gain comfort in the sector, but there have been times this week when the market has traded as if, look, it looks like we've walled this stuff off, and it doesn't seem to be spilling out we have the discount window borrowing. we'll see, really, whether that was precautionary or desperate >> i know. >> based on the issues >> we haven't even talked to sara about the fact that it was basically qe, in a sense >> the balance sheet expanded. >> the balance sheet went up >> that was more than half of what they managed to tighten going into the year, and now they've got a fed meeting next week where they have to talk about some of these financial risks. it's a lot to talk about, and on all of this right now, we've got a key news maker for you we're joined first on cnbc by deputy treasury secretary wally adeyemo. thank you for joining us from washington just on this deal we were talking about that came together between treasury and 11 big banks, to get deposits to first republic, can you tell us a little bit about how that came together behind the scenes >> sara, i want to be clear that

while the secretary did talk to jamie dimon about the deal, it was the banks that came together on their own to demonstrate confidence, not just in first republic but in the entire banking system, and then working as a consortium of the biggest banks in this country to demonstrate that not only regional banks but community banks in this country are a safe place to put your deposits, we think, was an important step in addition to the actions the government took over the weekend to provide more liquidity for those banks and to resolve two banks in a way that made sure that all depositors were made whole. >> but we were just talking about it, secretary adeyemo, measures to try to shore up confidence, and yet, there are still questions. are all depositors, uninsured depositors in the u.s. banking system protected right now >> sara, let me tell you what we've seen we've seen that over the course of the week, deposit flows have stabilized in regional and small banks, and in some cases, have

modestly reversed, and this was due in no small fact to the fact that the way we resolved the two institutions that failed, using the systemic exception to demonstrate that we were going to protect not only insured depositors but also uninsured depositors in providing liquidity to banks in order to meet the demands of their customers. ultimately, the president has made clear our goal is to protect depositors to make sure they have the money they need to run their businesses and make sure their families are taken care of. >> but i guess the question becomes, what next what if there's another bank look, we've seen a domino effec already. it hasn't been ring fenced by svb or signature, as you were hoping, so is the presumption that if another bank runs into trouble, their depositors will also be made whole >> so, sara, what i'm saying is that in the data that we've seen over the course of the week, we've seen deposits stabilize in small and medium-size banks and in some cases -- >> first republic just had to have a $30 billion infusion.

it's not stable. >> so, sara, you're right that the big banks in this country provided $30 billion to first republic in order to put them in a position where it was clear that they had the money to meet any demands by their depositors, but it wasn't an infusion just in first republic. what these banks were doing was sending the show of confidence from these biggest institutions in the entire banking sector, which was important because it was important for people to see that your money wasn't only safe if you sent it to a big institution, but it was safe if you sent it into the system. we welcomed that move, and we think that, in addition to the moves that we've already taken, have put us in a position where you've seen stability in terms of outflows from some of these banks. >> you know, some people, secretary, have talked to me about the bondholders, for example, in svb or signature concern there about regional banks, community banks' ability in the future to actually sell bonds. in other words, you've got to keep your cost of funds as low

as you possibly can. if you crush the bondholders or continue to, you raise costs for these banks, and some wonder about their own viability in our financial system in the future because of that. how do you view these continued, you know, dissolutions, so to speak, to the extent that if we continue to see the bondholders taken out at, you know, pennies on the dollar? >> as you know, our resolution pr process is very clear in this country in terms of the way that people are paid back as assets are sold, but i want to be clear that the fdic's goal is to sell those institutions, and they have actually opened up a bidding process, both for signature bank and for svb, in order to sell those assets the goal ultimately is to do what is the least cost for the american people, and we know that the least cost is to try and sell these institutions as quickly as possible, and that's what we're doing >> you know, i wonder, in this entire situation, whether some

believe more regulation would have helped identify the problems at silicon valley bank. others say, well, what exactly was it they weren't matching duration with their deposits base they went long, but, you know, they owned what were safe assets, treasury securities, gses do you feel that more regulation would have potentially prevented svb from making the decisions it did and therefore we wouldn't be in the spot we are now >> my view is that we have to do a careful review of what happened at svb and signature bank to better understand what the causes were of those banks' failures, and then we need to address it working closely with congress the president's called for them to look at additional regulatory solutions to make sure this doesn't happen again i think that's important, but it's important that we do it after a careful review of what actually happened to these institutions so we're in a position where we can make sure that in the future, we have a better financial system that continues to secure the future for the american people.

ultimately, what people do is they put their deposits in banks in order to do things like be able to afford to send their kids to school or to run their small businesses, and our goal is to build a regulatory regime that continues to make that safe for people >> i mean, you started out by saying, secretary adeyemo, that the system is safe, and we heard that from treasury secretary yellen yesterday in testimony. we heard it from her during the weekend. we also got word that banks tapped a record amount from the discount window, the fed's discount window this week. how do you read that isn't that a sign that things are not stable and there is a lot of stress on the system? >> so, sara, that's exactly what the discount window is for, for banks to be able to get liquidity in order to be able to use it to meet the demands of their customers, and it was seen that -- and over the course of the weekend, the secretary, myself, chairman powell, we all spoke to a number of ceos not only big banks but small and medium-size banks, and they sent a clear message to us that they

knew that unless we difficult with the situation at silicon valley bank and also signature bank, in a way that demonstrated confidence, that you could see deposits, outflows out of regional and community banks all over this country. that's why the federal -- the fdic board and the federal reserve board recommended using the systemic exception for both silicon valley bank and for signature bank in order to send a clear message. and while a number of banks coming into the weekend prepositioned the need to get more liquidity, what we found over the course of the week is that they have had to use -- they have had to use less and less of it, and now that we've seen a stabilization in terms of deposits to those institutions, what we expect to see over time is that they're going to need less liquidity from the discount window, but ultimately, this is why we have a discount window, in order to make sure these institutions have the ability to borrow from the fed against their safe assets in order to meet the demands of their customers and what we found over the course of the week is that

those demands have come in less and less, and deposits have -- outflows have stabilized and in some institutions, even reversed >> are you surprised that we're still not seeing all these worries calmed as a result of some of the swift and determined action that you guys and some of the other regulators have taken, and how do you spend your weekend, given that some of these worries are still very much out there, front and center >> so, sara, we're -- we still remain vigilant, and we know that the market is taking time to price in the actions that have been taken by regulators, but also by the biggest banks, but ultimately, what we've seen over the course of the week is that because the actions we took over the weekend, we have seen deposit outflows stabilize within these institutions, and in some of them, reverse, and it will take time for markets to address these -- to catch up with the actions that have been taken by us and by these banks, and what we've done now is given these institutions time to think through how they organize their

businesses going forward >> wally adeyemo, thank you so much for the time and perspective this morning really appreciate it >> thank you so much >> from the white house, deputy treasury secretary i don't know are all uninsured depositors safe >> they'd like you to believe that, but it's not clear and it still may not be enough to stem some people choosing to move or not. and to the point he made, investors, mike, are just trying to figure out what these banks are worth in a new scenario under which there may also be more regulation, which is going to be costly, perhaps, for them as well. >> separate question long-term earnings power a depositor need not fear the safety of a bank to say, i could just go in a government money market fund or short-term treasuries and be okay >> lot of money going into money markets. >> not to mention short-term treasuries six months is well above 4%. we have breaking news on industrial production. let's get to rick santelli >> yes, david, it industrial production for the month of february expected to be up,

comes in unchanged what's interesting is last month was unchanged as well, but it was revised up 0.3%, which means last month now becomes the highest level since july of last year, and we've dropped back down to zero the rate of change here isn't a positive, and utilization backs that notion up expected 78.4. we get 78.0, which has dubious honor of being the lowest level of utilization since september of '21 w,on tchhano d'tou tt remote "squawk on the street" will return after a short break

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fedex is the biggest premarket gainer you can see it right there, 11%. that is on the s&p after posting better-than-expected quarterly earnings cost cuts is the key here. revenue came in below wall street consensus, due in part to what fedex calls continued demand weakness. the company's ceo summed it up on yesterday's earnings call >> a cost reduction action supported margin expansion at both ground and freight but have not yet fully offset the impact of continued pressures that express. we will continue to aggressively manage head count, including attrition, to align our teams with the network changes under way. by the end of this fiscal year, we expect u.s. head count to be down roughly 25,000, year over

year >> that is heartening investors, of course. the company has been under the microscope for what was considered a bloated cost structure for quite a long period of time we talked about the number of activists who have been in there or at least one in particular. there has been some change on the board, but this is a quarter where they started to show those cost cuts coming through >> yeah, so, bloated cost structure kind of on a chronic basis. also, just serial shortfalls in the execution, so a lot of adverse surprises every quarter, and i think that is the story now of what the street is latching on to is they're upping their targets for cost cuts this year relative to what they laid out in september there's a little more progress toward them, how many of them might be permanent keep in mind that fedex, even though it's a macro play, even though it's going to be sensitive to global trade flows and all the rest, when the world was coming back online from 2020 to 2022, this was an awful stock. it got no benefit from it. u.p.s. absolutely trounced it because of the execution and because of the exposure to air

freight and china and things like that. so, it's not necessarily the case that, well, they have their act together, but the macro looks really tough that might be the case, but i think the street's making the bet that they have enough under their own control, costwise, to at least be on a better earnings path and justify the valuation where it sits right now which, whatever, 12, 13 times earnings as the estimates get revised >> it's a stock story, and it's a profit story now because, you know, i always go through the fedex call and the release to see what they say about the economy, because they're such a bellwether, and not great. lot of talk about demand weakness, lot of talk about lower shipping volumes in express, in ground they're being helped by cost cuts and higher shipping rates as well, but if you were looking for any sort of robust business and action in the global economy, you didn't get it in the fedex report even china has been slow to come back online. >> they're doing things like having more price discipline, not going for empty quality of

volume i think those things can take hold in a stock that was a big laggard, has new management, and is at 12 times forward earnings. >> all right regional banks once again, of course, are the biggest laggards on the s&p we're going to be keeping a close eye on all of them first republic, you see, all over the map the last couple days down 20%, it would appear, when we start trading six minutes from now don't miss it, by the way, as well former fdic chair sheila bair is going to join us in the next hour

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>> announcer: the opening bell is brought to you by nuveen, a leader in income, alternatives, and responsible investing. will the deposits in every community bank in oklahoma, regardless of their size, be fully insured now? >> a bank only gets that treatment if a majority of the fdic board, a super majority, a super majority of the fed board and i in consultation with the president determine that the failure to protect uninsured

depositors would create systemic risk and significant economic and financial consequences >> so, what is your plan -- >> we make that determination. >> right so, what is your plan to keep large depositors from moving their funds out of community banks into the big banks >> look, i mean, that's certainly not something we're encouraging. >> that is happening right now >> that is happening because depositors are concerned about the bank failures that have happened and whether or not other banks could also -- >> no, it's happening because you're fully insured, no matter what the amount is, if you're in a big bank you're not fully insured if you're in a community bank >> well, you're not fully insured. >> that was treasury secretary janet yellen and senator james

langford of oklahoma on capitol hill having an exchange about protecting uninsured depositors. it's something we've been talking about for the last week as well. jim cramer, out today, has been talking about the fact that they need to come out and say, all depositors -- >> as she said, she can't do that it's congress. >> we had wally adeyemo on earlier. you had asked him the same thing. he wouldn't answer >> they can't do it, but it is one of the key questions it's not the only question, by the way. it's also increased scrutiny and now attention to what's happening on these balance sheets and the mismatch on assets and liabilities >> deposits are liabilities for the bank the assets are the loans they make or the securities they buy in part with money that's come in from deposit ezors, and you' right. we haven't even talked about commercial real estate, which could be carving a gaping hole on some of these balance sheets. >> that's a slower-moving issue that's absolutely out there, and it's got to basically force a reckoning, but i do think that on the asset side, we kind of know what the paper losses are

in aggregate you kind of know what would have to happen if they realize, it's a big hole, but it's not surprising it's the price of treasuries it's the price of mortgage-backed securities i think if there's one little comfort in this whole thing, it is that. it's that we knew that rates went up. we knew that losses existed. we're just finding out what they were and to what degree and whether they can support them. >> realtime exchange at our headquarters at the big board, women in etfs. over at the nasdaq, it's ys biopharma, celebrating its listing, look at that, havia spc >> if you had listened to the first half hour of the show, you might not realize that the nasdaq is up 5% this week and the nasdaq 100 is up 6%, and by the way, the s&p 500 is up 2.5%, which is kind of a head-scratcher when you have several banks failing and

lifelines and infusions. >> but sara, you have had rates go down a lot. >> that's why. >> declining rate environment, they want these stocks >> it's not just rates going down it's people grabbing for the companies that generate capital and will never need a bank, and they're underowned, and -- or were underowned coming into this year the ten-year treasury yield today is exactly where it was january 9th. the nasdaq 100 is up 12% since then it ain't just the rate move point to point >> it's the move from point to point down over a week, mike >> it's a little part of it. >> that's sent people to higher multiple spots >> he and i have been fighting about the yield impact on stocks >> he's very passionate. >> he just wants to say i'm wrong, because the yields are in control, mike. >> they're in control of the psychology of the market, absolutely the credit situation is very touchy buying microsoft, paying up -- microsoft and google are up $300 billion in market cap this week, okay, before today the entire regional bank sector of the s&p 500 is $200 billion and falling.

so, it's just a matter of the market migrating to where you don't have to worry about the banking stuff. it's not just about longer-term -- >> that's fair >> -- discounted cash flow analysis it's just about their relative safety in this moment, and again -- >> bitcoin in that basket too? >> it's feeding off the general sentiment. >> two things happened this week massive repricing of what the fed is going to do the market thinks the fed is going to raise 25 basis points and then be done and then cut. >> yes >> in the latter part of the year the balance sheet went up. after all this worry about qt and shrinking balance sheet. balance sheet went up. it's no coincidence that bitcoin and ark innovation fund and all the nasdaq stocks had a really great week >> look at a two-year chart of ark and tell me there's anything interesting going on with ark this week. it's just coming off the mat a little bit it's like, yeah, fine, we can put -- >> mike, i could name any number of other companies that aren't necessarily technology, so to speak, that don't need, to your point, banks or that are

certainly financially secure, and they haven't benefitted much this week. the money has gone to some of these names in part the same way -- >> amd is up 18.5% this week >> because people are in love with the whole semi story and the a.i. story and it's something that you don't -- it's not dependent on what the fed does next week, really it's not dependent on recession in four months or eight months, or at least people think it's not dependent on it. so, i'm not arguing that lower rates and fed policy are not part of the equation they're just not the entire equation and in fact, that could be the trap, because if you think that microsoft getting back to 30 times earnings is safe because it's -- it's not affected by this stuff, it still doesn't mean you've got good forward returns coming >> although we know microsoft's move, as has been nvidia's, is in part related to what you just mentioned, which is enthusiasm over a.i. and the introduction this week of chatgpt 4 i mean, we may be focused on

this mini bank crisis, but when we look back on history, the end of history as i see it, potentially, it will be back to this week when they introduced chatgpt 4. morgan stanley did upgrade now to overweight, nvidia as the large language model enthusiasm, they say, and this is the headline, transforming the cloud capex. they go on to say, "generational a.i., too much of a mega trend to get distracted by tactical concerns the stock will continue to be hard to ignore in an otherwise challenging semiconductor environment. been a good week for nvidia as well, mike >> it has. you know, the morgan stanley upgrade almost admittedly is just a little bit of a belated chase. they were tactically negative on it they don't think there's a new catalyst it's just the opportunity being too big. yet, they're sort of, i guess, close your eyes and just pay up for it is the case right there that's one of those instances

where, again, people go back to the familiar feeling of, we want to own the secular story, and we prefer not to have to worry about, you know, industrial production and weekly jobless claims and all the rest of it. there's sometimes an illusion of freedom, of just sort of believing in the big story and not having to worry about the immediate. >> i was watching williams sonoma, another earnings mover i like to talk about something that's not the banks they came out. it's a tough category right now. we know that americans aren't spending as much on their homes and furniture, and yet it was a pretty strong showing from williams sonoma. pottery barn was up on top of really strong comps last year. west elm down, and williams sonoma down, but guidance for revenue came in a little bit better than wall street was expecting and that's because in the declining category -- and we heard the same thing from signet in the jewelry category -- this is a company that feels

confident it's taking share. it's a big theme right now when you're in these tough categories, where the consumer is fickle, and the macroeconomic is hard, if you can show you're taking share and executing well from a profitability standpoint, then that's how you can differentiate between the winners and losers >> well managed sort of companies in retail that dominate a subcategory has been one of those pretty good themes that you could lean on, like you've talked about ulta, tractor supply, dick's sporting goods, i keep coming back to them because they are considered to be, okay, in a spot, they're well managed, they have good comps, they're not so big they can't stop growing their store locations, so i do think it's a little bit of a sheltered story from, again, is the consumer getting fatigued in the whole overall picture of exactly what you have to worry about from the macro? >> the worst-performing sector of the week is not financials so far. it's energy. the other thing happening in the

backdrop to all this -- and this plays into the lower yields we're seeing -- it's not just the fed rethink, but a rethink on the economy toward a harder landing and toward an inevitable recession. you saw that really take its toll on crude oil. >> wti was very low yesterday. even with increased chinese demand, story in "the journal" about these large tankers and incredible demand for them, but you can see it right there $67.50, despite what has been an increase in demand from china. >> well, it's been quite a tell that oil couldn't get out of its own way when, for six months, people have been talking about china reopening. and it's not about the dollar, and it's not about the exogenous stuff. the market is acting like there's plenty of oil out there, and maybe it was that the winter wasn't as bad as we expected and natural gas got crushed. it's interesting that it has had

that round trip. >> don't you think it's part of the same trade, though, where it's weak economy, decreased demand for oil, lower yields, and strong tech stocks >> i know, but that makes me -- we haven't had our usual discussion about 25 or nothing i mean -- >> let's do that >> never been more uncertainty, it would seem, in talking to people -- i mean, you're talking about a weak economy you're talking about all these things, and yet we're still saying that the fed is going to raise rates? >> yes, because we still have an inflation problem. we have 6% inflation on the headline number. core inflation is more than double of where the fed wants it to be. what did we learn from christine lagarde of the ecb yesterday you can raise interest rates to fight inflation, and you can try to safeguard the banking system. we'll see if it works, but that's what she's trying to do >> did she give cover to the fed? >> i thought it was already there. the cover was -- i think the bank of england gave cover last year when they bailed out the pension reformers and still raised rates the pension, you know, funds, and still raised rates to fight

inflation. anybody who says the fed is going to pause -- and again, this is just from a lot of research i've read and studying the fed -- they're stuck in the '80s and '90s before the fed had balance sheet tools. now it's all about balance sheet operations and endless acronyms for special facilities it's what we saw the rabbit out of the hat last weekend for the emergency -- >> on sunday, yeah >> -- borrowing on svb, and they had that tool. and they can use that, and they can use it at the same time as raising interest rates to fight inflation. that does not mean that we're going to see higher for longer, because eventually, this is going to take its toll on the economy. but david of jeffries put out a great note on this, this morning, which is, how could you not expect the fed to raise when they're data dependent and the economic data has shown the economy still looks good and the inflation is still high? i may get hate mail for that >> the good news is it doesn't matter except for the signaling effect,

it doesn't matter that much economically it's the right thing to do they would love to be able to do it, and why not? you can do it, and you can speak dovishly or do it and say, we're open to however the data break from here. but i also don't think if they pause it's a tragedy the only reason it is, is because they've backed themselves into a corner why does that even matter? do you want to talk about '80s and '90s, they were stop-start all the time, not in a bad way, just in a flexible way >> it was also a time where they only had interest rates. >> they had a balance sheet. it was $800 billion before the financial crisis the minute before the financial crisis >> they weren't using it to the same extent. >> they weren't actively using it as much they had a discount window from day one in 1913. >> i love arguing with him >> i know. let's just hit the banks because we haven't actually discussed them, which has been nice for the first ten minutes of being open but they are lower certainly first republic, down another 22.5%, this after yesterday's gyrations had been

even lower than this on that stock price, then moved up appreciably on that deposit plan you can see them there the bankruptcy filing from svb i should point out, by the way, when it does come to silicon valley bank, silicon valley bank financial group intends to use the court-supervised process to evaluate strategic alternatives for svb capital, svb securities, the company's other assets and investments. they also say they have attracted significant interest, that, in part, being led by center view partners in terms of that restructuring so, it doesn't mean that assets will not be sold from here they will now. of course, especially because they have gone into bankruptcy the point i was making earlier was, obviously, no bank wanted to step up, given the marks that would have had to have been taken and what they viewed the franchise value not being equal to that on their balance sheet >> one thing we're seeing is

some differentiation in the regional banks' stock performance, if you look at the week-to-date returns first republic is at the bottom, but schwab is down 4%, and the ceo came on in the middle of the week with me, walt bettinger, very plain spoken about some of the misunderstandings he thinks are in that stock, said he's buying stock, offered a vote of confidence i guess wall street is just looking at some of this duration risk on their balance sheet. >> yeah. and not necessarily deposit flight, certainly nothing like we saw late last week. >> for more on the markets, ubs director of floor operation joins us on the cnbc newsline. always good to talk to you on a friday, art. how are you feeling about the bank crisis and potential for more pain? >> well, i think, first, let me say that the viewers want to be

very, very careful a friday like this is a rumor monger's delight, and we are on the edge of what we were doing back when lehman got in trouble. you may recall they were buying the credit default swaps, and they were buying out of the money options, out of the money puts, and then compounding it by spreading the word on twitter and elsewhere, did you see that? somebody just bought a put 20% below the current price. the viewers have to be very, very careful about what's going on now, what happened over this last week came as a shock to the fed and everybody else, and the reason that they implicitly had to guarantee was that we were actually on the verge of a rerun of the panic of 1907, the actual panic that caused the fed to be established. and i believe that there are folks running around -- i would

love to see what the credit default swaps are doing -- running around and getting a list of the banks and seeing who has the largest percentage of uninsured deposits and then kind of bringing that to everybody's attention to see if you can ktip over the bank. that's the kind of backdrop that you have got here. and that's why you're not necessarily seeing people look directly at the economic news. this is fully captivating. we had all these people a week ago were running around with the word "idiosyncratic" like it was a new baby toy, and assuring us that there was nothing systemic about it it is systemic the fed has forced many of these banks to reconfigure their portfolios so as sara alluded to

they are having duration risk, and that's been around before. you guys should call up or interview chris whalen he wrote, back in february 27th, that the fed was forcing people into duration risk, and he singled out svb. and sure enough, it all came down so, this is not unknown. and finally, everybody's talking about new regulation i think this is a failure of supervision rather than regulation i think the bulk of the regulation is there, and you know, where were the people who noticed that they didn't have a risk officer at svb? where were the bank examiners to notice that the duration of the portfolio was misaligned so, today's a good day to be careful. friday before a weekend, rumors

around, so your viewers have to be careful to avoid rumormongers >> art, just quickly, what's your read on how the overall market has been able to actually stand up to a lot of these concerns this week, and at least kind of hang in there, in the middle of this range >> well, it has been impressive, but you know what i have noticed is that, you know, we've zigzagged too extreme. so, the market goes from oversold, which then allows for quick bounces and that stabilizes everything, to almost overboard with that reaction so, that's why you're getting this kind of volatility here, and again, relative to these regional banks, i think the game is afoot i think there are people -- i wouldn't say purposely spreading rumors, but trying to agitate

things as much as possible, possibly for their own good, credit default swaps and that other money thing, but yes, it's been range-bound, and that's -- that is impressive but i think i'm going to wait for a couple of weeks to see if that holds up. >> thank you, art. we appreciate the analysis and perspective as always. happy st. patrick's day. we know you're celebrating >> top of the morning to you top of the morning to you, lassie thank you. >> there you go. art cashin lot of irish folks here at the new york stock exchange. >> yes, there are. >> plenty. >> yes >> stocks are lower. >> it's a friday and st. patrick's day. >> he says, be careful because of the rumormongering. it's always going to be, be careful on st. patrick's day >> also be careful on the streets. lot of people with their heads in the gutter. i won't get into any details but you know after the st. patrick's day parade it's kind of ugly up there before we head to break, it's time for a bond report. let's take a look at how treasuries are faring this

morning. there they are the two-year note. think about where we were just -- where were we, sara, one week ago >> about 5%. >> a hundred basis points has been the decrease. we got to go i'm so glad we did this. i'm so glad we did this. i'm so glad we did this. i'm so glad we did this. i'm so... ...glad we did this. [kid plays drums]

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there it is. a look at the week's top performers on the s&p. we mentioned advanced micro at the top there. that illumina move is interesting. icahn seeking board seats there. microsoft and nvidia, added more market cap than has been lost. >> don't call it a rate move he doesn't agree with that. >> we're going to have more of this ongoing interesting argument between mike and sara when we come back. conventional results. at allspring, we break away with purpose. harnessing data-driven insights and boundless curiosity. we dissect the market from every angle.

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welcome back ing fang plus index is up week to date. this, of course, as we have been discussing as people turn to large technology stocks perhaps as a safe haven in a mini

banking crisis joining us is brent phil, the nasdaq 100 outperformed the s&p for 11 straight days through yesterday's close. what do we make of that? >> hey, david. it's just a flight to big balance sheet strength tech had a terrible year last year and we're searching a rotation back as multiples are down as you said, marketing in europe, seeing declines in london and paris and concerned about what's happening in the financial sector you're seeing sector rotation back to tech ultimately we're concerned about the magnitude of the move because fundamentals have not improved and we could he see a downtick in the fundamental demand environment for tech. this is a sector allocation than any real hope of a big

acceleration in tech demand. there's definitely some a.i. excitement, too, around what's happening with microsoft and nvidia. >> sure. but to the extent that multiples are now going up, are they not going to be justified by the earnings that follow >> i think that's the risk is that we've had a huge move and right now we've continued to see companies not have a great top line what we're seeing is the condition of the bottom line as long as the tech, it continues to control the bottom line expense even if the top line was weak, i think investors will give them a hall pass we've seen with meta and we've seen it with microsoft and a number of companies that have had strong cost controls, investors are giving them a hall pass and stocks continue to work higher on stronger expense controls so i think, you know, the back half of the year still a real big open question in terms of demand at this point, but i don't think from what we can see

and from a lot of tech companies we talk to that demand is falling off. it's inflecting. we have to take into account what's going to happen with the banking sector and then some of the small startups in tech, their consumption of technologies, this can create a headwind for demand in the next three to six months given there's some distractions that are going on in the respective subsectors that's something else that we're keeping an eye on. >> yeah. there's one line of thought in addition to everything you've said there in terms of what's driving the flows that also, you know, a lot of big tech stocks kind of took their medicine in terms of earnings estimate declines, maybe not as much vulnerability, to your cost cutting and bottom line discipline aspect. amazon seems to be the outlier in terms of how it's been straight down and doesn't necessarily have that real valuation support. where does it leave it in terms of looking for a catalyst or how, in fact, investors should approach it here >> yeah. the two biggest questions on

amazon is when is aws going to bottom in growth and hopefully that happens in the next couple quarters that's their cash cow. that's numbers one topic number two is, when do they get the retail costs aligned with demand, and there's still -- you can see it in all the actions, you know, pulling back in the second headquarter build out, friends of ours that have warehouses you're seeing amazon abandon some warehouses and continue to pay rent because they have lease costs. you're trying to unwind the expensive network they built up in the pandemic and i think those are the two big areas that we hear i think coming out of this they're going to be in a good position. jaci, again, a software guy cares about high margin businesses getting control around their bottom line and ultimately aws from the cloud perspective is going to emerge out of this as still the best position company across the

cloud providers. we're still bullish long term but think tactically short-term there's challenges as it relates to employees and what they're doing in their supply chain costs. it's going to take time for threat to get full control over the expenses >> real quick. you said you're marketing in europe any sort of difference between investors' concerns over there and here >> david, investors are underweight tech massively one of the questions i've been asked in the few days is are you overweight or underweight tech and they're underweight tech that explains the move in tech, which is every investor in the institutional market, we don't talk to retail investors, they're institutions, they are on their way to tech and that is another driver that's helping the recovery, which is we're just doing a portfolio reallocation it's not necessarily fundamentals but allocation of dollars from other sectors that's a big theme we're

hearing. >> thank you appreciate it. have a great weekend >> you too. good friday morning. another hour of "squawk on the street." sara eisen with david faber and mike santoli live at post nine of the new york stock exchange carl has the morning off take a look at stocks under pressure in the early going, down half a percent on the s&p and the tech strength story of the week, the nasdaq is higher right now up 5.25% banks are under pressure first republic, despite the $30 billion deposit infusion from the big banks yesterday, is down 17% right now. we're just getting some more economic data to chew on consumer sentiment, rick santelli, with the numbers rick >> yes these are march preliminary reads, sara. they're going to change in a couple weeks expecting 67 on the headline university of michigan sentiment. 63.4 that's a miss. the weakest of the year. going back to, of course,

december the last time we had a number that was smaller. current conditions expecting 70.5, also light, 66.4 expectations expecting 65, 61.5 on expectations. that's the lightest of the year as well. if we look at the inflation gauge, maybe the most important, 3.8, 3.8 on one-year inflation, 3.8. that is the lightest level going all the way back to april of '21 and if we look at the 5 to 10-year inflation it's at 2.8, the lightest level since april of '21 as well good news there. let's see if yields move down. finally leading economic indicators, always a bit in arrears, a february number, down 0.3, exactly as expected, down 11 months in a row, down 12 of the last 14, nothing to hang our hat on there we do see yields slipping a bit

but consider we're down over 55 basis points on the week on a 2-year, approaching 30 basis points on a 10-year, it's been a big week david, sara, back to you. >> all right huge rick santelli, thank you. >> kind of the data release that fed would want to see in its inflation fight. not necessarily that americans don't have as much confidence but their inflation expectations are coming down. >> remember last year, jay powell himself was actually fixated on this university of michigan consumer sentiment inflation expectation number as budgeting his case for being aggressive. >> it was making him nervous it was going up. >> it's not the widest sample and all the rest, but it is good news i think the question is, in the context of another decline in leading economic indicators that's ban pattern for a while, that's one of those almost undefeated bellwethers of a coming recession that's the thing you haven't been able to escape from the way the yield curve, the

leading indicators have been doing, incorporates market stuff as well, has now allowed anybody to get comfort in the no recession call we have a tricky one next with the fed. >> to reiterate any time leading economic indicators have been at these levels we've been in a recession. >> within several months. >> the yield curve steepening. the inversion of the yield curve. a lot of people say it's also, you know, sets the shock on when the recession comes. >> precedes it. >> a few months after the fact which has been a big reason, we've seen a reprising of the bond market as rick santelli said and the stock market, tech soaring and yields falling it's been a week you said a mini banking crisis if we were in a full-fledged panic banking crisis i don't know that you would strength in the tech stocks. the dollar is weaker on the week it's wild moves in the banking stocks. >> it is it continues we're not, perhaps, fully done

with it. we hoped yesterday with the $30 billion deposit, for example, from the group of almost 11 banks i think it ended up being in first republic would stem the declines there and create confidence perhaps so see first republic shares down 1 16%. this is nothing like '08, '09 in terms of the contagion and us sitting here every day talking about the largest financial institutions in the world being under incredible stress. >> if the cost is three banks and $30 billion spread among, you know, a half dozen or more big banks, then that's a bargain. if it buys you some sort of sense of stability in the banking system and brings the fed pause closer and maybe allows the data to sort of sort itself out before the fed gets to what it thought would have to be its target rate it gets contained and we can leave it there

the fun part ate this week has been deciding what year we're back in. for a while 1994 and had all these crises from the fed tightening cycle this looks like 1998 long term cap. >> supporting the $30 billion stories. first i was reporting i was like what >> exactly. >> because it didn't equate with what i had anticipated would be a so-called rescue and it's not clear it's going to be enough. the downgrades of first republic today that are fairly significant in nature in terms of talking about capital raising that needs to be done or if they move to an m&a scenario, they will be virtually no residual value. the hope is when it comes to needing the sell that will not be the case. this week, as i reported with the feds, treasury, perhaps wanting first republic to be in different hands. >> yeah. by the way, just to be specific about long-term capital in 1998, when of it facing margin calls that would have crippled it and sent ripples throughout the financial system the wall street banks invested money in the fund

to backstop it but they knew also that assets were going to work themselves out. it was more a leverage situation and in this instance, it's the public depositors that are, in effect, delivering a margin call on the banks that are affected. >> wasn't it followed by greenspan cutting rates 50 basis points. >> like five weeks later. >> back then it was just look the fed cut interest rates. >> when the fed breaks something it cuts and goes other way people are getting excited about the rate cuts. i don't know if that's true. >> the nasdaq tripled in the next 18 months tripled after the '98 cuts. >> because rate cuts. >> the late '90s, it was the bubble. >> rates 6 or 7%. >> sara was in grade school. >> i'm younger than you guys but not that young the other chart of the week contender besides first republic stock, is what happened with the banks borrowing from the fed's

facilities, the discount window. we didn't talk enough about that, but i think it's notable that 150, almost $3 billion was borrowed from the discount window - >> $153 billion. >> altogether 300 added to the fed balance sheet this week. there's the chart. it puts in perspective how much has been borrowed. >> a lot was first republic at one point. they hit $109 billion at one point. >> reflects stress in the banking system you can't say there wasn't liquidity needs and that's a big part of the story. we talked with wally, the treasury deputy secretary and asked how could you keep saying the banking system is sound and everything is okay when we saw borrowing. here's what he said. >> the number of banks coming into the weekend prepositioned the need to get more liquidity what we found over the course of the week is that they've had to use less and less of it and now that we've seen a stabilization in of deposits in those

institutions and what we expect to see over time they're going to need less liquidity from the discount window. >> that's the hope that's the hope for everyone that's what treasury is hoping. >> do they need the other part of that program. everyone seemed to have gone to the discount window. >> $11 billion maybe that's more of a stigma. >> i think that's the takeaway. >> the facility and we're going to find out the names. the message is clear of what happened more borrowing. now we figure out whether these -- the bank stock sell-off has to do with concerns about more banks failing or just lower earnings profile, more regulation, fewer loans, what that will mean for the economy that's going to be a crunch, a liquidity crunch, especially you guys mentioned commercial real estate which gets loans from community banks. >> as mike indicated a slower moving process but one we don't

want to lose sight of. there will be a lot of buildings given back to banks. >> the way the office reit stocks look right now it's vertical down basically. the concern is manifested there. our next guest believes the sell-off in bank stocks has been overdone joining us to talk about that, gerard cassidy, head of u.s. bank equity strategy good to see you today. overdone in general, overdone in certain instances and does that mean you don't believe there are going to be further distressed institutions surfacing >> thank you, mike i would say when you look past periods of time where there's been panic selling in bank stocks like we're seeing this week, if you take the longer view, 12 months, let's say, on average following the '08- '09 bottoming and 2020 bottoming, stocks are up 88%. when the bottoming is today or next week, it's around this time because we will stem the

nervousness and the angst that everybody is feeling today with bank stocks because the deposit outflows will stabilize and the system will, i think, start to stabilize later next week and into the end of the first quarter. >> you point out this morning that in previous cycles when you did have fears around the banking system and got a bottom on a monthly basis in the stocks, that they rallied massively afterward, so 2009, back in 2002 however, they were a lot cheaper, the stocks were n those instances, right the largest banks have not necessarily gotten to those valuations relative to book value, tangible book value, that would necessarily suggest that they're completely washed out? >> no. that's a fair point because when we put this current situation on a scale of 1 to 10, versus those other periods, i think we would all agree at the early days of the pandemic in march of 2020,

when we didn't know what final outcome was going to be, and the financial crisis of '08- '09, 1 to 10 scale, those being 10 the worst possible accident yo the current situation we're in is probably a 5, maybe a 6. that's why to your point, it's a good one, prices haven't fallen as much nor should they have we just don't have the same issues we had in the other two time periods >> gerard, what about longer term earnings power of the banks, cost of funds is going up, the regulatory burden increases, say we have to mark to market their health maturity portfolio, are you taking that into account and what impact will that have >> no. you're absolutely right, that there's going to be lower profitability. we pointed that out in the report this morning, that we expect banks right now the largest banks as you may know have to adhere to lcr, liquidity

coverage ratio, which means they have to hold on their balance sheet 30 days worth of cash or very liquidity securities to handle a bank run. well those are the biggest banks. we expect banks between the asset sizes of 50 to 250 will be held to higher levels of liquidity. there will probably be forced to take their aoci, the unrealized losses in the securities portfolio through regulatory capital, and i think you're right, we are going to see lower profitability, just like with saw after the 2008 and '09 financial crisis we saw a reduction of 200 to 300 basis points in roe. this one hard to say how much, but it's fair to say 50, maybe 100 basis points of lower profitability measured by r.o.e., but the stocks i think are just overdone even with the expectation of lower profitability in the future. >> yeah. definitely what's been priced in this week is more than 50 to 100 basis

points of r.o.e., erosion in the long term. appreciate it. thanks for checking in. >> thank you about 250 on the dow as we head to break, more on the markets as we close out a volatile week and recession warnings continue to grow. >> fedex shares higher whaefl break down that name and what's means. >> don't miss former fdic sheila bair with a warning for regulators following the collapse of svb and signature bank rasqwkn e re" thstet stight ahead for you dad, we got this. we got this. we got this. we got this. we got this. yay! we got this. we got this! life is for living. we got this!

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welcome back to "squawk on the street." seeing mostly losses right now the s&p 500 down about half a percent. the dow down more 250, the nasdaq remains resilient the winner on the week up 5% it's been a chaotic one for investors. financials at the bottom of the market today but for the week, it's energy and bank stocks. the banking worries persist and investors are piling into cash at the fastest rate since april 2020 joining us here at post nine to figure out what to do next is citigroup strategy scott crowner and morgan stanley chief economist seth carpenter good morning scott, you set the 4,000 target on the s&p for this year is this one of the weeks you go back and revisit the call? >> we're revisiting in the sense that we have to incorporate the

new information. i feel pretty comfortable we're still in pretty good shape here. ultimately where we think this plays out is that we have to expect there will be a little bit more of earnings response on the financials as you see tightening credit conditions we factor that in to our earnings outlook to a certain degree already the risk is probably to the downside from here, but if consensus is looking for call it a 14% increase for the banks this year we're modeling closer to 2%. the issue is going to play out already in corporate in our views. >> ends up in this place seth, what about you, a lot of economist changing their views and outlooks on the economy and fed policy path. have you done that >> we have not i think it's really important to try to sort out what's going to go on with the economy, with financial markets and at this point it's hard to tell. say the ecb, for example, just showed us yesterday that they

were comfortable going ahead and hiking despite some turmoil on their side of the atlantic i think when it comes here in the u.s. with the fed they're going to be looking at how much stabilization have they been able to create through their new lending facility, for example, through the various deals that have gone on with the banks that are in trouble if they can come to the conclusion, which i think they will, that there is a sep perrable market, not a macro economic read through, then i think they will go ahead and we still got them hiking at the meeting. >> and where from there, seth? there's a lot of talk that no matter what, that perhaps the terminal rate is lower and have to convey some openness to adjusting their plans. of course the market pricing in big cuts already, although they've tried to over anticipate that a few times. >> absolutely. so i think the near term and the longer term are worth thinking about independently. we still have left our rate hike

for may at 25 basis points but no more hikes after that the market before all of these financial disruptions started, the market had gone above us in terms of the peak rate and didn't change our call then. now things have retraced a bit for them to hike next week and in may it's going to require funding markets to settle down a bit. we think chances are good that they will. i think when they start cutting rates, though, becomes sort of an additional question our bank analysts think there is going to be some additional funding cost pressures for a lot of banks to the extent that feeds through to lending, it could lead to an earlier rate cutting cycle for the fed as they try to calibrate policy about but that's several months off. for now we sort of left march of next year as a time where we think they nudge down the policy rate. >> scott, you know, you just

mentioned the earnings power of the banks seem to have come down and probably will, but we've seen this massive move into big tech, big cap tech is that sustainable? >> i think it's sustainable in to the degree they benefit from the perception of lower interest rates and tend to be long ter duration equity assets in the broader construct of the s&p essentially what happens is they're well capitalized and not tactically exposed to what's happening with the banks they become a safe haven we've talked about growth being defensive and we would say that's probably coming back into the discussion here as you talk about 10-year yields coming down as they have. >> defensive in a world where the economy slows more and rates go lower. >> right if you watch the way this year has unfolded we started out with a relief rally in the mega cap growth companies last year you saw your defensive which held up last year to roll over to start the year. your economic sensitives maintaining last year's gains. that's flip flopped over the

past week and seen your economic sensitives roll which is an indicator of recession concerns and defensives stepped back up and your mega cap growth has outperformed it's following the narrative ever of where does this lead us in terms of an economic response. >> good to talk to you after a crazy week neither of you changing your forecast which is interesting. >> all right also, a big rally for bitcoin, but given the volatility this week and a fed decision in the next, can the rally hold here? we'll discuss that after the break. don't go away. back in two minutes.

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and build a treatment plan with you. visit makeapdplan.com today. bitcoin up more than 30% this week. some are calling it a safe haven from this week's banking contagion and others argue it's a sign that riskier trades are returning and we have seen a big jump in a lot of these stocks on profitable tech companies and the nasdaq 100 names cnbc.com's tonya has been tracking the action and joining us to break things down.

>> bitcoin absolutely ripping at the start of this week kind of started to pull back a little bit amid all the uncertainty around the u.s. banks, first republic and credit suisse and kind of back to life and springing into action again today. you saw this week a lot of investors got a little bit of a glimpse into the tech, in the banking system, which is fun when debating bitcoin narratives might fuel this idea of bitcoin as an alternative financial system and i think a lot of investors that didn't quite get that before, got a little bit of a chance to rethink that, but i would say that, you know, despite however -- whatever way it is that you value bitcoin, be it digital gold or hedging on inflation or crypto currency, i would say that price, the price action, is largely driven by the mack kroshgs by the inflation data and fed rate hikes. this is a welcome rally for crypto investors and we'll see what happens with the fed meeting. >> right

and, of course, actual gold, physical gold, rallying as well. feels as if several things have lined up in favor of at least a trade to the top end of the range for bitcoin, such as you say, nasdaq 100 talking about how it used to trade along beside it. maybe the fed will get easier and then actual gold as people question, you know, traditional banking relationships, starts to work i guess the question is whether it vindicates the big picture story here or just a trade >> you know what, there's a lot of panic in the market as well right now so there is a lot of momentum this is moving on and we talked ability this a lot bitcoin is kind of the tip of the spear. so it is the riskiest of risk assets and people kind of look at it as a long-term asset if you are wanting to hedge against uncertainty. definitely agree and you see that bitcoin kind of broke with its correlation with risk assets

after, you know, that sort of leading the price action a lot last year. >> thank you. >> thank you. markets closing out the week, of course, if you didn't know, it's friday, happy st. patrick's day. this week's bank rescues a dangerous precedent for regulators we'll discuss that with former fdic chair sheila bair that's next. [music - cover of blondie's “dreaming”] [music playing] ♪ imagine something of your very own. ♪ ♪ something you can have and hold. ♪ ♪ i'd build a road in gold just to have some dreaming, ♪ ♪ dreaming is free. ♪ accenture, let there be change.

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here's your news update this hour i'm contessa brewer. chinese leader xi jinping heads to moscow monday for a meeting with russian president vladimir putin. the two men are scheduled to hold a news conference china's foreign ministry says xhi will push for a political settlement between moscow and kyiv a spokesperson told reporters

china is pushing peace and promoting talks. in paris protesters set fires and fought with police well into the night after french president emmanuel macron used his constitutional power to bypass lawmakers and hike the requirement age from t62 to 64. and the environmental protection agencies telling states they can't block shipments of hazard waste from last month's ohio train derailment if going to a licensed disposal site oklahoma's governor said he's not allowing any of the waste to enter his state. sara, it's a football in more ways than one. a political football, hot potato just something nobody wants to touch. >> yeah. thank you very much. contessa brewer. a little off an hour into trading. the loss have picked up steam. down more than 300 on the dow.

to bob pisani on the floor with what's moving. >> and just off of the lows here, but it's hard to believe with all this chaos the s&p is up 1.8% this week. there's two stories for the week the banks and tech stocks. so banks, well one day rally back down again, near some new lows energy down 7% for the week and technology, of course, has been the big story here all generally rallying here we have comerica, key corp, all the banks rallying and down again today. this is not going away that's the number one story. the number two story is the continuing tech rally. this is five days in a row where the big, big mega cap names, nvidia, microsoft, alphabet, intel up 10%, up close to 10% for the week every day to the upside. there's a macro story going on it's not an individual story the story is that the bulls are hopeful what we call a dovish hike next week where they raise

one and essentially stop at this point. the risk to tech stocks has always been that the fed will continue to keep raising rates higher, longer, faster if you remove the risk that's going to be positive here. want to note changes in the s&p 500 today. we're going to see target, dollar general dollars, tree, out of discretionary into consumer staples, visa, mastercard, paypal out of tech into financial this is part of a yearly change that s&p and msci do in their indexes, goes it show the power of indexes people trade these sector plays on an intraday basis look at what they've been doing with the kbe, sector play all during the week. the index providers, guys, becoming very powerful back to you. >> thank you bob pisani let's get back to, of course, the continued volatility in the banking sector yesterday 11 of america's largest banks pledged to deposit $30 billion in first republic for 120 days as i reported at least. that to be a demonstration of their confidence in their

particular institution and in the system overall our next guest penned an op-ed describe the precedence that u.s. regulators set earlier in the week questioning if there are more failures who will the fdic bail out next joining us is the former chair during the 2008 financial crisis, we both remember that, a senior floel at the center for financial stability, sheila bair let me take you back a week. almost exactly a week ago. you have got silicon valley bank on the brink of failure, at least depositors getting out in mass signature bank, first republic, all of which we might have expected might not have been in a position to open given the deposit runs and then the prospect of that moving to other regional banks what would you have done had you been in your old position as chair of the fdic? >> well, i would not have declared silicon valley and

signature [ inaudible ]. these are combined assets, $300 billion in a trill dlarn banking system i don't think there would have been systemic ramifications from putting a slight haircut on the uncertainty depositors, those bailed out if regulators were seeing a truly systemic problem with uncertainty deposit withdraws they should have have, and i continue to say, go to congress and get approval to provide a blanket backstop against uncertainty uninsured depositors at all banks if you say do this one, the ones that do not get the bailout are under more pressure where we're seeing with first republic, you know, uninsured depositors are uncertain. it was -- i think we've lost a lot of potentially a -- i think the optics around it bailing out

silicon valley bank uninsured depositors will help silicon valley venture capitalists it would have been a small haircut announcing they were going to do an advanced dividend to the uninsured 70 to 80 cents to calm the situation. explain to people this is an unusual situation, explain to people how the fdic process works. we handled nearly 400 failures when i chaired the fdic without a systemic risk determination. so that is what i would have done and if they're seeing -- i haven't seen it -- look, i think the risk of this was by saying it was systemic these relatively small banks people are nervous what's going on? what's going on in the broader system if it starts to get out of hand they need to go to congress and get blanket authority to provide all protections, not just a hand picked few. >> sheila, it remains uncertain as to whether congress would give that blanket authority. there was divided opinion here on this point in terms of the

idea of moral hazard that would come from insuring deposits. >> we did it during the great financial crisis it would be temporary. charge banks an extra premium for providing the coverage look, i don't like bailouts of any sort i would only do this if they're seeing, you know, true systemic problems with uninsured deposit runs a lot you can do with appropriate communication telling people, you know, where they can get information about their bank,assuring them that most banks, the vast majority including regional banks, are perfectly fine but if there's truly a problem, if they're starting to see significant runs, if the chair of the fdic, the fed, the president, and secretary of the treasury go to congress and say we need this authority, i think they would get it. there's a past procedure for it. even if they don't, you know, i don't think that would happen, i don't think congress would take the chance of saying no and

catalyzing a potentially worse situation. i've talked to people and they've all been reaching out to me and i think there would be bipartisan support if they present a unified front they could get it done. >> do you think that's what ultimately will happen here? >> well, it may. you know, again i don't like bailouts of any kind you never have good options. it's the least bad option. yeah, it may well come to that you know, this first republic thing it's disappointing i thought that would give first republic time to get itself straightened out but there's a lot of pressure on the bank today at least they didn't use government support private banks came in to try to stabilize it, but it's not clear it's working the problem is, fear becomes the major issue. fear people need to understand how a bank works it's a classic jimry in stewart problem. when you put a deposit in a bank they don't lock it up in a safe. they, you know, keep a lot in reserve to make sure they have enough liquidity cash for

deposit withdrawals, but most of it is make loans, make investments, and whatever returns they make on that, that's how they get their profit and then they pay some of that in interest to depositors. that's how it works. if you rush into a bank everybody at once this is what happened with silicon valley and pull your money out you will force a haealthiy bank to fail that is the dynamic that regulators have to avoid at all costs. >> right if the regulators are facing exactly that risk, and we can't immediately get congress to formally backstop all uninsured deposits isn't the only -- wasn't the only avenue last weekend to declare a systemic issue with silicon valley bank and backstop it that way >> well, as i said already what i would have done and i think if they had just announced a dividend, explained the unusual

situation there, get out and communicate how the fdic works i don't think you would had this issue. if they can't get authority from congress they need to clean up a little bit some of janet yellen's testimony yesterday, and say okay everybody is systemic because right now they put a huge target on the community banks and so you're looking at this saying $100 billion is the new cutoff and anybody below $100 billion will have massive deposit outflows. that they can't divide if congress -- again, i think congress -- we don't know unless they ask, but say they're going to do it for everybody and that's going to be hard to do. there are extraordinary risk determinations each time, but i don't see there's another option. >> sheila, a number of people have brought up they're concerned for community and smaller regional banks as well in terms of cost of funds and float bond offerings whether anybody will be interested

buying them and that being a risk do you agree >> yeah. so no, i think the community banks are basically okay they tend to have stable insured deposit basis. this is the new fed facility if you have a lot of securities that have lost market value, you can pledge them as collateral for the full redemption value an get a loan up to a year. i think with that added liquidity, they should be okay again, i just think if they start seeing massive uninsured deposit withdraws they're going to have problems otherwise, i don't see any fundamental issues with community banks no. >> well a lot of them are worried about regulation and people like elizabeth warren saying roll back the roll backs from dodd/frank and get them stress tested and regulated like bigger banks what ultimately do you think needs to happen here that could be a big headwind for these banks and make it really tough to compete

how do you save the community banks but also put in place guardrails so this doesn't happen again >> right well regional banks are in regulators' targets now. there were things done in 2018 they could have done better. if you have a security in an available for sale you might sell it, you should be marking it and deducting it from capital. there needs to be more rigor around the counting of security banks say they're going to hold to maturity but don't have the capacity to do it as we saw with silicon valley this has nothing to do with 2018, they need interest rate risk stress tests. this is the new issue. it's an interest rate risk problem. this is the issue confronting all banks. there are ways to hedge your interest rate risks but examiner and managers need to stress if you have to sell these securities what your capital position is. the banks large and small that

have a high reliance on uninsured deposits, those are not sticky deposits, they may well have to sell those securities to make deposit redemption requests. those are the kind of targeted things i think that regulators and policymakers and supervisors should be looking at now i don't see a need for a wholesale crackdown on region banks. just the opposite. they performed great during the financial crisis they were providing credit when the big banks were withdrawing and that sector is still basically sound. >> right. >> let's not lower the boom unnecessarily. >> sheila, finally, the nature of this bank run, digital in nature, so quick i just wonder if it introduces a risk, somebody -- one of my friends back from '08 saying wamu lost $8 billion in deposits over a number of days, $42 billion lost by silicon valley in four hours. >> yeah. it's pretty amazing.

well wa mu had a lot of insured deposits and even uninsured. social media, the rapidity with which information can travel and false information can travel, it is a new challenge which is another reason why, you know, regulators tend to fight yesterday's issue. the last battle was over credit risk this is about liquidity risk, the danger of sudden runs and how resilient the banks are to withstand that and how diversified ner a deposit base so they don't have a huge amount of uninsured that can run. it's a new factor in the environment that banks need to manage and supervisors need to go in there and be aware and make sure that banks can raise the liquidity they need if they have a sudden amount of deposit withdraws. >> yeah. sheila bair, thank you appreciate your time should mention also the author of a book series for children "money tales" about financial

literacy or lessons in financial lit literacy. >> recommend billy the bor borrowing. >> i'm sure your boys have memorized it. >> top laggards on the s&p this week no surprise it's all banks "squawk on the street," there you go, first republic down 67%. broad market hitting new lows too. the s&p down 1.1%. "squawk on the street" will be right back go. go green. go wind turbines. go gorgeous reliable grid.

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it is the question many investors want answered. do companies that prioritize, quote, just business practices actually outperform the market our partners at just capital have run the numbers and our own brandon gomez is here to give us the numbers after you've gone through the data what does it all say >> that is the question. and just capital says the answer is yes, they do outperform you can see that it's -- it might be a sigh of relief for investors who are less convinced

on the value of tracking sustainability back in january, we reported on just capital's rankings of 100 most just companies. now using the just 100 index which you can see on your screens, those stocks it shows the group as outpraeshing the broader russell 1,000. just to backtrack as a reminder, ranks the performance of america's largest publicly traded companies on issues that matter most according to americans. like providing a fair and living wage, workforce advancement and shareholder accountability but now to better understand the business and investor case for each of these issues just capital released a suite of index concepts you can see here on your screen is the just wage index concept taking the top 20% of russell 1,000 companies from just annual rankings most transparent when it comes to diversity and inclusion but the wage concept that have the highest wage transparency you can see there, outperforming

just about say 4% or so of the broader market fromdecember 31st of 2021 this index companies like bank of america, like verizon we also have ready to show the dei disclosure chart as well where you can see the same trend. companies who prioritize disclosure of diversity, equity and inclusion, out performing the broader 1,000. these charts showing there may be more to the story in terms of the value of investing in these metrics. david? >> also, pushback against, you know, the gop who are saying svb failed because it was too woke. >> just capital injecting more data into this highly politicized conversation. >> thank you great stuff. brandon gomez. still to come, jean claude trichet. the double interest rate increase from the ecb yesterday

ahead of the fed decision next week, that's going to be in the 11:00 a.m. hour. we're down about 400 points on the dow. the dow. stay with us i'm so glad we did this. i'm so glad we did this. i'm so... ...glad we did this. [kid plays drums] life is for living. let's partner for all of it. i'm so glad we did this. edward jones

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venture capital firm had 30% of its portfolio banked with svb. in the days since the collapse, our guest says silicon valley needs the government as much as the government needs silicon valley joining us is the managing partner. what is the lesson for you >> the valley is generally pushing back into government, saying they stifle innovation. we're seeing that with a lot of the acquisitions blocked by the government this is a sniecenario where the valley needs the government. centralized capitalism we're in a decentralized world i think the valley need the government as much as the government needs the valley. >> to be made whole in this particular bank failure. so how does the view change from here for you does business -- is it business as usual is it going to be harder to

access funding and invest? >> yeah, i think fundamentally, we're early stage. the companies we're investing in won't be impacted. we're investing for the decade two fundamental things you have to think about one is capital so we did no deals in q4 for the first time we're ramping up in january and february march will be a slower year. secondly from a fundraising standpoint, this was already going to be hard for fundraising. we probably had more calls last week about these than covid and the 2022 drop in the stock market it's very clear to lps that there's concern. fundraising will probably be harder, meaning downstream will be harder in the near term. >> without a doubt what about the return expectations long term, whether you have to really write down investments right now? are end investors expecting too much more than can be delivered

here >> most did citwritedowns in q4 it dropped by 15%, to 20%. i don't think it'll change long term for returns historical data, the lps that are interested in venture, i think they realize this year and next year will probably be really good, and 2021 and 2022 probably won't i think the opposite is true, but the interim will be much harder from a deployment standpoint with capital. >> yeah. it's true, the pendulum swings good times to exit are often not good times to enter. we have to leave it there. i appreciate it. >> thanks for having me. >> thank you markets all lower, in fact near the lows of the market. the s&p down 1.2%. not too far from yesterday morning' levels. the nasdaq outperforming, down 1% we'll be right back. we'll be right back. stay with us

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markets remain under pressure see the russell 2000 down more than 2%, double the decline in the s and p 500 right now. it's been the weak point this week in the markets among the broad indexes. a lot of financial stocks as well as bank dependent companies in the russell 2000. the banks themselves also a pressure point today, down another 5% or 6% a lot of discussion around this attempted bailout of first republic, whether other institutions going into the weekend might have trouble with deposit flows and the profitability of the sector very much in question, as well. still pockets of strength where it has been all week, which is in the growth stocks the fang stocks have been outperforming today. microsoft and nvidia doing most of the work on the upside, if there is any to be done. you see profit taking in the broader take outperformance in the nasdaq as people are taking advantage of the stability and the fact they generate cash.

we have a quarterly expiration under way today. could kind of lead to clustering of activity around some of the big round number index levels. that'll do it for us let's get to david and sarah on the floor right now. good friday morning. welcome again to "squawk on the street." i'm sarah eisen with david faber. setting the agenda for us today, down 20%, up 20%, now down 20% we'll have the latest for you on first republic, as 11 big banks team up for $30 billion deposit rescue we'll talk to analysts from wolf research. citi's chief economist nathan sheets will join us the vulnerables in the market, and his call on a pause for the fed next week. later, ecb former president jean-claude trichet on the 50 basis point rate hike we saw from europe this week. credit suisse's worst week since the financial crisis. we're going to start with the markets.