the first trading day of spring. "squawk box" begins right now. good morning welcome to "squawk box" here on cnbc we are live from the nasdaq market site in times square. i'm becky quick along with joe kernen and andrew ross sorkin. everyone is watching this morning. trying to see what the u.s. equities are going to be reacting to all this you see the dow futures are off 61 that is off the lows of the session. we have been down by 350 points early this morning s&p futures right now down 4.5 the nasdaq indicated up right now by over 3 points this has been bouncing all over the place when the futures opened last night where it opened in possible tough territory. you have seen -- opened in positive territory

you have seen swings at the moment, look at what is happening with treasury yields you see the dow futures there. the treasuries, if you are looking at the 10-year treasury, 3.354% the 2-year treasury is really the place to be paying attention. 3.755% i have to say if you were looking at this number last week, first of all, on friday, the 2-year treasury at 3.846%. a week earlier, the friday before, the 2-year treasury closed at 4.588% a drop of more than 75 basis points from a week ago friday. if you are looking at what happened in asia overnight, where trading is active right now. nikkei is off 1% the hang seng is down 2.6% shanghai off .50%. in europe, where early trading is taking place, things are mild just a flatline. dax is off barely.

spain ibex down .25% then bitcoin has been steadily rising for more than a week. since friday, you see the big gains. up above 28,000. >> gold, too >> gold is up. $2,000 >> again, all of this happening, andrew, as the big news is b breaking from yesterday. let's talk about it. big banking news ubs buying credit suisse pledging a loan up to $8 billion to support the takeover. credit suisse shareholders will receive one ubs share. the deal will trigger a write-down of the bank tier 1 bonds to increase capital and put 17$17 billion of risky notes

up the chairman structured a transaction which will preserve the value left in the business and limiting our downside exposure tens of thousands of people could lose their jobs. big question of the investment bank at credit storied investm because it used to be first boston and acquired with the other things that took place in the 1980s and beyond a storied bank gone. we can write the obituary this morning. >> we don't have anything like those weird -- the bondholders get nothing? >> they are known as cocoa bonds.

invention of 2008 w, in fact, te bonds were built for this instance the bondholders lose first unique piece of it >> we have confirmed here and some are convertible, but they don't go to zero. >> this is a european -- >> they were good investments for a while. there is risk. >> i think if you look at the credit default swaps on ubs and we should point out this is no longer a $3.2 billion deal this is an all-stock deal. one ubs share for 22.4 credit suisse shares you hold if you look at ubs, that is down 8% the value of the deal is dropping as shares are trading they were down 11% earlier we will see where it continues to go. if you look at the ubs credit

default swaps, they have risen overnight. that tells you that the concern isn't gone, but shifted to a different balance sheet. that is where people are focusing >> first republic -- i know you looked at the pre-market there closed at 23 it is at 19 and change that is another pretty big character. >> that is witis where i was go go with this i think there is a view in the treasury department in the united states and white house and others that if the situation in europe gets resolved, does that end the domino run? there is an issue with first republic and pac west. >> zion. >> it doesn't seem like this is over the connection between these two is one of panic which is to say credit suisse was a firm that i think for the last year or two years where more was challenged than the past couple months

where you could argue it was directly challenged. a lot of people look and say what does credit suisse have to do with the regional banks in the u.s. i would say very little except everybody is on a knife's edge and comments came with the chairman of credit suisse -- rather, the saudi national bank. >> lehman. >> saying they would not invest more the panic began. >> lehman. that's weird. >> the write-down and how quickly this took place. saudis bought a 10% stake last year for $1.5 billion. the bank was $15 billion at that point. the bank closed with the market cap of $8 billion on friday. this deal was done for $3 billion and falling at this moment just how quickly all of that eclipsed and done with the massive backstop from the swiss government to say they will loan the two institutions $100 billion to make sure there is

not a liquidity crunch andrew, that shows you, again, how quickly a crisis of confidence can be removed. that is what is in common with this and the u.s. with the ubs >> who shows duration risk on the balance sheets on what they he are holding? this scares me more. the fed will allow them to do the bank term funding program where they borrow against it at par, but if rates continue to go up, the new things borrowing are not worth it you are layering another duration risk on what you have already done how much of what our banks hold are held at par? >> held bank by bank some have substantial of what they are holding in securities

>> do big banks have to show as for sale or hold to maturity >> all of them. >> hold to maturity. they have been doing it better you look at the way jamie dimon has been doing it. i could be wrong i think there will be a little bit of see no evil and hear no evil for a couple of years if you wait around long enough and rates come down or the spread shifts and we will talk to steve liesman about this and all of the losses are not the same losses they were. >> if it was our own portfolio and we loaded up on a bunch of 10-year treasury below, we know it was a bad move or bought a bunch of munis we know -- >> flawed accounting rule. >> it is not worth that much you can wait ten years >> the problem with not marking stuff to market.

>> and to not see it could be coming is unbelievable we want to go to liesman >> he is going to actually talk about this issue that you referenced, joe, which is the u.s. federal reserve launching a joint operation with other major central banks. steve joins us with details. he is on the squawk news line. steve? >> good morning, andrew. the fed yesterday announced agreement with five other central banks to make more dollars available if needed around the world saying they will provide enhanced to auction off seven-day money every day instead of once a week which was the old. a swap line is central banks exchange currencies to make money for available in their banking system an example is the ecb puts euros at the fed and the fed puts dollars at the ecb

no loss transaction. it is quickly unwound. the question is is this needed or preempted no indications right now like there were during great financial crisis there are no indications of the dollar shortage which is why the plan might be done it has the suggestion it is worse than it appears with this situation. it is a win-win for the fed according to lou crandall. he said if it is not needed, you get a data point every day if nobody used it you can see it was used a lot in the great financial crisis which spiked on the left then it unwound and they don't result in losses here. like i said, we will know every day if central banks use the swap lines looking at the need for dollars in europe after what you were talking about with the takeover

of credit suisse by ubs. to preempt your next question, look at what is happening with fed futures. 59% probability of no hike now with the risk-off trade this morning on the decline in bond yields 59 to 41% from where it was last night. it turned around this morning. >> that's really important, steve. we haven't gotten to the point of the discussion yet. we were talking off camera before the show started. it seems like it would be illogical at this point for the fed to raise rates this week if you are looking at everything broken and worried over what comes next and hoping to stop contagion. why not pause? there are economist notes all over the place over what is happening to loans at this point. the availability of loans for businesses and consumers and to dry up that could be equal to 25 to 150

basis points depending on the economist you are talking to right now. >> what is the 2-year treasury saying 5 5% to 5.5% >> no, if you have the fed rate outlook in the back, the peak rate is 4.77, joe. we are at 4.64 that is the 60/40 i showed you debate if they do another quarter. something is built into the peak rate more. it is interesting if you look at the january 2024 they are looking for over 10 basis points of cuts i'll give you the reason why the fed may hike that is the fed may want to separate the bank supervision policy from the monetary policy.

they have different tools to do that that is what lagarde was saying last week. these are different things going on obviously, those things merge with what is going at the banks creates the reality of the economy and dictates monetary policy >> steve, that is what muhamed el-erian was saying last week. i have a different question for you around the arranged marriage we saw this weekend in switzerland. arranged by the government, we should say, and including changing the laws there so the shareholder approval process is different. my question is why you think we haven't seen more arranged marriages, if you will, here in the united states? we had a number of questions about the number of banks. there are lots of conversations happening that i have been reporting on last week there seems to be the massive game of chicken taking place

both between potential buyers and companies or banks that want to inject capital into others and saying maybe i should wait for the government to help me or the price to come down then the banks may need the help and saying not at this valuation. >> i think there are two reasons. the first reason you put up any bank index kbx, whatever you want to put up the prices keep falling. you tell me if i'm a bank executive and where i'm supposed to come in and buy this thing. you remember the bear sterns and waiting for a price of $20 and it was $2. who knows what wthe right price is you don't want to come in and buy at $100 when it is $50 and, two, andrew, you know the banks that stepped in to help other banks in the great financial crisis they got saddled with the legacy issues i think one and two are --

>> known as liabilities and lawsuits >> liabilities and lawsuits. i don't know the government could come in and snuff out and signify that against the bank they are buying. they become responsibility for -- they become responsible for it you have liabilities down the road i'll ybuy the thing for $1 then. >> steve, let me ask you about one thing. when the fed came out with the implicit guarantee that the depositor funds are safe. you reported on it the fed was trying to make people relax so they weren't taking the money out of regional banks. the treasury secretary, janet yellen, seemed to undo the good work they had done building it up she said the backstops will

protect if the regulators found it necessary to protect the system that sounds like a guarantee if a big bank is about to fail and everybody else is not broprotec. that is why the crisis of confidence is taking place what happened? >> i think what happened is the treasury secretary was essentially saying what the law is and, becky, you are right it is an implicit guarantee. the law requires that in order for the guarantee to be used, a finding of systemic risk for the individual bank needs to be found by the fed, treasury and fdic this is the re-write of the dodd-frank law that took away the ability of the fed and fdic and treasury to provide a blanket explicit guarantee back in 2008, they had the tldp whose name i cannot figure out

a blanket guarantee on deposits. they guaranteed senior debt issued by new banks. congress took that emergency authority away in order now for an uninsured depositor to get money back, the authorities have to go in and find the bank failure is creating systemic risk and guarantee the uninsured dep depo depositors that is how it works now they will say they will do it with every bank failure. it is implicit >> by saying that and reiterating that, you then get to the point where depositors are behaving rationally taking deposits out of regional banks >> i'm not sure, becky the law is the law unless you go to congress and they want do a blanket guarantee of depositors.

the guarantee is implicit and not explicit i heard that from several authorities. we will come in and bailout the depositors in a bank if it fails and we take it over. it is not explicit >> steve, thank you. we will hopefully be talking later this morning to clear up some of the issues facing the market this morning. when we come back, we will have more reaction to the credit suisse and ubs deal. if you are watching, the futures situation continues to improve the dow futures are down by 40 points s&p futures are off by 2 the nasdaq is indicated up by 6.5. we will continue to watch because we have seen big moves the dow futures were off by 350 points earlier later this hour, we will talk to former fed chair roger ferguson for the expectations of the fed desi u e watching "squawk box"

and this is cnbc ♪♪ inner voice (kombucha brewer): if i just stare at these payroll forms... my business' payroll taxes will calculate themselves. right? uhh...nope. intuit quickbooks helps you manage your payroll taxes, cheers! with 100% accurate tax calculations guaranteed. (vo) if you've had thyroid eye disease for years

and you can't get any shut eye cheers! because you can't shut your eyes, it's not too late for another treatment option. to learn more visit treatted.com. that's treatt-e-d.com.

it's official, america. xfinity mobile is the fastest mobile service. and gives you unmatched savings with the best price for two lines of unlimited. only $30 a line per month. the fastest mobile service and major savings? can't argue with the facts. no wonder xfinity mobile is one of the fastest growing mobile services, now with over 5 million customers and counting. save hundreds a year over t-mobile, at&t and verizon. talk to our switch squad at your local xfinity store today.

welcome back to "squawk box. ubs bought credit suisse for $3.2 billion to try to stabilize the global market. for more on what this means, we are joined by devin ryan for jm securities good morning you probably heard the last c conversation about the fed and why the regional banks in the u.s. had question marks over have not had the arranged marriages like what we saw in switzerland over the weekend >> good morning, andrew. i think the challenge right now is that the u.s. banking system from the capital position and just from a strength position is in a good spot the challenge is that confidence and stability are not there at the moment if you look at what happened at

silicon valley, they were on the extreme end in terms of asset and liability and mismatch and other issues that is a standout a lot of the banks are saying we don't look like that there is still a crisis of confidence going on right now. that is the push and pull right now. it is really tough for the equity investors to underwrite all of the moving parts. >> devin, what is your sense of deposit flight it is all anecdotal from my perspective. i am calling around and phones are not ringing off the hook like the way they were weeks ago. if that news is true, it is not reflective of the stock prices of the backs -- banks. >> that is my impression the first couple days no one knew what was going on money was moving in some cases, we heard that

last night some money has moved back to certain banks. it is not one size fits all. i think money did move around in the first few days that affects earning power as you lose depositors and your assets are less productive i think we have seen a little more stability in the broader banks, but still relatively fragile. that is the question mark here in the broader market. that is what we heard as well. >> devin, given that banking is often times called a confidence game, how do you think about the regionals? we can put first republic on the screen and pacwest up on the screen go through the list. is there any bank on that list you feel comfortable saying this is something shareholders should be buying or are there banks on the list you think they should

be selling what would you be doing? >> andrew, i have done this long enough through the financial crisis things don't go back to normal in two days. there are a lot of effects here. earnings power is impacted here. most banks are asset sensitive lower rates does hurt. now we're talking about the economy potentially tightening you have to think about credit exposures. to me, if that is the conversation, that is a good thing. that is a stock pickers market kbx is 40% of the s&p against 80%. i do think there will be opportunities here you need to be in the safest firms with good balance sheet and asset management liability investors should be careful here >> when you look at the banks,

do you say they are priced because of the risk they actually get taken over by the fdic you can argue they are not priced for that. do you say they are priced to what may be the regulations that are coming or deposits that will not be there the shift i hear is small business owners saying my payroll should sit in a money market account that changes the dynamics. >> those are all the questions what regulation comes in on the other side of this and are we done yet i would say 6.5 times forward earnings and there are going to be banks in there that are being overly penalized because of this broader overhang this isn't just about earnings right now. this is about some of the instability and confidence you know, if we can bring confidence back, there will be

some opportunities in there. again, this is not one size fits all. banks across the spectrum. silicon valley is one example. we do need to get back to the point where people are looking at earnings and thinking of credit exposures that will create opportunities that is not the conversation as much right now it is more about the broader stability of the system. you don't want to have banks being in the volatile sector of the market >> devin, thank you for your per spec -- perspective thank you. >> thank you coming up, senator elizabeth warren blasting the fed chairman we will talk more about the fed

meeting this week. goldman out saying he expect the fed to pause this week we'll be right back. 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! let's partner for all of it. edward jones the cloud makes it possible to expand your infrastructure. but to make it powerful enough to connect your data wherever it is, you need cdw and netapp. cdw experts will work with you to understand your needs, then customize a netapp cloud services solution to integrate data management for all your clouds, helping you reduce spend, improve security, control data 24/7 and automatically detect anomalies. in the cloud, at least. netapp makes efficient cloud management possible. cdw makes it powerful.

you'll always remember buying your first car. but the things that last a lifetime like happiness, love and confidence... you can't buy those. but you can invest in them. at t. rowe price, our strategic investing approach can help you build the future you imagine. ♪ this feels so right... ♪ adt systems now feature google products like the nest cam with floodlight, with intelligent alerts when a person or familiar face is detected. sam. sophie's not here tonight. so you have a home with no worries. brought to you by adt. sfx: [soft beach sounds] c'mon ref, that's a foul! jay? jay's back? gimme a time out. huddle up! i call the time outs. didn't expect to see me so soon, huh? well, i invest in a fund that fuels innovation, like next gen video conferencing, and when i saw your defense in the first half, i had to step in! anyone can become an agent of innovation with invesco qqq, a fund that gives you access to nasdaq-100 innovations. coach, what are you doing?! this thing goes fast. before investing carefully read and consider fund investment objectives, risks, charges, expenses and more in prospectus

at invesco.com

senator elizabeth warren blasting jay powell. >> my view on jay powell is well known at this point. he has had two jobs. one is to deal with monetary policy one is to deal with regulation he has failed at both. >> would you advise president biden to replace him >> look, i don't think he should be chairman of the federal reserve. i have said it as publicly as i know how to say it i said it to everyone. >> senator warren accused the congress and fed of working together to weaken financial regulations. there is something for everyone

here there are other people that would say and andrew, i know, we disagree on this the fed and congress work together to really ignite the inflation that the fed is trying to deal with right now at least that is one viewpoint >> i don't disagree with that. no question they created a lot of the challenge >> she was parcel to everyone of those bills that extended -- there was a pandemic and a lot of emergency relief that the fed was forced to do if you look at the piece kevin's piece in the journal and this is what druk ckenmiller was saying. it is weird. jay powell is getting it from

both sides. >> it is bizarre so much finger pointing and we have not resolved any issues same thing in switzerland. there are already people who are angry and politicians who are angry that ubs is getting a steal of a deal. i don't know if i would call it that recriminations are coming before the dust settles on whether this stuff is working. >> right >> in that probably makes it mo complicated. >> i have a question if shareholders are sacrificing. >> they got something. 59% haircut. >> if you protect -- if shareholders are all gone and bondholders. >> a lot of bondholders. >> should depositors have to --

>> to know more than the fed >> to protect their money? >> clearly >> only insofar as we set up rules that are supposed to account for -- look, i have great sympathy for the depositors i don't expect them to know more than the bank or the fed >> guarantee every deposit what would that cost >> that's a good question. >> hopefully the answer is nothing. the fdic is paid for by bank fees and the promise they will have a backstop for everything would stop before it goes too far. the big banks don't want to cover for everything with the smaller banks. i don't think they are in the same boat. the mid sized banks. you saw the statement asking if we will cover all of the deposits >> the insurance costs by default get passed on to, yes, all of us in the form of fees.

>> not if it doesn't go through the fdic reserves. >> if something bad happens. the concern is it costs -- the reason why people don't want a higher level of insurance. the question is different ways to traunch the insurance could you have a payroll account identified as just payroll just insure those? >> the question is there are different types of money markets here >> bitcoin, you don't need deposit insurance. >> you need a different type of insurance for that mark grant will join us next on the reaction of the swiss bank deal and the fed liquidity issues. later, mayor eric ams lladwi join us on the health of the city's economy we are coming back with all of

it >> announcer: executive edge is sponsored by at&t business at&t 5g is fast, reliable and secure ly! welcom ur third bark-ery. oh, i can tell business is going through the “woof”. but seriously we need a reliable way to help keep everyone connected from wherever we go. well at at&t we'll help you find the right wireless plan for you. so, you can stay connected to all your drivers and stores on america's most reliable 5g network. that sounds just paw-fect. terrier-iffic i labra-dore you round of a-paws at&t 5g is fast, reliable and secure for your business.

good morning welcome back to "squawk box" live from the nasdaq market site in times square. check the futures. you have to say they are under control. joining us is mark grant chief strategist at colliers mark, i read your statement last night. the forced arranged marriage it is a good sign the futures up a little then i got up this morning and futures are down 350 i have to ask mark grant something different about this working. now they are down 28 points or so it is a fluid situation. do you think things are stabilizing at this point in your view? >> no, joe, i don't. this is an incredibly messy situation. i think it will get worse. i have been on wall street 49 years this coming april. i have seen a lot of stuff

let me start with what is going on in europe t ubs says they will not pay the a-t-1 bonds or cocoa bonds which were higher equity, but give equity holders money there will be massive lawsuits, in my opinion, because of this the takeover of credit suisse also raises issues in the united states for instance, credit suisse has three exchange traded notes covered by the s.e.c. and covered calls on gold, silver and oil. we have no clue what will happen to those securities. then in the united states, you know, first republic got downgraded twice in a week yes, it is a takeover of some of the banks by the first community, but this is allout

with credit suisse and obligations and liabilities is looking to be a mess for the united states and europe i also think the banks in europe are going to get hit i think this situation, joe, is so complicated that most people don't understand it and don't understand the potential liabilities that both american banks and bondholders and european banks face. it's a mess. >> you tie a lot of what we're seeing to the original sin or original mistake by central bankers or fed by staying at zero for too long? >> yes, joe, they stayed at zero too long there is mismanagement in the banks like silicon valley bank the part of the problem, in my opinion, the fed stayed with interest rates way too low for

too long ever since the financial crisis in 2008 and 2009 they made the second mistake which is raising interest rates much too quickly and too aggressively that is feeding into the financial stability of the regional banks in the country. i think, in my opinion, the fed's smartest move and a number of people get my commentary every day. i think the smartest move is to stop -- just stop raising interest rates let the world cool off let the markets cool off then, if you want to come back in and say let's try to get back to 2%, fine. we are 4.5% to 5% now. there is no question in my mind what the fed needs to do that is just stop.

>> mark, as you said, silicon valley bank might have been a one-off. if you think about the entire debt structure that built up at zero at 0% interest rates and how many people have long duration assets of some kind and go up 450 basis points and nobody is marking that to market how big is that issue? what does it cause does it break or slow down gdp growth for a number eof years how does it manifest itself? not everybody is in 2-year treasury some are in 10-year treasury or 30-year treasury if you needed the money, you probably have to take a 20% or 30% haircut and it is not reflected anywhere is that ever going to come home to roost >> i think it is coming home to

roost now, as we speak, joe. the banks to the mark-to-market. all of a sudden, as you pointed out correctly, it is a huge loss not just in treasuries, but huge losses in corporate bonds and mortgage backed securities and munis and secondary markets because they are widening versus treasuries you have a multitude of sins, if it you will, taking place all at once i think it is a much more serious situation that will last longer than we think we are facing and virtually there is no way out of it right now. >> mark, you bring up a good point not just treasuries, but mortgage-backed securities is the fed going to take all of this at par at the window or is

this the situation where it is only treasuries and all of the other stuff can come back to be a big, huge issue because it is not backstopped by the fed >> let me explain this the fed will not take this stuff to par when it is 60 cents on the dollar that is number one two, there is a really large problem almost nobody is talking about. the fed has been giving the treasury money every month to help offset the deficit in the country. now, with what's going on and the fed doesn't have any money now to give to the treasury because they are lending money to the banks by the way, the federal home loan bank system is lending money to the banks consequently, you think the

clock made the qt situation and you think the balance sheets would be coming down, but in fact, they are rising. the fed and fhe system is taking on more debt here and they are not able to pay the treasury and they are getting more and more in debt. >> mark, we got to go. the whole idea of the bank term funding program where they will pretend if it is ten years out, they give you a loan based on par. that is a new loan they are making that is not at market rates. that's a fake rate if they let you use par to get a new loan and this is a new class of securities that the fed will own that is not valued at market rates. they are getting -- we're getting screwed. the fed is getting screwed probably if rates continue to go up, these will -- i wouldn't

lend money to these people at par with current long-term rates. >> joe, something else that is taking place -- you are right, joe. let me mention the prime rate is 7 7.75%. they are keeping people borrowing. if you have credit, you borrow at 22% we are seeing tremendous problems on a wide scale >> i thought this couldn't happen again >> and the media doesn't seem to understand how big this problem is and it is big. >> mark, they are playing us out. thank you. good to hear your thoughts i was reading them over the weekend going this guy is not happy. it is what it is someone once famously said that. thanks. when we come back, former rgon chairman of the fed roger

feus joins us. and we have jack lew with the next moves for the fed we'll be right back.

if your business kept on employees through the pandemic, getrefunds.com can see if it may qualify for a payroll tax refund of up to $26,000 per employee. all it takes is eight minutes to get started. then work with professionals to assist your business with its forms and submit the application. go to getrefunds.com to learn more. the first time your sales reached 100k with godaddy was also the first time your profits left you speechless. at the counter or on the go, save 20% with the lowest transaction fees and keep more of what you make.

start saving today at godaddy.com ♪ and unforgettable scenery with viking. unpack once, and get closer to iconic landmarks, local life, and cultural treasures. because when you experience europe on a viking longship, you'll spend less time getting there and more time being there. viking. exploring the world in comfort. you're doing business in an app driven, multi-cloud world. that's why you choose vmware. with flexible multi-cloud services that enable digital innovation

and enterprise control, vmware helps you keep your clo options open.

this is ge aerospace, advancing flight for future generations. ♪ welcome to a new era of flight.

top economists disagree about what the fed will do come wednesday. jpmorgan is expecting a 25 basis point hike goldman sachs is expecting a pause. right now we want to bring in roger ferguson, he is former vice chairman of the federal reserve, the former ceo of tiaa, and of course a cnbc contributor, and roger, i would have said a week ago that i thought it was probably more likely that the fed would raise by 25 basis points, but seeing everything that played out last week and watching what's happened this weekend, i've

changed my mind. it seems like it'd be kind of crazy to go ahead and raise rates without stopping to look around and see what's really happening in the banking system. >> i think i have a slightly different point of view. i think it's a very, very close call i wouldn't be surprised if they took a pause, but recognize two things one is inflation is still running well above target. two, labor markets are still tight, so we are very focused on this show and you know, the wall street world of financial market ss a real economy that the fed has to think about the second point i'd make is the distinction should be drawn between monetary and financial stability policy at this stage they have laid down quite a bit of protection in the financial stability world. maybe more to be done, i don't know, but their argument, i believe is we've stabilized that system for now, and let's now focus on the inflation rate. and the final thing is i think if they pause, they're going to

have to explain exactly what they're seeing that is maybe giving them more concern i'm not sure that a pause is comforting at this stage given where the system is. and finally, if they pause the then the question is when are they going to start again. so i think there's more question around pause than maybe people imagine. >> look, i'm sure they're worried about what the market's reaction would be if they paused, everyone thinking it's off to the races again, that they're going to be done for a good deal of time or forever at this point if you look at what's actually happening because of the concerns around the regional mi mi mid-sized banks that is going to mean the economy is slowing down in some regard i think i read goldman was saying tighter financial conditions are going to cut a half a percentage point off gdp. jpmorgan is saying slower loan growth is going to cut half of 1% off of gdp. it seems like the fed's job may

be done already by what's going to happen, the ripple effects of what we're seeing right now with the banks. >> i understand that and would not dispute that there would be tightening loan conditions the other side is the flight to quality in treasuries in particular as you have reported several times is still true, has taken the yield on the two-year, the five-year and the ten-year down quite a bit that may be an offsetting factor there are financial implications there in terms of financial conditions may be easing in some degree, even as it's tightening in the banking system. and we've seen a surprisingly, i think, pretty good stability broadly speaking in the broad equity indices and so this question of financial conditions i think is not all on one side. i think it's a two-sided discussion, which, again, is why i think 25 basis points, you know, should be on the table. >> roger, the swaps lines that

all of these central banks have extended, look, the argument, they're doing that to make sure that there aren't cracks in the global financial system. steve liesman is reporting he hasn't seen the need for it to this point, at least in what he's been looking for. that in itself is not exactly calming. the idea that, oh, we're doing this emergency switch on how we run the swap line so that it's eff day in-- every day instead e o a week you would think they would have serious concerns about what they're seeing in the banking industry >> i can't disagree with your read i understand where the swap lines coming from, we used them to good effect on nine len ini9/11 initially. i don't think there's any sign of excessive demand for dollar liquidity overseas the swap lines were already in place. i was a little uncertain as to

exactly why they chose to make the announcement over the weekend. i don't think it's inherently wrong but it's the kind of thing that raises a question people often ask do the central banks know something we don't know i don't think they know anything we don't know about demand for dollar liquidity overseas right new. perhaps i would have been a little more circumspect in letting the existing swap lines maintain themselves unless there's clear need for something different. >> roger, thank you. >> thank you okay coming up on the other side of this, futures, we're going to show you right now we are in the green, just marginally we're going to dig into the big deal between ubs and credit su suisse later new york city mayor adams rs going to be joining us in a fit on cnbc interview on the health of the economy. "squawk" is going to be coming

right back two big hours ahead [office sounds] ♪upbeat music♪ ♪♪ ♪when the day that lies ahead of me♪ ♪♪ ♪seems impossible to face♪ ♪a lovely day (lovely day)♪ ♪(lovely day) (lovely day)♪ ♪(lovely day)♪ a bank that knows your business grows your business. bmo.

sfx: [soft beach sounds] c'mon ref, that's a foul! jay? jay's back? gimme a time out. huddle up! i call the time outs. didn't expect to see me so soon, huh? well, i invest in a fund that fuels innovation, like next gen video conferencing, and when i saw your defense in the first half, i had to step in! anyone can become an agent of innovation with invesco qqq, a fund that gives you access to nasdaq-100 innovations. coach, what are you doing?! this thing goes fast. before investing carefully read and consider fund investment objectives, risks, charges, expenses and more in prospectus at invesco.com a ballet studio, an architecture firm... and homemade barbeque sauce. they're called 'small businesses.' but to the people who build them there's nothing 'small' about them. that's why at t-mobile for business... you'll save more than $1,000 versus verizon. and with price lock guarantee, we'll never raise your rate plan. so you can keep your focus on toe-turns and making sure the sauce is extra spicy.

at t-mobile, there are no small businesses. ♪♪ good morning, ubs agreeing to buy credit suisse for more than $3 billion, at least where the stock closed on friday both those stocks, though, sinking this morning taking down the price that they're paying along with other banking names struggling as well we'll have the latest on the sector fallout the fed in focus this week as it prepares for a two-day meeting and a decision on interest rates and the futures on the move this morning as well, off the lows of the session for sure we're going to break it all down and find out what you should be

doing with your portfolio as the second hour of "squawk box" begins right now ♪ ♪ good morning, welcome back to "squawk box" right here on cnbc, i'm andrew ross sorkin, along with becky quinn and joe ke kernen we have so much going on after a wild weekend with ubs and credit suisse in an arranged marriage take a look at u.s. equity futures at this hour we do have some screen on the screens, just marginal right now, but nonetheless, a little bit better than maybe where we were even before take a look at treasuries, though, because that, of course, the big question as to what the federal reserve is going to do can they go 25 basis points or not. we just talked to roger ferguson in the last hour about that. you're looking at the ten-year

note of 3.382, the two-year at 3.7. crypto, bitcoin has crept up -- i shouldn't say crept up, leapt up maybe is the way to say it to over $28,000 gold also on the move as maybe more concerns about what the fed is doing these days, joe >> you think ubs can eventually make something, make some lemonade out of these lemons i'd be mad that stock is down too. >> the shareholders are mad because they didn't get to vote. >>st it's getting done >> ethey have a plan if they are allowed to shrink the investment bank and do other layoffs that they will be able to make more money on this deal if you listen to the chairman of the ceo of the bank last night, they made a plan and put it forward was this was clearly done in a hurry and done at a sweet discount to where credit

suisse closed on friday night. >> i think it's a steal, guys. >> if they do make money on it, that's what people are going to say. i would say that's an unknown factor at this point. >> were any of those things that jpmorgan got a steal >> those were less steals because of the liability that they -- >> the liability exists here too. they don't get the liability washed away. >> right, but there were so many -- i mean, one of the reasons it was so troubling for jpmorgan in some of those instances was the number of lawsuits and settlements that came from the department of justice. the question is are those similar suits available, the department of justice going after these wbanks credit suiss, or is the swiss government going to go after them i don't know if the swiss government will. it's a very different situation. >> there are already swiss government -- members of the swiss government who are complaining about this being a steal, and you got to remember when you're negotiating with the government, it's different

people on a regular basis, and that's part of what happened with jpmorgan. it was doing a deal with some regulators and saying, okay, this was going to be the situation, but regulators change, government officials change, and that kind of twists what happens down the road i think the reason hthey got it for a steep discount is because of the outstanding questions i don't know that i'd say it's a steal at this point, though. >> right. >> switzerland thinks -- switzerland thinks of ubs and credit suisse as national champions in a way that the u.s. doesn't. we don't think of our companies. we protect our u companies but in a very different way. there will be lawsuits there will be no questions there will be all sorts of shareholder lawsuits, but if the government goes to take the money, that will be different than what i think would happen in the u.s. >> the government over there i think is very neutral on all these things. >> swiss >> let's get to jeff cutmore

with more on this. what do you think, jeff? >> yeah, let me just pick up on some of the points you were making i think one of the issues that will be a big focus here now is the concentration of risk in ubs as a result of this merger ultimately you're going to end up with one very large bank here that represents something more than 50% of the swiss nation's deposit. so that actually is incredibly important from a political per sp perspective and one could argue does make switzerland somewhat vulnerable going forward to a more systemic banking crisis w back to the points you were making about the politics, i think the reason this is so toxic, this deal, is that people here feel that the regulator, fin mark should have been more active in the past about forcing credit suisse management to come up with a restructuring program

that actually worked and as long as i've been coming in and out of switzerland over the last two decades reporting on the woes at credit suisse, it's been a death by a thousand cuts you know, it's been the legal fines. it's been the misallocation of capital. it's been, quite frankly, terrible behavior by some management figures who have done things that they really shouldn't have done, and all of this has added up to the huge reputational damage that credit suisse has experienced and of course on friday we have the swiss national bank offer this $54 billion credit line, and it wasn't enough to stop the outflow of deposits from this organization, which is why we got this shotgun wedding over the weekend. very steep discount, 59% ultimately as far as the equity holders are concerned. you know, there is one story in here that i think bears focusing

on because it will have consequences as the rest of the market looks at all of the other systemically important banks that's the way that these additional tier one bondholders have been treated, effectively $17 b $17 billion worth of these bonds written down to nothing. and these bonds were created after the last financial crisis to in some way provide the kind of loss absorbing capital that these major banks needed the fact that those bondholders have been written down i think is part of the reason that other investors now in global banks and european banks are a little bit worried this hour. back to you. >> jeff, we're definitely seeing that with stock prices of other banks, and if you look at the credit default swaps on some of those banks too. unintended consequences of new changes, new things that go through. >> reporter: yeah, absolutely. you know, we were told too big

to fail after 2008 we will never see the collapse of another systemically important bank, and here we are 2023, we've basically just seen the collapse of a systemically important bank and i guess you have to take your hats off to the swiss authorities that they did ultimately act quick through the weekend where they had to. friday this bank was worth $8 billion, today, what, 3 billion or so? and we still don't know how this works out because how do they wind down the investment banking business what happens ultimately to the retention of key staff 50,000 employees around the world. how does ubs make sure it keeps the ones it wants but lets the others go. many are arguing this is the wrong buyer because of the overlap of services in private and asset wealth management. this wasn't the bank that should have bought credit suisse, but of course it is the solution that the government here wanted.

back to you. >> jeff, i have two questions, one about culture and one about government, and maybe they're related. the culture question, these two banks have been rivals for years, they hate each other. these people hate each other you talk to people at ubs, they hate credit suisse people. credit suisse people hate ubs people how is that supposed to work on a day-to-day basis especially after what may be tens of thousands of people losing their jobs how much of that conversation is taking place right now where you are? >> reporter: yeah, it's definitely happening, and to be honest, the banking story is such a big story here in zurich that all of the salons and coffee shops are abuzz with conversation about how this can be pulled off. you've nailed it there there was a very different risk taking culture in credit suisse that at times seemed to jar with the idea of the more stayed and

stable approach. we understand the consequences of that have been billions of dollars in fines over the years paid to the s.e.c. and other regulators as risks were taken that were perhaps unwarranted or even illegal at times, so i think it's goingto be very, very difficult to merge these two organizations. i think ralph hammers, the ceo has a real job on his hands here to bring these two organizations together i know you guys were talking about bank of america, merrill lynch. we've seen over the years many, many case studies of how it dbt work there will be a lot of people here in zurich today hoping this won't turn into another one of those stories. >> jeff, thank you very much joining us right now to talk more about all of this is jarrett syteburg of td callen washington research group. you had thoughts on friday about

this my guess is you've got pretty different thoughts watching everything that happened this weekend. what's your take on what we saw in switzerland and what it means for the u.s. >> i think right now ubs has to bed world's safest bank. the swiss authorities have told everybody that this thing is too big to fail, and theyjust can' resolve it, so you know, in the flight to quality, ubs is now in the spotlight and the safe place to be. >> safe place for depositors or safe place for shareholders? >> for depositors, for depositors. >> not necessarily the case for shareholders. >> people worried about their money. >> right go ahead >> oh, well, i was going to say i really think the big news over the weekend is that the fdic sold signature bank and the loss is only going to be $2.5 billion, and you know, grant it, i'm from washington, but even i can figure out that's

only 2.5% of total assets for $100 billion bank. that's on the low end, and, you know, it suggests that the deposit insurance fund is going to be much less than expected, and we may not see those higher deposit insurance premiums that the three of you were talking about earlier this morning. >> meaning that you don't think -- i mean, the mid-tier banks yesterday asked the government, the fdic to come in and insure all deposits. you don't think that should be done. >> i'm not willing to go there yet. i think that is the, you know, break the glass emergency option you know, this is a really healthy banking industry you know, net income last year was 263 billion according to the fdic net interest margin was up 82 basis points to 3.37%.

so what we really have is the crisis of confidence banks are designed to be ill liquid what we're seeing here is a confidence crisis, and that's why at the end of the day unlimited to deposit insurance is the final act to restore confidence, but i'm not sure it's needed today. >> you say that but we're looking at month-to-date some of these regional banks down anywhere from 35% to more than 80% in some places first republic is down this morning another 15%. is it okay for those banks to shut down, and if they do, what message does that send to depositors in any of the rest of these -- in any of the rest of these banks? >> sure, so i don't think regulators are as pofocused on e stock prices as the rest of the us i think they're really looking to see what depositors are doing. i think it was very positive

that we got through friday kand the weekend without another regional bank failure. but as we saw in 2008, falling stock prices eventually do impact consumer confidence in the bank, and so if you're first republic, of course you've got to be wary that's why we saw such efforts last week to back them. >> you think the ring fencing has worked at this point you think depositors aren't taking money out, and that means that it will be okay, confidence will be restored >> yeah, i think that it's not appreciated fully how much the fed has done the liquidity options that they put forward, the bank term funding program is cheaper than the discount window. it's for up to a year duration, but you can prepay there's no haircuts for either the discount window or this new program. so i think they've really

injected a ton of potential liquidity. you know, and i think we're getting a lot of investor questions now on, okay, like what's the punishment for all of this and you know, i think that punishment is coming for, you know, much tougher regulations, and you know, what we've really seen then is, you know, the fed saying we'll help you, but there's going to be a cost >> jaret, thank you. >> pleasure. when we return, we're going to be speaking to roger altman about what the banking turmoil could mean for the fed's decionn testsi oinre rates much more on that when we come right back to satisfy cravings from tokyo to toledo? so you partner with ibm consulting to bring together data and workflows so that every driver and merchandiser can serve up jalapeño, sesame, and chocolate-covered goodness with real-time, data-driven precision. let's create supply chains that have an appetite for performance.

ibm. let's create.

in order for small businesses to thrive, they need to be smart... efficient... agile... and that's never been more important than it is right now. so for a limited time, comcast business is introducing small business savings. call now to get powerful internet for just $39 a month, with no contract, and a money back guarantee. all on the largest, fastest, reliable network. from the company that powers more businesses than anyone else. call and start saving today. comcast business. powering possibilities.

welcome back to "squawk box" this morning top economists disagree about what the fed will do jpmorgan expecting a 25 basis point hike goldman sachs expecting a pause. i want to bring in roger altman to break the tie which side are you on for wednesday, roger >> andrew, i think this a there are two giant questions here one is if the fed were to pause, would that boost confidence or undermine confidence after all, everyone knows the fed is on a -- has been, excuse me, before this, on a steady upward path confirmed just ten days ago in terms of further rate hikes, and i'm not sure that a pause would instill

confidence as compared to undermine it but the other question, which is in the other direction is whether this banking crisis is already having a pro-recessionary effect in two senses first, financial conditions have tightened, open market financial conditions already, and se secondly, often people get nervous when they're reading all these headlines. maybe i won't buy that car maybe i won't take that trip and so fotrth. as steve liesman said it's going to be a very close call. as the future markets are indicating oo i'd like to see the fed go ahead on a 25 basis point hike, but i honestly don't know what's going to be done, and i'm not sure that it won't be affected by the events of the next 48 hours. >> roger, the question i have is actually -- and it really is data dependent in this sense a different kind of data if deposits really are not

fleeing the regional banks, i would say it again, anecdotally that seems to be the case again that could change at any moment, but if there was real data, hard data that jay powell could come out publicly and discuss and marry that with a 25 basis point increase, that, to me, might actually -- you know, that could be the solution to all of this, but the question is if you go out with a 25 basis point increase at a time when it looks like one or two or three of these banks continues to be troubled, that's where it gets a lot more complicated >> well, let's talk about deposits for a moment, and i'll come to your question. i heard the debate a little bit earlier. i argued last week here that the rescue of silicon valley bank and signature bank effectively meant that all deposits were not guaranteed now, i also said that the authorities would not confirm that because they don't want to

imply that degree of federalization, and then secretary yellen said they're only guaranteed if we determine that the institution is systemically important and that there would be a systemic threat associated with it well, i think we've learned that all banks now are systemically important. certainly the 99 so-called regional banks are systemically important. so that's a distinction without a difference i would repeat as of this moment, all deposits regardless of size in any serious bank are effectively guaranteed. >> roger, let me just push you on that point. i think that's incredibly important. i think that's what the fed was certainly trying -- the implicit guarantee they were given. i think that's the question. when janet yellen comes out and says, look, we'll do it if the bank is systemically important and pointing back to the rules and when you have people like elizabeth warren and others saying, no, we changed the rules

so that doesn't lead to that point, i mean, i think that's the uncertainty that has people questioning whether this fence they've put around things is actually going to work >> well, it would be a good thing if they clarified this maybe by proposing a sweeping reform of the deposit insurance system yes, it would take a long time to legislate that, but in the interim they could confirm that deposits at serious banks are guaranteed what would reform look like? a system where all deposits are insured regardless of size, but where the larger the deposit the bigger the fee paid into the insurance system at the fdic to insure it. but i think, listen, right now you've been talking about first republic or whatever your favorite regional is, those deposits are guaranteed. it's obviously systemically

important in this environment. and if you step way back -- >> roger -- >> go ahead. if you're right does that mean there needs to be additional transactions, arranged marriages, a la what we saw in 2008, a la what we saw over the weekend, with the first republics of the worlds with the pac wests of the world, if you say all deposits are guaranteed, just leave it where it is? >> this gets to the distinction between depositors and shareholders as i say, i argue that the depositors are protected, and i'm convinced of that. the outlook for the shareholders is different as we're seeing the earnings outlook for these institutions, whether it's first republic or any of the other so-called regionals may not be very good as people aren't sure of whether it's smart to do business there and, therefore, move to do business or at the margin more business with the largest institutions so the earnings outlook and

therefore the stock price outlook may be poor, and the head llines are talking about first republic's share price i don't think that affects the question of whether depositors there are protected. they are. >> roger, real quick, can you just speak to this game of chicken between people who want to buy first republic, and let's take first republic's name out of it directly, but into these banks and the management of these banks who are sitting there saying, well, you know, our price is so low that doesn't make sense for us, and some others that are saying we've got to wait for the government to help us or give us a backstop -- protect us from lawsuits. >> i think there's a big distinction, a really important distinction between what just happened with ubs and cs and what did not happen the weekend before this past one relative to sbb. let me try to make this point.

so we saw a giant liquidity backstop provided to ubs through the swiss national bank. you reported 108 billion we saw 9 billion of loss protections provided to ubs in connection with this this was the pattern, as you know, in 2008, whether it's jpmorgan or bear stearns and the loss protections there or other combinations now, weekend before last, i don't believe -- and i can't precisely confirm this maybe you can. that our authorities, the fed, the treasury, the fdic, were willing to provide those protections. i've seen in the press reports to the effect that they were not. why not? because of the bailout, the aura or lack of aura of bailouts, which we don't want anything that looks like, smells like, or sq quacks like a bailout. we're not going to provide that protection that is a really important

change assuming i'm right. >> can't, roger steve liesman said before they weren't allowed to make those protections because of changes after the last financial crisis, that they can't say they're going to do those things it's not allowed. >> well, i think that's debatable, becky, because i think they have various emergency powers as we've seen in terms of determining that sbb was indeed systemically important and, therefore, what followed i'd like to know more about that, whether it's allowed or it isn't, it didn't happen, and eve i think that is a big reason unlike ubs, cs why there are no buyers if you ask a buyer to buy a bank in 24 hours, the buyer is going to say wait a minute i don't know what i'm buying i either need a lot more time or loss protections, and neither of

those was available, therefore no buyers. >> rogers, always good to see you and get your perspective especially in the mid-of all of it. finance committee member senator bill cassidy weighs in. and later in the program, former treasury secretary jack loom will be our guest that's bob diamond there, he may know jack loom but bob diamond is going to be on too. of bei. i don't want to outlive our money. and i have been eating all these stupid chia seeds! i could totally live to be 100! why do i keep taking such good care of my- since we started working with empower, we're able to get all our financial questions answered, so we don't have to worry. so you never- no. never. join 17 million people and take control of your financial future to empower what's next. start today at empower.com

woman: at first, it was just a team. now, i can't imagine my life without them. man: that coach changed our son. on the field and off. (cheering) (cheering) (cheering) ( ♪♪ )

welcome back to "squawk box. banks still dominating the headlines. we'll start on this side of the atlantic with u.s. regional banks which are trying to find stability. we've got incremental news from a handful of names including first republic, which is still feeling the hangover from the failure of silicon valley bank those shares are down another 19, 20% this morning on around 4 million shares of volume its credit rating getting downgraded to a single b plus to a prior bb plus at s&p s&p downgraded that rating to junk meanwhile, u.s. bank shares, usb is getting help from an upgrade at baird to outperform on better risk reward at current prices calling it a high quality franchise on sale. those shares for u.s. bank corp. helping up about 2.5%. moving to europe, over 2.5 billion shares of volume in the wake of its broker takeover of embattled competitor credit suisse, analysts over at kbw have downgraded it to an underperform citing amongst

other things unknowns around capital requirements and litigation risks analysts at bank of america upgrade the stock to a buy saying the logic of the acquisition is powerful and cost synergies could be substantial check out shares of meta platforms. the social media jigiant gettin help by analysts at edward jones saying it's making meaningful and notable reductions in expenses and addresses concerns about heavier spending on metaverse. pe pe pep pepsi co. shares up fractionally a market perform over at bernstein, a bit of a mea culpa by analysts who say they were wrong and that the momentum for growth in key brands and beveragb beverages could continue keep it right here, "squawk box" comes back after this quick break. thing. it really is something.

as an expedia member, you can save up to 30% when you add a hotel to your flight. so you can have a bit more money, to do even less. because you've got a whole lot of nothing to do and absolutely nowhere to be. new projects means new project managers. you need to hire. i need indeed. indeed you do. when you sponsor a job, you immediately get your shortlist of quality candidates, whose resumes on indeed match your job criteria.

visit indeed.com/hire and get started today.

senator is here, and we're talking. we're solving the world's problems we got to vote on this, i think. congress continues to debate over the budget and our next guest had a heated exchange last week with treasury secretary yellen over social security during a finance committee hearing on the president's proposal here to discuss that and possible bank regulation, louisiana senator and finance committee member bill cassidy, and yeah, there's a couple of

words now that due diligence is a two-word term that is getting a lot of -- but also duration risk, which we were just talking about with you and how big the problem is that's what got svb and you wonder is it a major overhang to what we're talking about and something to worry about is it the tip of the iceberg >> it could be the tip of the iceberg. you mentioned the social security exchange i've had with secretary yellen they've got a duration risk in social security. just like it's now reported, the fed have been telling svb years ago that they had a duration risk for 30 years it's been said to the social security folks that there's a duration risk, and i think as long as the issue is over the horizon, it's okay. it's someone else's problem. it's not my problem, and then it hits it hits hard and everything crashes. whether it's banks or social security, that has to be kr addressed. >> let's focus on the banks today just because of the situation. wall street is watching many of these bank stocks, these regional bank stocks are still under pressure even after

everything we've seen to this point. as someone who sits on the finance committee, as somebody who's watching this, do you think that we've contained the contagion or not >> oh, with e de don't know tha, right? we don't know what the balance sheet is i'm a gastrointerrolgss, you have a sense that the they're whistling past the graveyard of their duration risk. presumably others are at risk, whether or not someone's stock is at risk i think depends upon how they've managed this high interest rate environment. >> are we engendering more moral hazard again and it comes home to roost, that seems like it's happening again, isn't it someone said that capitalism without risk is like religion without sin. and if there's nothing -- if there's no downside it doesn't work, and it's like the federal government is always there to

backstop us until it's impossible to do, i would think. are we doing it again? >> it seems as if there is encroaching moral hazard or i should say expanding moral hazard every time somebody is rescued from their kind of their sin, their investment sins, the fed steps up now, what's the alternative? that's the challenge where are we going to let a lot of very innovative tech companies, small startups not able to meet payroll and dispense that whole system i think we can probably agree that would not wbe a good thing. they also builailed out a lot of folks who were personal depositors who had exceeded the $250,000 payroll to your point it is an expanding moral hazard. >> but depositors are different from shareholders or bondholders in all of these issues do you think depositors should be protected and is that the thing that needs to be made explicit so that you don't continue to see money run out of

regional banks >> yes, obviously you see the rationale in order to preserve the strength of regional banks, obviously. what makes it difficult is it papers over the sins of management management was told they had a duration risk. they didn't pay attention to it. the they continued kind of again just whistling past the graveyard, and then it came crashing upon them. >> when they had to sell they were forced to mark-to-market on a large portfolio and then people saw what the real risk, at one p $.8 billion in losses on selling a small portion. i think andrew wants to -- >> i want to go back to the moral hazard question, which is, you know, we keep saying we want all depositors to be fully insured, which, you know, i think we'd all like in many ways i'm also curious where you land on the personal responsibility issue which is to say we've had fdic insurance, we've told the public that it's $250,000. i know some families, by the way, that to the extent they

have more than $250,000 in cash, they put 250 in one bank, 250 in another bank there are ways to do this. i'm not suggesting it's the right answer, but i'm curious how you think about that. >> yeah, so if you look at an individual investor of high net worth, typically he or she has the sophistication, i'm told, a single bank can then spread $250,000 in multiple banks so that the entirety of what they do is kocovered. it's legal and they could have done that. in this bank, they did not are we going to rescue those people from the casualness by which they approach protecting their own assets i don't think the american people particularly care for that that just tells you again there's no risk in capitalism, and they think that there should be you don't want anyone to lose money, but there should be a due diligence. if you don't have that due diligence that papers over the mismanagement of the leadership of a bank and at some point we've got to get out of this situation. >> the issue is --

>> go ahead. >> all i was going to say is is, senator, the customers are not acting as governors, if you will, or influencers over management clearly we've seen that, even with supposedly the smartest people in the room who were invested and banking at silicon valley bank, you know, who have cfos frankly didn't seem to see it or put blinders on. >> yeah, i mean, that's what's making this so difficult but at the same time, can you allow a bank to mismanage its own assets so terribly and there be no consequence? >> now, you could say he's lost his money, the investors lost their clars. yes, that's true i can tell you the american people think something's going on that would not have been available to them at their regional bank unless you have the confidence of the american people, you're not going to have a solution which is long-term. >> if you're cfo at svb was 30 years old, senator, he's never seen, or she has never seen rising interest rates.

fed went up 450 basis points fast after staying at zero for a long, long time, and we had the pandemic, we had 2008, we had things that they were extenuating circumstances, but there's a lot of finger pointing going on right now we need regime change at the fed, i don't think he's necessarily talking about jay powell he's talking about the fed itself, the way that the fed manages its affairs. what would you do? do you -- is this the arsonist trying to put out the fire >> i'm a doctor. there's a saying in medicine don't just do something. think. now, what are you arguing about? i'm not saying there shouldn't be regime change at first you want to define what your objectives are. if your objective is we don't like the way jay powell has been handling this in particular, what in particular the fact that interest rates were kept near zero for so long has created a different sort of economic environment than when interest rates were typically -- >> that's why those banks were

in those long bonds, they thaukt they could do that they could put it on their balance sheet. it's a rutreasury w, there's no risk. >> you can't excuse it because they're too young to understood this the first article about duration risk by a friend of mine was written 50 years ago people learned about this, and they could have accommodated that understanding the fed was warning them jay powell said this is what we're going to do sending that clear message. i don't think you can excuse management i think that's what people are upset about. the fed's actions are currently excusing management. if you want jay powell going back to what you want him to do, you want him to let banks fail and all the depositors lose their money, be explicit about that don't just say get rid of jay powell by saying, okay, what do we want the next person to do. >> senator warren is criticizing the fed that they were complicit in terms of regulation, and she's been a critic of jay powell for a long time, didn't think he should have been reappointed because of lax

regulation do you think the fed was complicit in the other way that staying at zero allowed congress to spend -- how much did we spend in the last -- go back to the trump administration if you want with the tax cuts, whatever you want, because we got to mention both parties are guilty of this, but we spent a lot of money in the lasttwo years, in addition to the last six years, right, and the fed was at zero didn't that enable all that spending >> of course you want to have a context around each, and fairness to the trump administration, that's when covid hit, and you're trying to keep businesses afloat you may argue about it, but that was the intent as opposed to president biden's $1.9 trillion bill when clearly the worst was past and by the way, his pause on student loan payback continues to inject $5 billion a month into the economy, which is obviously adding to inflationary pressure now, if the fed is given an expanded money supply, they're

trying to back off of it, and one of their few -- they got two or three tools, they're trying to employ them and things turn upside down. that's kind of what's going to happen when you start trying to subtract. >> one more really important question about how gird can cause wheezing do you know gird can cause wheezing >> absolutely. >> you're a gastrointerrolgs, stay where you are breathing, fine, why am i wheezing it's gird. prilosec. >> you don't do that anymore. >> i don't, but i can find you one. >> andrew, you got any health problems acid reflux? >> trying to avoid him thank you, though, thank you, senator. thanks, joe. when we come become, what the shuttering of signature bank and svp could mean for the commercial real estate market. and atlas capital and former barclays ceo bob diamond is going to get us. follow squawk pod on your

favorite podcast app and listen anytime. we're coming right back. ♪♪ ♪when the day that lies ahead of me♪ ♪♪ ♪seems impossible to face♪ ♪a lovely day (lovely day)♪ ♪(lovely day) (lovely day)♪ ♪(lovely day)♪ a bank that knows your business grows your business. bmo.

it's hard to run a business on your own. make it easier on yourself. with shopify, you have everything you need to sell online and in person. you can have your inventory, payments, and customers in sync across all the places you sell. it doesn't have to be lonely at the top. join the millions to finding success on their own terms. start your journey with a free trial today.

still to come this morning, the ripple effect of banking turmoil on the commercial real estate market. rxr ceo scott rechler will join us right after this break. ask at the top of the hour, new york city mayor eric adams is our special guest continue to watch the futures this morning right now it looks like the dow is indicated off by about 53 points nasdaq down by just over 20

points, the s&p down by just over 6 points. and by the way, throughout the month of march, we are celebrating women's heritage sharing the stories of women leaders in business, and those of our cnbc teammates and contributors here's cnbc content center vice president lisa dupree. >> as a woman, a black woman, a human being, what i've learned on my life's journey so far is never give up on yourself. never give up on truth, honesty, and integrity. never allow others to determine your destiny i believe god has created a unique path for each of us as women, we have an innate ability to put osthers first boh a at home and at work. and at work that may appear to underserve us but what i learned from my dad is it's a strength, a sign of leadership, not of weakness encourage and mentor others, empower and invest in others elevate and champion others, and while you're doing that do the same for yourself.

♪ at morgan stanley, we see the world with the wonder of new eyes, ♪ helping you discover untapped possibilities and relentlessly working with you to make them real. ♪ because grit and vision working in lockstep ♪ puts you on the path to your full potential. ♪

a subsidiary of new york community bank corp has reached a deal to buy deposits and loans from signature bank which closed a week ago it's going to be buying $12.9 billion of loans at a discount

signature bank was a lender in new york executives are writing to congress on friday, urging action similar to 2008 and covid era programs to help stabilize the markets. joining us is the chairman of rxr reality. scott also serves on the new york fed board of directors. thanks for being here today. no question there are issues surrounding real estate issues >> let's just start with after decades of free money, the day of reckoning is coming there's $1.5 trillion of commercial real estate loans coming due in the next three years. these loans were made at periods of time when interest rates were

near zero and to refinance now it's going to be much higher this is a major challenge to go through the process. so up so you need to take time to invest new equity. there's not a lot of liquidity in the market and they're asking to encourage lenders to work with the borrowers so we tonight have a freefall of -- >> what happened why was anybody surprised that zero interest rates was coming to an end. the fed was signaling it, jay powell was saying it you're talking three years to get things in order. why do we need to relax things and pretend like it's 0 interest rates again. >> i don't think you need to relax things most of these loans will not be refinanced for the same amount of debt that they had before that takes time. we lived through this in the

early 1980s with the savings and loan crisis. if you create the time, the private sector can work it out a lot of these are regional banks, by the way. that's where there's pressure on that. >> that i understand, the idea that the regional banks are getting squeezed and are not going to be there in the same way. that i understand. however, the idea of trying to be able to refinance some of these or hold off on maturity on some of nithese issues, that was reckless lending >> not necessarily you're refinancing at 70% loan to value it will require an injection of equity i think the equity is out there. >> are you talking about just the last two weeks it's an illiquid market or --

>> you've seen sales drop down by 70% in terms of being able to sell assets, cnbs is down 86% from where it was before, new issuances are down it's the market saying take the time and make sure you have sources to do this >> here's the question the reckoning is coming. everyone who is going to get in trouble from that wants help and assistance and time for all of these things the regional mid-sized banks want to be firmed up and told all depositors are insured by the government >> this is a slow-moving train wreck. it's picked up speed and running out of control i think in that situation you want to try to slow down the train, you want to be able to cushion yourself and avoid further distress if you do this right, the private sector will have the

money. if you don't do it right, you'll have to get bailed out the regional banks are exposed municipalities get 70% of their income from real estate taxes. small businesses that rely on regional banks, housing shortages get exacerbated so there's challenges along the way. >> we have a lot more coming up on squawk this morning new york city mayor eric adams will join us along with katherine wild we'll talk about the health of the economy, reviving an iconic marketing campaign and we'll talk banking in new york city. and former barclays ceo bob diamond will join us to discuss credit suisse and what jack lew

sees the fed doing at the meeting this week. stay tuned with great ideas. can they help us improve our digital experience? absolutely. they've invested over $2 billion in tech. that could really help us manage inventory. and save us a ton of dough. then let's take back our market share. checkmate, chess heads. girls, i said “bedtime”!

(vo) the fully electric audi e-tron family is here. 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. go. go green. go wind turbines. go gorgeous reliable grid. go emerson software. go science people. go breakthrough meds and safe science. go space age welds for super silent cars. go big. or go home. from software that delivers new cures at warp speed, to technology that makes clean energy reliable, emerson innovation helps make the world healthier, safer, smarter and more sustainable. go boldly. emerson.

good morning a marriage made in crisis. ubs taking over credit suisse in an effort to restore confidence

in the banking system. meantime, u.s. futures and european markets bounce off their lows of the day. the fed's next move front and center and how will the current banking crisis impact the big apple? mayor eric adams and katherine wilde are going to be our special guest as they look at the city's postpandemic economy. the final hour of "squawk box" begins right now good morning and welcome to "squawk box" here on cnbc live from the nasdaq market site in times square i'm joe kernan with andrew and becky. did you ever think you'd be

hitting up premarket frc for a living that seems to be a little bit of a flash point for how things are going. it was down sharply last week, had a really tough session on friday it was in mid 19s earlier today, got down to low 18s. it seems to be finding a place at 18 1/2. >> down another 20%. >> down another 20% but not down more we'll leave it at that we'll see whether that stabilizes the futures down as much as 350 on the dow earlier this morning. now down only 6 points nasdaq's been trying to stay green. it's down a little bit right now and the s&p you can see down 2 points the yield curve has been fascinating to watch, treasury fascinating to watch the two-year, look at that

inversion, only about 14 points right now. that's one of the narrowest inversions that we see you can use the two-year for where the fed is being directed to go by the markets if they're still going to 5, 5 1/4 -- >> it's just a flight to -- >> that's where short rates are. >> six trading sessions ago, a week ago friday, the two-year was 5.88%. talk about the decline over the period of just six trading days, not even this is the beginning of the sixth day of trading so five trading days later in the meantime we want to check out some of today's top stories. ubs agreed to by credit suisse for $5.4 billion you can see down 58% on this

it's the 58% air cut they're going to be taking on. ubs shares are down 8% and the valuation of the deal will be down that much as well all this happened after the swiss national bank triggered funding of $3.2 billion the fed agreed to make more dollars available if needed, providing enhanced swapped lines. cen central banks, we'll check in with steve liesman to learn more about it >> and putin said he had high

hopes from a visit from his good ol' friend, in his words mike santoli, so many things to watch. >> it's one of those mondays bond yields are bucking all over the place and equities inaggregate, s&p 500 relatively steady we're kind of bumping along the almost 20% down level from thele all time highs positioning was relatively muted going into this little crisis period before sbc. we kind of just thovered in thi range right here you multiply by ten to get the index itself it's exactly where it was a year

ago. we're a little below 3900 right now. take a look at the mega cap area of the market relative to the smallest docks in the market many of the stocks, nasdaq, here's the 50 largest stocks in the market against the microcaps. most of this year to date they've been tracking one another until about ten days ago when you have the divergence market caps get hit more in uncertain and volatile times and in terps of the financials, the relative positioning of those financials, you sell add heard those reports offer the weekend. here's burke shire hathaway and then just the banks index in the u.s. you berkshire hathaway is 12.5%

of the financial sector etf, even though it doesn't fit perfectly in there but you've soon here the rest of the financial sector is radically lower capitalization the worst things have gotten for banks, the less they are can concern of the overall market cap. >> we have breaking news the new starbucks ceo will take over two weeks earlier than expected howard shechultz is expected to testify about the company's alleged union-busting activity at least that's what bernie sanders has suggested. meantime, new this morning, new

york city mayor eric adams and the partnership for new york city launching a campaign today called we love new york city joining us from midtown m manhattan, mayor eric adams is here good morning to you both let's talk about this campaign, the state of new york city and i want to get into some of the banking issues that have been confronting some of the city's banks as well. mr. mayor, where did this campaign come from >> the partnership, kathy wilde, who is joining me today and all of our corporations and businesses we realize that we are here together we love the city and know what the city represents not only here locally but across the nation new york is the economic engine of our nation. we want to ask people let's all come together, no matter whether

it clean-up parks, at a homeless shelter. it about all contributing together because this is the city we love >> mr. mayor, the speech of this, i gather you've been on a phone with the in banks here in new york city. we just saw the end, if you little, of signature bank. what are you hearing and what are you thinking about >> well, the governor and i met with kathy and the partnership to really stabilize the fears that many people have. i want to really thank the federal government for stepping in last week these are difficult times but we're confident we're going to navigate our way through right here in the city, we're seeing an amazing recovery 90,000 jobs prepandemic and 16,000 in january alone. we believe the federal

government, the state government here locally, we're going to stabilize the situation. >> i want to talk about new york but maybe you can speak to so many companies and how they're thinking about the economy, sm having ptsd from 2008. i'm hoping we're not in that kind of a banking crisis but clearly we're in something >> there is a lot of concern but also faith that we put the tools in place and the last financial crisis it will allow us to get through this without the repercussions we saw before. ubs has taken over the suisse bank in danger of causing a systemic calamity. the fact we can get through this shootly, the federal government

is making sure nobody is losing their deposits unfortunately the bank failure, the depression coming out of the divisiveness in our country, that's the reason for our campaign today, to say we've got things to celebrate. this is a great city, we're in a great country. we hope our campaign can lead the nation in bringing back positive feelings and optimism about our future >> you're wearing the t-shirt. show of the t-shirt if you can, khat. >> the "i love new york" campaign was back in the 1970s >> absolutely. >> so true that campaign really inspired at new york instead of just the singular --

i see it every day when i'm on the subway system, we had 3.9 million riders in one day, that is back to the prepandemic levels we're moving in the right direction and we're excited with this city and we love it >> and it's a time for "we," not "me. >> katherine has been on our broadcast talking about the safety issues that the partners have raised with her where do you think we really are when it comes to safety in the city >> january 2022, january and february almost 42% up in crime. they did a survey and point pointed those important areas. we need and we were afraid to ride the subway ond come babb to

work in february we rolled out the next version in october you saw the customer roof the numbers don't lie. we knew we had to deal with the homelessness, the encampments and create a safe environment be decrease in our shootings and homicides. the city is coming back with the toughism 98% of preechl-pandemic levels, and bringing a positive attitude back to this amazing city. we're resilient, we're new york. >> i now the mayor is sitting right next to you but are you satisfied? >> absolutely we are headed in the right direction, but we have got to show new yorkers they can step up and do something people are frustrated, as the mayor mentioned, our surveys smo

that the negatives and what we're going to try and show them through this cam a is there are a million ways that workers can step up and take back our city, make sure we're going in the rice direction and trust yourself again >> we talk about hybrid jobs and what that impact has been. you look at a monday and a friday throughout the city, it's still complicated obviously. by the way, this banking crisis not helping things signature a major presence throughout the city. by the way, first republic presence throughout the city as well when you start to think about cred what's your thought >> new york city's signature is

big today than it was. we have created in the last year 32,000 new businesses created in new york city in the last year so we are absolutely headed in the right direction. as the mayor noted, we are safer than we have been, that crime is down, arrests are up so positive, we're going a in a positive direction in new york city our economy good and we hope to lead the nation in that roar as well >> 957,000 jobs we lost during the pandemic, 99% of those jobs are back our. i saw the new building that jpmorgan is building to have a major presence here. and tourists are coming back 63 million last year, 65 million

this year. this is an excited moment for our city new york is going to continue to come back bigger and. >> we just had scott on. he was saying there's a crisis right now when it comes to commercial real estate and it's a bigger crisis than even workers not coming back to their offices. they -- there's going to be major problems without some kind of help from the federal government have you been involved with any of these talks do you have anything to say about it >> yes scott is really a great new yorker rxr is and we have been communicating with all of these retail spaces we may have to figure out how to redefine these

spaces, there's some important legislation up in albany right now and we want to partner with our albany lawmakers and figure out how to use retail spaces for child care uses and other uses this is a time when we need to when we're living in this post-pandemic era. >> you have a full-page ad >> open that up. >> it's the other side, the other side there it is. thank you, mr. mayor thank you katherine. >> thank you >> we get three t-shirts,

andrew you're getting one, right? >> i want you to wear a t-shirt all day. >> coming up, rebuilding confidence in the global banking system we'll talk to former barclay ceo bob diamond and get his reaction at 8:30 a.m., former treasury secretary jack lew on the coordinated action on the and "squawk box" returns in just a moment you're a rock star. you are a rock star. no more calling co-workers rock stars. look, it's great that you use workday to transform your business. but it still doesn't make you a rock star. so unless you work with an actual rock star. hi, i'm ozwald. hello ozwald. pam, you are a rock- i wasn't going to say it.

♪♪ ♪ ♪ luxury exemplified. innovation electrified. with apple music seamlessly integrated. the all-new, all-electric eqs suv from mercedes-benz. see your dealer for exceptional offers on mercedes-benz electric vehicles.

i screwed up. mhm. i got us t-mobile home internet. now cell phone users have priority over us. and your marriage survived that? you can almost feel the drag when people walk by with their phones. oh i can't hear you... you're froze-- ladies, please! you put it on airplane mode when you pass our house. i was trying to work. we're workin' it too. yeah! work it girl! woo! i want to hear you say it out loud. well, i could switch us to xfinity. those smiles. that's why i do what i do. that and the paycheck. i screwed up. mhm. i got us t-mobile home internet. now cell phone users have priority over us. and your marriage survived that? you can almost feel the drag when people walk by with their phones. oh i can't hear you... you're froze--

ladies, please! you put it on airplane mode when you pass our house. i was trying to work. we're workin' it too. yeah! work it girl! woo! i want to hear you say it out loud. well, i could switch us to xfinity. those smiles. that's why i do what i do. that and the paycheck. ubs purchasing credit suisse for more than $3 million, the first merger since 2008 financial crisis here with me is bob dimon, the former chief executive of barclays we call 3 billion like small most of the time, but these are two big institutions

the equity -- that's probably generous at 3 billion. what did you think of how this was arranged and the individual components with the deal itself. what's happening with some bond holders that i guess are not bond holders >> i look at the acquisition o lehman brothers and how different that was than what just happened, joe in 2008 with bear sterns failing and being taken over by jpmorgan around easter, i think it was, between then and when we acquired lehman's u.s. business, it was like six months, 5 months we had three or four board meetings to discuss if there's another sthu to fall it was an extraordinary fit. we had meetings with the treasury about if there's another shoe to and so we really

wanted to hire the organization. if somehow you could resolve the commercial real estate, much like merrill lynch and morgan stanley and goldman sachs, they all have an issue with credit but are really high performing operations if you can solve that problem. in the first year for lehman's we paid 1.25 billion there was 10 billion in income in the first year. this is very different this is is a shot and i think if you believe your read, then the chairman of ubs, tom kel her was saying for weeks and weeks and months and months. in my mind this wasn't a

solvency issue for credit suisse they're bankrupt they're out of money it's very hard to create a scenario where they're profitable >> do the shareholders get the short end of the stick on this, to not let them vote on this and have it crammed down their threat. >> we had the same issue in 2008, which is being a over the weekend we tried to acquire the full bank and we needed the fed to guarantee funding on monday morning because it required for barclays a shareholder vote, which you can't get. i don't know all of intricacies but it didn't sound good for sure i do think that as i sit back and look at ubs today, from all the things that they've put into

driven action. i don't know if and trau is and we just defined a new era in too big to fail. you combine credit suisse and ubs so the two bigges banks most branded by being the home of banking, the original home of banking. it's shock lus, it's watchless it's like germany saying that they're out of auto manufacturing. >> that's why i thought this marriage, if you will, people are talking about liability and whether there are going to be lawsuits there will be shareholder lawsuits but i'm not sure they'll go after them the same way they did at jpmorgan

how do you think about the regional banks and united states and what seems to be at least from my reporting this are have who are saying, i don't know if i want to buy because the price might drop and i also could use help from the government and you are hearing i know i need capitol because this is usery and i think my valuing a i think the lehman situation is a perfect example where bear goes down and the monthing to do something and again there's this strange game of ticking going on on beau sides. >> in my mind there's a clear policy action that needs to be taken. the reason that the united

states and you don't see them is because of deposit insurance the fact that we have deposit insurance has allowed a regional banking system, a specialist banking system, a community banging system 40% of the loans to businesses come from have and drod troud it went to 60% and that's going to get even more concentrated and i think the value to small businesses, to consumers, to the agricultural industry,ing having regional and specialty banks is so important the large are banks can't afford that kind of coverage and don't

have that specialization we need to do something from a policy point of view in my mind it's significantly increase the cap on deposits maybe we go with a recommendation that came out last week from many of the community banks, which is maybe for two years just have it deposit insurance on whatever the deposits are while we work on the policy of what the right level is you know, we've already crossed the rubicon here thank have become more and more like utilities, closer to 2008, much closer to government. we saw it last wook with the treasury to supply $30 billion to furst republic. so it's a highly regulated industry athink you can have a and equity investors and unsecured creditors but i think we have to protect depositors to a

different level than we have in the past we've been asking that question. maybe you can do it with the fdic it just seems like if it's too sooner than later. >> if there was a true crisis, i don't know >> what's the alternative, joe >>ion. the concentration is significantly different today than it was in u.s. banking in 2008 we're not. >> we've done a lot for first republic it's just not budget >> about regional banks overall, i would love to take a look at how to be supportive of them but if if i was.

right now we need clarity and quickly. it's a great attribute to our economy. >> bob diamond, thanks >> coming up, the fed and other central banks. steve leaseman will break it down for us in a couple minutes. take a look at first republic, off close to 19% right now that's sharply down. several others in that sector, though, are in the green "squawk box" returning after this help make trading feel effortless and its customizable scans with social sentiment help you find and unlock opportunities in the market with powerful, easy-to-use tools power e*trade makes complex trading easier react to fast-moving markets with dynamic charting and a futures ladder that lets you place, flatten, or reverse orders so you won't miss an opportunity

[office sounds] ♪upbeat music♪ ♪♪ ♪when the day that lies ahead of me♪ ♪♪ ♪seems impossible to face♪ ♪a lovely day (lovely day)♪ ♪(lovely day) (lovely day)♪ ♪(lovely day)♪ a bank that knows your business grows your business. bmo. my name is brian delallo. a bank that knows your business grows your business. i teach ap and honors economics in pittsburgh, pennsylvania. financial well-being to me is knowing that i can be free to do the things that i love to do. i hope when i retire someday, they say,

that guy made this place a special place to come to school and gave as much as he could to help the community. coming up, former treasury secretary jack lew will join us with his perspective on the interest rate challenge. "squawk box" will be right back.

think he's posting about all that ancient roman coinage? no. he's making real-time money moves with merrill. so no matter what the market's doing, he's ready. and that's... how you collect coins. your money never stops working for you with merrill, a bank of america company. lomita feed is 101 years old. when covid hit, we had some challenges. i heard about the payroll tax refund that allowed us to keep the people that have been here taking care of us. learn more at getrefunds.com.

welcome back to "squawk box" on cnbc. futures have been all over sort of the flat line but now you can see it's the nasdaq actually in the red. dow's up a little, flat on the s&p and treasuries have been something to behold for a couple of weeks now and the 10-year, 3.42, below that earlier today and on the two-year, all the way back to 3.82, down a little. steve liesman joins us now with

more good morning, steve. >> good morning. the fed announced it will make more dollars available globally. it's going to auction off seven-day monday every day it's to make currency more available. the ecb would deposit euros at the fed, the fed would deposit dollars at the ecd the question is whether it's needed or just preempted no information we can find yet of a dollar shortage or dollar scramble around. it does have the potential to suggest that some problems exist and that the situation is worse than it appears. you can see it was used a lot during the great financial crisis, that's the spike on the left and then again during the

pandemic and then they're pretty quickly unwound and have not been needed. the market trading with about a 60% probability of no hike and a 40% probability of a hike. weep put together a list of what might be on powell's notes there figuring out whether to hike inflation is high, and then this attempt to separate monetary policy from financial stability policy well, why not hike the credit interaction could be disinflationary or deflationary and the pause would give time for financial stability to take hold as we reported, sachs says no hike fed and powell will make up their mind maybe the night before depending how much money

is flowing out of the regional banks. >> you ever read "monkey's paw," you make a wish and put it in your pocket and they wish for a lot of money and their son is killed and they get $200,000 the long pivot that some of us were hoping for, the market players were hoping for but it comes with the second and third biggest bank failures. it reminds me of that, be careful what you wish for. so now they're stopping. it's not a good reason but it's almost like a put but it's a credit risk put. i love that analogy. i don't know if i want to think about it >> it gets worse because you get three wishes

they ask bring my son back after he was in a machine accident and he comes back all bloody and it's a horror -- anyway. >> i have been saying for a while, joe, from what i can tell from the fed, financial stability comes in the first order. they can't do monetary policy if the financial system is not working. so they want to make sure they have conduits for the conducting of monetary policy if that is all gummed up and you have problems at the banks, it's not going to work. we also discussed the idea that what's happening in the financial system has an economic outcome all its own. and you can imagine that all of this money that's out there, it's not going to be used for lending the way it might otherwise have been. people aren't sure about their outlooks for their banks they're not going to be out there extending loans, even

though rates are lower you can imagine trouble on balance sheets with net interest margin and you can move money around willy-nilly with the punch of a button, what exactly do banks do these days becky is going to buy treasuries with a punch of a button >> secretary lew is right, it's money good unless you need the money now. that's what they should have been thinking about because their investors were strapped. they should have seen that coming that's why they needed a risk manager maybe. >> we've actually got another piece of news we're going to read first >> really? >> we have news out from the fdic it says it is extending the bidding process for silicon bank process. it says more time is needed to explore options, probably meaning more options for higher

bids bids for svb high are banks are due friday night and the bridge bank on friday night joining us to talk about the banking process is form are treasury secretary under president obama jack lew and he served as white house chief of staff and director of the office of management and budget secretary, thank you for being here we all know as treasury secretary you couldn't say anything other than you support the strong dollar policy you're not treasury secretary anymore and i wonder what you think when you look around at everything happening in the banking world right now. >> good to be with you this morning, becky, under circumstances we all wish we weren't talking about. the strong dollar is fundamentally a -- >> i was kidding about the strong dollar. >> you would say as a private citizen what you would say as treasury secretary, i think. obviously as secretary of the

treasury, you're limited in what you can say. so i come to you today in a different capacity >> so what do you think? >> i think fundamentally we still don't know exactly what happened the forensics are going to continue every day we're seeing more details come out what is clear is that you had some banks that got into a difficult position what you don't know for sure is whether the things that could have been done to prevent it i think the actions that were takenlast weekend were effective in terms of saying we're going to do what we have to do to stabilize the situation within a system of limited discretion the regulators only have so much flexibility and the systemic exception where they said there was financial stability risk was the basis for stepping in. so i think they've done a good job with the tools that they have >> is it concerning, though, to continue to see the regional banks, not only their stock

prices drop but deposits continue to leave those banks? if they had done most of what they were able to do in a very limited framework, was it enough >> well, i actually think you're seeing the deposit outflow change >> slow. >> last week it slowed considerably whether it's enough remains to be seen. i do think the action had the effect intended to stop the outflow. you have a mismatch of what what's happening with deposits and stock prices and it's fundamentally the risk to shareholders remains real out there. i think the fact that they did the backstop to protect depositors was the right thing to do. i don't think there's a way to assure shareholders that the values are -- >> are all depositors insured or not? there's been question about whether this was an implicit

g guarantee from the fed and janet yellen has basically said we can't. >> i think they went to the ability they have to protect people i don't think it's effective for policy makers to do things they can't do they don't have the power to announce we're going to guarantee all the borrowers. they'll have to make a case-by-case decision to see whether it warrants that action. the threshold for systemic risk is not that high right now >> mr. secretary, the question, though, if that is true, it's just implicit, not explicit. the good news is right now maybe deposits are not fleeing and that's a good thing. do you believe that we have to create laws and makes deposits explicitly guaranteed and do you

undermine the value of the implicit guarantee if we have a debate in washington for months about whether to raise the fdic limit to a million dollars or across the board whatever it's going to be, does that take away whatever value has now been brought to bear in this implicit system that's we've created >> i think the question of where you go from here is a complicated one. whenever there's a debate about where policy should go, you create uncertainty so there is a risk at the time when policy is pending i think there needs to be a fairly detailed deep dive into what the consequences of changing our deposit limits, insured limits are what are the consequences of going to no limit? and what are the costs we're all talking about what are the risks to regional banks, to community banks. it will cost them more to pay the insurance for higher levels

of insurance it might well be the right answer it might be that somewhere in between 250,000 and unlimited is the right answer i suspect you're going to see that debate start pretty soon. we're at the moment where they're doing crisis management now. you know, we saw after 2008 part of what congress did was take back authorities the question becky started with in terms of the authorities that the regulators have, they were limited in dodd-frank. it takes three regulators throwing the keys, saying there's a financial stability crisis to intervene. i think there's going to be a pretty full-throated review and debate over what the right level of protection is i do think that protecting depositors is very different than protecting shareholders and bondholders. >> elizabeth warren has been pretty outspoken saying these

rules were rehaclaxed and that's where the problem started. do you agree with that assessment >> i've been on the record that the right level for the threshold, higher level of regulatory review should not have gone from 50 to $250 billion. at the time i was of the view of going to a hundred would have been a reasonable compromise and it would have kept higher standards in terms of capital, regulatory review, stress testing and living wills on institutions that started to get really big look at the way they grew from under a hundred to just under 250. it was very fast without that degree of review so there was a lower level of regulatory review. whether it would have prevented this, we'll find out when the numbers are done i do think there should have been more regulatory oversight

>> watching what happened in switzerland over the weekend, there was a lot of finger pointing saying this was the fault of the american banking system for what happened there do you buy that? >> no. i this i credit suisse has had problems for 15 years. they've had problems in terms of risk management, they've had problems in terms of violating laws they've been under stress. so when a situation comes along that put greater stress on the whole system, an institution under stress takes it harder i don't think it's fair to blame what's going on on the united states >> your biggest hope over the next few weeks >> my hopes is we take a long look at what can we do to prevent things from getting worse. when i look at that, it's the debt limit you look at the potential

disruption from a crisis that's self-inflicted on whether or not the united states government is going to default i think what we've learned over the last couple of weeks and this is not the time and congress should add on that and take it off the table. worry size, next summer, we could have a whole new disruption >> what about the fed if they raise rates? is that self-inflicted at this point? >> my view on the fed is a bit more charitable than some. i think we're dealing with extraordinary uncertainty, they continue to be dealing with extraordinary uncertainty. >> but this week >> even this week they're dealing with incredible uncertainty. i don't think they'll decide until they see data over the next couple of days. they have to thread a very small needle and show they're continuing to fight inflation, which is still high, whale taking account of the financial situation. i think they'll be looking from

0 to 25 and everything in the middle the signal will be whether they made the turn or not and if they haven't made the turn, i don't think they want the markets to say that they have >> up next, weave oc hstks to watch. don ch

welcome back to "squawk box," i'm dominic chu with your morning movers if you take a look right now at oil prices, they continue to slide.

earlier at one point today, you saw them hit a 64 handle that drop in crude is now 0.5% but it's back up to $66. some of the stock are wavering between gains and losses also on the commodity front, check out what's happening with gold, going all the way back to spring-summer of last year we are above $2,000 at one point today, $1,977 is where we trade right now, but you can see that near-term, medium-term upside for gold prices. also on a cryptocurrency, continuing to see that bid for bitcoin prices still above $28,000 as that traditional banking crisis that we're seeing perhaps develop here in the u.s. and possibly europe given credit suisse is playing out with some people saying digital assets and currencies could benefit ultimately watch bitcoin prices $28,276. keep it right here we will have more "squawk box" right after this break

what do you get from the morgan stanley client experience? listening more than talking, and a personalized plan ♪ to guide you through a changing world. ♪ the hiring process used to be the death of me. but with upwork... with upwork the hiring process is fast and flexible. behold... all that talent! ♪ this is how we work now ♪ what do you see on the horizon?

uncertainty? or opportunity. whatever you see, at pgim we can help you rise to the challenges of today, when active investing and disciplined risk management are needed most. drawing on deep expertise across the world's public and private markets in pursuit of long-term returns... pgim. our investments shape tomorrow today.

welcome back to "squawk box. we are almost 30 minutes away from the opening bell. take a look, though, at the futures, because they're in the green, and we had been in the red nearly down 300 points before dow now up about 114 points. you're looking at the nasdaq up about 22 points. the s&p 500, up about 12 i want to talk markets with brenda of sand hill global advisors this move, what's the takeaway

is this some kind of all-clear sign is this some kind of sign that the fed is actually not going to raise interest rates at all, the 25 basis points is okay? what's the -- what do you think is signal is here? >> well, i think a lot of the move we've seen, even last week and this morning too, is this rotation back into the large cap tech group, which had been such a big underperformer last year and i think this year, we've seen, as the rates have come down, which rates have been such a big -- had such a big impact on valuation multiples and questioning just how much we pay for these companies now that rates have come down a little bit, i think that's been a positive for the group also, just their lack of exposure to small banks in general, i think, is another reason that investors have been rotating back into this group, but i think whether the fed raises or not this week is still a big question mark. i don't think we're going to know until wednesday we are of the view they probably shouldn't, given that we think the impact from having the

second and third largest bank failures in history and maybe a forty-o fourth one on the way with first republic, that's meaningful, and that's reason to at least pause for now and potentially pick things back up in may if we don't see inflation continuing to improve but i think it's still a big question mark. >> let's hope first republic does not go the way of the other banks, although i imagine their looking for more capital, of course no question. but in terms of this idea that all that's deflationary, if, for example, jay powell were to come out and say, you know what we're not doing anything we're -- no interest rate hike the market take that positively or the market takes that negatively and says, oh, goodness, maybe there's actually, you know, a bigger, tougher slog ahead than we even thought? >> well, i think we've already digested a lot of bad news with bank failures happening, and i can tell you, i'm a little

biased, we are based in the san francisco bay area, and there has been a lot of uncertainty about banking relationships here that we have been dealing with, with clients, but i do think, you know, i know there's a call out there saying if the fed pauses, that's going to raise more eyebrows, but i think it will be -- in my view, i think it will be an acknowledgement that we have been seeing some significant impact from interest rates rising as quickly as they did last year and perhaps it's wise to at least pause for a period of time here. >> okay. brenda, we're going to leave it there. we appreciate you joining us this morning after what has been a wild weekend of some marriages and maybe we'll see some capital raises this week as well ahead of the fed's big decision. joe? >> i think we would for this on friday, if we knew, ending the show on monday, that it would show 100 points up, maybe, because there was some question. we were likening it to last

weekend and whether it was going to be even more tense than the previous weekend it is -- these are interesting times. i don't know if it's -- it's not 2008, obviously, but it's been a while, so you had a good financial look i don't know if it's a tbt f2 or not, sorkin. >> i'm trying to avoid a sequel desperately >> join us tomorrow. "squawk on the street" is next ♪ good morning, and welcome to "squawk on the street," i'm david faber with sara eisen and mike santoli we're live from post nine at the new york stock exchange. jim and carl have the morning off. let's give you a look at futures as we get ready to start the trading week 30 minutes from now. you can see things have turned decidedly positive we'll seewhen we get going again. 29 minutes or so from now. let's start with our road map, and that starts with a major development amidst worries about the banking sect