jpmorgan chase to assume depo deposits and assets. jpmorgan chase's ceo jamie dimon will be on the media call later this morning how another bank failure factors into this week's fed decision former fed chair roger ferguson will join us it is monday, may 1st, 2023. "squawk box" begins right now. good morning welcome to "squawk box" here on cnbc we're live from the nasdaq market site in times square. i'm becky quick along with joe kernen and andrew ross sorkin. here we go it is monday, may 1st. u.s. equities are a mixed picture. dow futures up 20 points

s&p futures up fractionally. nasdaq off 3.5 points. last week was an up week for all three. here is where we stand for the year dow so far up 2.9% s&p is up 8.6%. big winner is nasdaq which is up 8% big news in the banking sector and we will tell you tha in a moment. the 10-year treasury at 3.46 crypto is down 2.8% for bitcoin. andrew, banking is the big news. jpmorgan chase taking first republic it is a big deal it is the end, hopefully, of what has been a crisis of confidence in the banking sector jpmorgan chase assuming the deposits and assets from the company. i want to get over to leslie picker who has been working all weekend on this story with so

many bidders fdic in the middle of course, janet yellen. tell us about it >> it is historic. it was a competitive bidding process. fast and furious this weekend. the news this morning is jpmorgan chase is acquiring first republic directly from the fdic which seized and sold the bank the transaction is a result of the competitive bidding process. it includes a majority of first republic assets. including $173 billion of loans and $30 billion of securities. specific terms for first republic underwater assets are not known yet. we will learn more about that in the next few hours the fdic and jpmorgan chase entered a loss share agreement and recoveries from the first republic single family and residential and commercial loans if purchased

jpmorgan chase will assume $92 billion in deposits. that includes the uninsured deposits from the ma march agreement to contain any contagion from silicon valley bank and signature bank. jpmorgan chase will repay the deposits from the large banking peers. first republic will go down as the second largest bank failure in u.s. history. that is bigger than silicon valley bank. in a statement out earlier this morning, jpmorgan chase's ceo jamie dimon said the government insicitsivited us to step up. we did we executed the transaction to minimize cost to the deposit insurance fund fdic estimates the cost to the fund is $13 billion as a result of the transaction jpmorgan chase will not be

assuming first republic corporate debt or preferred stock. shares trading under $2 per share in pre-market. not quite at zero. they have gone down 98% so far guys >> leslie, so many questions this morning that people have. the first of which is jpmorgan chase obviously in the hunt. pnc was there this weekend we saw bank of america in there. there were questions about whether the federal reserve and treasury would waive requirements of size with jpmorgan chase and bank of america at the moment. what waivers were necessary to complete this transaction? ultimately, what we think the cost will be to the fdic i know $13 billion is the number b bandied about. is it cut off at 13 or could it be higher?

>> i think it could be higher. they have the loss share agreement in place which would suggest it could be higher depend depending on the recovery for the assets with the loss share agreement. it is a great question in terms of what the various regulatory thresholds are that was my main ifquestion because there were other questions from other outlets that suggested pnc would be the leader because they don't have to get around those regulatory constraints ins t terms of maki bigger bank bigger we will with learn more with the calls happening later today. there is no detail in the releases so far with regard to any changes for the thresholds >> i have been trying to chase that down. maybe you have done better than i have with this chase down.

were there waivers around future lawsuits and liability and the like given the experience that jamie dimon had in 2008 with washington mutual and bear sterns and the list goes on? the amount of liabilities and lawsuits that took place for four or five years i think he said it cost the bank billions of dollars, but headline risk and if that is in the offing this time >> that's a great question jpmorgan chase says what it anticipating with the restructuring of costs they don't have a specific line item with regard to legal liability and any kind of expectation on that front. i agree. that is something we will learn more in the presentation due out at 7:00 we have a slew of calls in the 8:00 hour as well. >> leslie, regulators had to be in a bind here they may not have wanted

jpmorgan chase to get bigger, but they want the best deal for the remaining assets of the bank with they don't want to pick a smaller bank at higher terms which we saw earlier with silicon valley bank and signature bank they want to be in a position of knowing this is going to go okay first republic had a garbage p portfolio. worse than silicon valley bank with the loans they were providing. mortgages for expensive houses and loans for long periods with low rates. that is something you have to take over and deal with and say no problem we will be okay with this. >> not only that, but they had to reach out in order to fill the gap they had on their balance sheet. they had to reach out to the fed and take out loans in order to continue operations at 5% which they were operating essentially at a loss as a result. i think you are right, becky, if

the portfolio looked more attractive, they would have been able to do a regular m&a deal. more distressed the last few weeks. this was the outcome that had to take place in order to get the deal done. i think the fdic learned from the events of march and decided this kind of seize and sale idea where they immediately seized it and lined up a buyer was the best outcome >> leslie, the larger question is what happens to first republic in the end? i know the branches will open today. some become jpmorgan chase or chase branches and some disappear. >> they do >> the entire business model of first republic is something i know jpmorgan chase doesn't like they like the customer base, frankly the customer base was going to them anyway, so there are questions among shareholders if jpmorgan chase needed to do this or how helpful this will be

to the firm itself in terms of dollars. >> in terms of the deposits. the fdic fees would be high if they didn't take it over. >> that's true had it gone to bank of america, it could have gotten it out. >> bank of america bought out pnc. >> leslie? >> the deal is modestly -- this is what jamie dimon said modestly beneficial to the firm. first republic is a bank that catered to the coastal elite the wealth management business was large. as deposits took flight in the march period, we saw wealth managers leave as they saw what was happening with the firm and took their business elsewhere. it is unclear what remains of first republic which is wrapped up into jpmorgan chase in terms of the wealth management business, that is the

area they are looking to build out that consumer business and wealth business. from that standpoint, it does make sense strategically in terms of the various numbers, how creative it is according to dimon, it is modestly modestly >> andrew, you are right was there a deal cut with lawsuits brought down the road that is a huge concern and something they would be on the hook for >> can they get that by the way, if you remember in 2008, jamie dimon tried to get that he got a letter, but the letter was effectively an ineffective letter to me, i asked about the business model question, leslie, i'm interested what we will hear today on the call. the model of first republic is based on low interest and super jumbo mortgage rates that is how they got people in the door and why people stayed there for a lot of it.

jpmorgan chase has gotten out of that business. almost entirely. they are in the wealth management business, but first republic was in the mortgage business can you hold on to that customer and keep them inside the jpmorgan chase platform or does that customer look for another bank >> the only thing i would say is there are not as many banks willing to do that today. >> first republic was one of the last >> wells fargo a lot of banks that used to do that don't do it anymore >> there are a lot of big banks that are looking at the demise of first republic and saying they almost -- i don't want to say they're happy about it, but this was a competitive set for them below market mortgages that other banks, you know, couldn't see as tenable for their business model

first republic is now getting, you thknow, the second biggest failure in u.s. history and that is competition they no longer keeps them up at night >> leslie, thank you i appreciate it. we will talk to you this morning. bring us the information on the call we'll talk to you in a little bit. >> you got it. coming up, more on the impact of the collapse of first republic later this hour, we will have former fed vice chair roger ferguson how the central bank will process the news. later, former s.e.c. chair jay clayton and former nec chairman gary cohen will be with us you are watching "squawk box." >> announcer: this cnbc program is sponsored by baird.

visit bairddifference.com. 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”! at pnc bank, you can find us in big cities and small towns across the us, where our focus is to always support the people who live and work there. because you call these communities home, and we do too. pnc bank. good night! hey corporate types. would you stop calling each other rock stars? 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. ♪♪ ♪♪ ♪ a bunch of dead guys made up work, way back when. ♪ ♪ it's our turn now we'll make it up again. ♪ ♪ we'll build freelance teams with more agility. ♪ ♪ the old way of working is deader than me. ♪ ♪ we'll scale up, and we'll scale down ♪ ♪ before you're six feet underground. ♪ ♪ yes, this is how, this is how we work now. ♪

as a business owner, your bottom line ♪ before you're six feet is always top of mind. so start saving by switching to the mobile service designed for small business: comcast business mobile. flexible data plans mean you can get unlimited data or pay by the gig. all on the most reliable 5g network, with no line activation fees or term contracts... saving you up to 75% a year. and it's only available to comcast business internet customers. so boost your bottom line by switching today. comcast business. powering possibilities™.

bridgett is here. she has no clue that i'm here. she has no clue who's in the helmet. are you ready? -i'm ready! alright. xfinity rewards creates experiences big and small, and once-in-a-lifetime. it's the beginning of the month. we have a busy week. on the squawk planner, it is fed week and jobs week the central bank meets tomorrow with the decision on wednesday against the back drop of first republic and that makes it an interesting commentary we get the adp payroll report on

wednesday. on thursday, the jobless claims and on friday, the april employment report. tom tomorrow, we get results from pfizer and uber before the opening bell on wednesday, cvs and yum and qualcomm and etsy. and then thursday is peloton on friday, "squawk box" will be live from the berkshire hath an -- berkshire hathaway annual meeting. softbank's arm holding filed for an ipo despite adverse market

conditions, it should make a plan to sell on the nasdaq later this year. softbank's deal to sell arm to nvidia following objections from u.s. and european anti-trust regulators. and subway food chain has a $5 billion acquisition plan. subway has been exploring a sale since february, but struggled with rising interest rates and concerns of economic slowdown. jpmorgan chase is hoping a $5 million debt package will show they can borrow enough to structure an attractive deal at or above $10 billion. and "super mario brothers" remains the number one spot in north america for the fourth consecutive weekend.

that movie is a collaboration with nintendo and universal, cnbc's parent company. coming up, the annual return rate on i-bonds is set to come down today we will talk about p what it men for the investors as inflation took off. and later, reaction to the collapse of first republic from mohamed el-erian "squawk box" will be right back.

ordinary problems are for ordinary companies. we're here to fight the big, intimidating, impossible-to-change problems. [beeping] from developing treatments at unprecedented speed to addressing threats to global health. we're leading the way with a revolutionary mrna platform that could teach our bodies to do extraordinary things. we're here to do something more than make medicine.

we're here to change it. moderna. this changes everything.

keeping your money safe is a

major concern for savers people have been pouring money into the i-bonds and inflation protected as set backed by the treasury sharon epperson is here with more good morning >> good morning, becky if you bought i-bonds a year ago, the return the last 12 months was 8%. starting today, you own half the next six months. may 1st, the annual rate on i-bonds is 4.3% through october. that rate consists of fixed rate of .90% and adjusted on consumer priced index the adjusted rate on i-bonds has fallen an annual rate of 9.62% through may of 2022 and 6.89% from november through the end of april. now at 4.3%, the annual rate of

i-bonds is lower than the top rates of one-year cds and savings accounts which is earning 5% i-bonds have restrictions which make them less favorable you can only buy $10,000 each year you can't cash in for one year and you lose three months interest if you redeem within five years i-bonds offer tkey tax advantages. >> exempt from state and local income tax you don't have to worry about the federal income tax until redeemed or mature at 30 years. >> that makes it easy to hold iboni i-bonds for an extended period of time and not worry about taxes. >> if you wanted to leave a

i-bonds, you can get more? >> it depends what you need the money for and when you need it if keeping the money in i-bonds or t-bills, and you can't make payments day-to-day or month to month with credit card payments, it is not a good idea to be in i-bonds. you need the money quickly in a high yield savings account if you have the money and you don't need it right away, it is a smart move think about if the i-bonds are advantageous. >> and some americans are worried about keeping money for now above $250,000 are you worried about keeping that in the banking system >> i think there are people that are worried about that some people still may not know it is $250,000 for your account, per account, per individual. i think it is important to know that you can ask your bank if

they part of the network that will allow you if you have more than $250,000 to spread that among many banks so you have all of that money secure people are still trying to figure out how to keep money safe and knowing they have fdic insurance is very important to point out. to understand what those limitations are as well. >> t-bills government bonds for three or six months three months above 5%. that is exempt from state and local tax also there is no limit. >> that is a good opportunity. the rush to i-bonds. now there are other options. it is a good opportunity. >> sharon, thank you. >> sure. coming up, more on "squawk box," a big day. big banking deal first republic revolved with jpmorgan chase we'll talk about that plus fed

week we talk to former vice chair roger ferguson and how the fed will process the collapse of first republic. during month, cnbc celebrating asian american and pacific islander month with business stories and leaders here is the head of meta's social media marketing group >> the asian american community is one that is is built on resilience what makes me most proud is not how we reacted, but how we look to the future. asian americans contribute to the gdp. if you look at that, we are still under leveraged. what makes me proud is the line of sight to be so much more and continue to expand and bridge and build better bridges with other communities so the business world does thrive

>> announcer: executive edge is sponsored by at&t business at&t 5g is fafst, reliable and sdur 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 well welcome back to "squawk box. we are live from the nasdaq market site in times square. s&p futures are down, but fractionally recapping the breaking news. regulators seized first republi b bank jpmorgan chase says it will publish an investor publication at 7:00 a.m. we will have the highlights from those. jpmorgan chase is up 2.7%. first republic, they are not taking over the stock or the debt of the company. it is down 47% this morning. and the fed going forward set to kickoff the two-day policy meeting which starts

tomorrow markets are trying to anticipate jay powell's move on rates it is widely expected the fed will hike rates by 25 basis points the fed funds at 86% joining us on the meeting and how the fed will process the collapse of first republic bank is roger ferguson. former ceo of tiaa and cnbc contributor. it was orderly, this process this is not a centipede yet, roger. it is almost a unique circumstance for the banks, however you want to contribute to the flux. this may be it they are all one-offs. >> good morning, joe i think the fed and others want to position this as very much three unique situations.

each with a business model not replicated in other places they will use that to continue to tighten as the marketexpects. >> there are others, charlie munger, anmong them, with the issue with the commercial property loans i don't know the fed feels somewhat comfortable about going up 25 basis points without introducing more risk to the system. >> i think you are right that's the way the fed sees it i think they also put in the term lending program for banks which is a special tool they think will support the banking system to what charlie munger had to say, i would have to say he is not wrong. there are across the banking system many institutions that

invested in commercial real estate mortgages and regular individual mortgages as well as we have seen in government securities, all of which at low interest rates and now with rates rising, the mark-to-market has been negative. one cannot is asay this is not across the sector. the policymakers will say the banking system is safe and sound and solid. they will say that with the last move they don't have the same fear of contagion. i'm not rejecting charlie's argument i think it is factually correct. i think the regulators will say we have this ringed fence now and we can fix monetary policy withi both eyes focused on inflation. we will see, over time, if charlie is proven to be right. i'm not rejecting the possibility of others because

the balance sheet of many institutions are filled with assets priced for a low interest rate and low inflation requirement. >> in a different situation, you see different players do things to gain market share that probably aren't that smart i think silicon valley bank is an example and first republic is another example. we hear about the dumbest comp competitor how much was zero interest rates also to blame? we hear that criticism all the time that you will have people move out the risk curve when they shouldn't and an they haveh false sense of nothing would happen how do you see the fed with zero for so long or is it bad management at the individual banks? >> when you have the failure across banking institutions, there are many contributing

factors. certainly very low interest rates for a long time caused stretch for yields or seeking yield. as interest rates start to rise, those assets you invested in at a low rate lose face value y i think no one would deny low interest rates for a long time was a contributing factor. having said that, in each case, as you pointed out, we had a unique business model with its own risk that could have occurred any time. it is not one thing drove all this it was an intersection of low interest rates and management seeking yield that perhaps they should not have or overly aggressive or a number of other one-off factors. having said all that, i'm still in the place where i'm with charlie. i'm not sure this is totally over yet i hope it is because of that point that we were discussing of many, many institutions having assets on

balance sheets priced for a lower interest rate nvironment i think there is risk that we have to continue to watch the situation closely. >> roger, it was bad management, no question. different or bad business models chasing after this stuff, but lax regulation coming from the same institution raising rates. if they knew they were raising rates and watching what they were doing, shouldn't it have tougher regulation so some of the activities were called out >> look, i think one thing that came out of the report that the they issued was, in fact, they were not forcing very agg aggressively taking a look at asset liability and matching and taking a look at interest rate risks. some scenarios were focused on unemployment, et cetera, as opposed to interest rates. as that said, the fed released that on friday and they take the

blame for supervisory failures and the intersection of supervision failures and rising interest rates they are doing a mea culpa in the report on friday >> will this make them any less hawkish in the commentary? i expect it would not make them not raise interest rates on wednesday as anticipated, but be more cautious in the credit crunch and broader implications in the economy or not? mike wilson is out with a note saying if the fed is more hawkish, that will be bad news for the stock market >> if the fed is more hawkish than anticipated, itwill be ba news i think this is going to be played is 25 basis points already built into the market. no surprise there. the way the questions will come in my mind, they deal with just the issue of forward guidance.

one is will anyone dissent here? secondly, there will be the press conference i'm sure chair powell will be asked about the credit crunch risk the last time out he said it was the equivalent of a small 25 basis point hike he will be asked about the health of the banking system he will be adamant about the banking system is well capitalized and these three failures are unique to the business models and the overall system is safe and sound and implying they can continue to move i think the big question will be the degree to which he indicates that it is one and done. i.e., they are now done or the the possibility of another 25 basis point move in june i think the unexpected hawkishness would be as it always is a problem for markets. the problem, i think the fed has is the inflation incoming data shows it is still very sticky.

core pce has not moved down very much toward the 2% goal. there is another indicator they look at. employment cost index from the labor department showed a fair amount of stickiness i think they are stuck here. inflation is not moving as much as they liked. the banking system has shown cracks with potential more to come uncertain about how that plays together this is a very, very challenging situation for them in almost anything they do will have negative and positive consequences >> inflation peaked, roger, we know that. and then growth -- the effect, whether the lag effect or we're seeing it with the gdp or the earnings from the consumer centric companies.

it is evident that whatever the fed is trying to do, slowing demand is happening. maybe they have some of the inflation metrics you are talking about, but at the same time, they are seeing the effects of the higher rates across the board in the economy. >> look, absolutely. remember early on they expect a period of softness they expect a period of sub par growth their own forecast the so-called dot plot all of that is there i'm not denying we are seeing softening. that is part of what they expected to see. it is a challenge. >> no mission accomplished. >> no mission accomplished yet >> maybe not with the inflation data maybe that's just around the

bend ing r-- roger, thanks should be an important report on friday based on the strong labor market and services which we will talk about again and again. we appreciate it, roger. it's early, i know it's monday. bleh thank you. >> thank you >> i had no weekend. >> we did not. >> we had no weekend >> boo-hoo >> we were hob-knobing with the rich and famous. >> it is all journalists it is not off the record >> you see him walking around. lisa van der pump and you at this thing that was it, right >> keep going. say more when we come back, joe mentioned berkshire vice chair charlie munger out with a warning of the u.s. banks. and later, mohamed el-erian

will join us for what's to come. you can get the latest from our squawk pod with your favorite podcast app we'll be right back. (♪ ♪) how do we demonstrate our unmovable strength? (eagle call) nope. how do we show that we'll stand tall through the storms? nah. (thunder) how do we make our clients feel secure and- ugh... not lions.

(lion rumbles) we do it with our people. people who've been looking after people for over 170 years. what if you could make analyzing a big bank's data... no big deal? go on... well, what if you partner with ibm and red hat, use a hybrid cloud solution to connect data across multiple systems globally, then analyze all that data with watson. okay, but this needs to meet our... security standards? yup. compliance standards? mm-hmm. so they get the insights they need... yup. in real time... check. . ..to make quick decisions? check. aaaand check. that's the hybrid cloud solution ibm and a global bank created. what will you create? ibm. let's create. (swords clashing)

-had enough? wh-no... arthritis.e? here. aspercreme arthritis. full prescription-strength? reduces inflammation? thank the gods. don't thank them too soon. kick pain in the aspercreme. welcome back take a look at the u.s. equities dow futures up 6.5

s&p down fractionally. last week was an up week for the three major advantages charlie munger out with the statement over the weekend he said the u.s. banks are packed with bad loans that will be vulnerable. he was talking about commercial real estate and the commercial real estate that the meteorology -- regional banks own trouble happens to banking like trouble happens anywhere else. in good times, you get into bad habits this is something he knows about. he and warren buffett have been investing in banks for 50 years. they have seen this play out a time or two. programming note on friday "squawk box" will be live at the

berkshire shareholder meeting. they whill be taking as many questions as we can get to cnbc is the only place to watch live coverage of the all-day event. coming up, apple is the highlight of the busy week of earnings we'll talk about that after the break. reminder, you can listen or watch us any time. look at that beautiful shot of the capitol. i miss it. you can watch us on the cnbc app. we're back after this. p, achievers. you're making the most of every hour of your life. except the hours that you're sleeping. so why do we leave so much untapped potential on the table? this is a next level bed, for a next level you. my circadian rhythm is kicking your circadian rhythm's butt! it's not a competition. i know, but i'm still winning! so it is a competition. of course. save $500 on our new next gen sleep number smart beds. plus, special financing. only at sleep number.

this thing, it's making me get an ice bath again. what do you mean? these straps are mind-blowing! they collect hundreds of data points like hrv and rem sleep, so you know all you need for recovery. and you are? i'm an investor...in invesco qqq, a fund that gives me access to... nasdaq 100 innovations like... wearable training optimization tech. uh, how long are you... i'm done. i'm okay. i've spent centuries evolving with the world. that's the nature of being the economy. observing investors choose assets to balance risk and reward. with one element securing portfolios, time after time. gold. agile and liquid. a proven protector. an ever-evolving enabler of bold decisions. an asset more relevant than ever before. gold. your strategic advantage.

(vo) verizon small business days are back. april 27th through may 3rd. get a free tech check and special offers. like a free 5g phone. get started today with verizon business. it's your business. it's your verizon.

welcome back to "squawk

box," tech's quarterly results outperformed last week we're going to hear from amd, qualcomm, and apple this time reporting. joining us with her picks, danielle shay, vice president of options at simpler trading given what we saw last week, what is your anticipation for what we will see this week, and what do you like or don't? >> what i loved about last week specifically is that the market was setting up to be disappointed as it relates to tech earnings, and so we know that momentum is slowing we know that eps estimates might come in a little bit low when you look at something like microsoft and you see the way it performed post-earnings, i think that we're setting up to have reactions that are better than fears. so that means even if momentum continues to slow, we can still see stocks trade higher. >> you like apple? i mean, if you didn't own any of these stocks that are going to report this week, would you want to own ahead of it >> yes, absolutely because when you look at apple specifically and you look at the

stats, apple over the course of the last 12 quarters, we've only seen apple trade higher post-earnings in four of those quarters however, they continue to beat estimates. last quarter when they missed estimates, they actually traded lower initially, but in the preceding quarter they continued to trade higher. what that tells me is that even when you have an earnings report where the stock will pull back and we don't really have, you know, a strong beat, we can still see that stock continuing to trade higher over the course of the quarter and if you look at apple, you know, people are confident about this stock because we have a stock right now that's less that be 10% off of all time highs regardless, even if apple comes in a little bit soft here, i still think it's a great long-term buy, and i feel the same about amd and qualcomm. >> what i was going to ask you where do you see them fitting into this larger ai conversation, obviously chips are necessary for all of this.

by nvidia and a couple of the other firms seem to have gotten an even bigger boost. >> yes, absolutely when you look at the larger ai conversation and especially technology, amd, what i also like to look at is the fact that we're going to see continued chip production, especially within the united states, so when we're looking at the chip bill and additionally, when we're looking at the computing power that's going to be necessary as it relates to ai, i like amd and i like qualcomm as well when you look at amd, amd has continued to beat earnings quarter-over-quarter, the last two quarters specifically had nice beats to the upside yes, it has been a little bit soft going into the earnings report, which typically i do like to see strong semiconductor stock like this trading higher going into earnings, but because it's pulled back nicely going into this earnings report, i think that it is setting up for a nice beat and i'd like to see some more upside here. qualcomm, yes, it is a little

bit on the slow side here. we've been continuing to trade to the downside, and we're closer to the lows i think in the long-term, qualcomm has nice leadership within its unique space, and i do continue to buy this stock. i think it's a great bear market buy. >> okay. danielle, we appreciate it, thank you. >> thank you. at some point in this three hours of show we need to talk about tech we got to talk about this jack dorsey elon musk story >> oh, yeah. >> i mean, it's unbelievable that elon musk who had been so vociferous in his support -- >> jack dorsey had been so voe s sif rous is now saying he thought the whole thing was a complete mistake. >> it hasn't been going so well. i thought you were going to say steph curry honestly. >> we can talk about steph curry if you like. >> most points in a seventh game

ever. >> and the devils and rangers are going to final tonight. >> boston got kicked out last night. >> i haven't been following. >> we've been to the games. >> the bucks are out >> that i did not know >> crazy >> but you're right, i want to talk more about jack dorsey. >> yeah. >> huge. >> it's huge he's devoting his life to bitcoin so you like what he says about this -- you think he's out of his mind. >> i'm just surprised given how public he was. >> he was the board. >> i know. >> and the whole thing makes no sense. >> another chance to say stuff about elon. >> no, ever since the fire thrower. >> it's such a big deal. >> i think this is more about jack dorsey too. this is more about jack dorsey pushing this and then changing his mind, and by the way where was he at twitter when all this was happening. >> when he was running it, it

was even worse. >> where was he with all of this >> he was in a monastery with that beard. former s.e.c. chair jay clayton, former nec director gar gary cohjoinn ing us a busy week ahead with the jobs report "squawk box" will be right back. >> announcer: stock picks is sponsored by wisdom tree, the modern alpha pioneer ♪ imagine, a car that goes as far as it does fast.

as sleek as it is spacious. as smart as it is beautiful. introducing lucid air. experience the best. ♪ ♪

good morning, everybody. first republic seized and sold to jpmorgan in the second largest bank failure, and the third since march. a breakdown of what it means for the u.s. financial system is coming up. a big leap for the fed as they get ready to make another decision on interest rates plus, earnings for the world's most valuable company, what investors should watch when apple reports. the second hour of "squawk box" begins right now ♪

good morning, and welcome back to "squawk box" right here on cnbc looive, i'm andrew ross sorkin along with becky quick and joe kernen we have a big monday morning and a big deal morning when it comes to the banking industry and what seemed like a banking crisis one domino saved this morning, we'll talk about it in just a moment the market, though, reacting to that one domino, jpmorgan taking over first republic with the help of the fdic you're looking at the dow up about 10 points. i don't know if i want to say on the back of that news. all weekend those negotiations taking place, and now that news crossing the wires early, very early this morning you're looking at the nasdaq off about zseven points, the s&p 50 just marginally, but right now we want to bring in leslie picker who has the latest on this jpmorgan, first republic transaction. we've been waiting for many a week now for a deal like this. >> and this -- that's right,

andrew and there is an investor presentation that was posted to jpmorgan's investor relation website. just been digging through that for additional color to build on what we talked about last hour importantly i think for investors who are trying to wrap their heads around this transaction is the transaction assumptions. we talked about how a lot of the asset side of the balance sheet was under water as a result of giving those jumbo mortgages, loans out at below market races in order to attract customers. jpmorgan is part of this transaction says the average loan market is about 87% the fair value marks on acquired loans of about 22 billion, and they say that these marks are supported by a due diligence process that it describes as involving 800 jpmorgan employees led by senior management across businesses and functions in this investor report they also describe more about the loss chair agreements they have

with the fdic. jpmorgan says single family residential mortgages, there will be 80% loss coverage for seven years, commercial loans kmk including cre. 80% loss coverage for five years. they also describe kind of how it will work with regard to the $30 billion in deposits that jpmorgan and ten other banks put into first republic back in march in order to kind of shore up that confidence jpmorgan says they will repay the 25 billion in deposits from large u.s. banks and eliminate the $5 billion deposit that jpmorgan had put into first republic on consolidation. they do note -- and this kind of speaks to what we were talking about last hour -- that all regulatory approvals have been received the transaction has closed first republic branches will open as normal today guys >> go ahead. >> leslie, i mean, this -- just to be clear for anybody else

who's watching out there, if you are a depositor in first republic, don't worry, the branches are still going to be open today you can still operate with electronic banking through any of these issues. if you're a shareholder or a bondholder, that's a different story. jpmorgan's not picking up any of that. >> they're not picking up anything of that earlier this morning, first republic trading around $2 a share. that's kind of a symbolic level that these things have been taken out historically, obviously first republic going into receivership, they're not acquiring -- jpmorgan's not acquiring any of the preferred stock or the debt on first republic here, so it's unclear whether they're, you know, acquiring it at some kind of symbolic price, that's not mentioned in any of the releases, bus if you're an equity holder, you can pretty much count on that -- >> if it's zero, what does the market know that we don't? why is it trading at $1.90 >> or is it just short covering at this point? >> do you see what's happening

here, leslie how many times have you seen that in the past >> companies like that >> the equities never goes to zero. >> if you were short the stock -- >> right it's probably not worth anything >> no. >> yeah, i'm not sure people are looking at say a bear stern situations and that special $2 mark that bear was acquired at and saying maybe that's going to be the case here there's nothing in any of the releases that indicates that common stock is part of this deal. >> when a bank is resolved -- >> this is different -- >> in fact, it says it's not jpmorgan goes out of its way to say this is not covered. >> when bear stearns happened, that was outside of the process. what i don't understand is why anybody -- >> there was no receivership >> correct, this doesn't make any sense. >> how much money we got left in the fdic so what was this -- >> 13 billion they assumed >> which could go higher and by the way, they're also -- the fdic is financing jpmorgan. >> the coverage that comes for five years of the commercial

real estate and seven years of the home loan mortgages, that's covered by the fdic, not taxpayer dollars. >> if this is it, we've got plenty left. it's going too well for me to believe how well it's going. it's in a lot better shape than the spr. i'll tell you that much. >> leslie did they give the answer on that though? who they're being covered for the losses on this by the government, by the fdic. >> by the fdic. >> the fdic is the bank self-insuring it, that's not taxpayer dollars. >> the financing piece of it, $50 billion is coming from the fdic, it's little bit like vendor financing. >> yeah. >> which is a very sort of unique and odd sort of structure. >> get that back. >> you hope to get it back. >> we're doing well for a banking crisis, we're -- you don't even need to -- you don't even have to charge the big

banks -- i don't think you have to replenish it really. >> it's not too bad -- >> i'm saying things never work this great i just don't believe it. it seems like when you stay at zero for that long, it seems like we don't know everything yet. >> i have one other question do you think it was a mistake, given where we ended up, was it a mistake for the banks to put the $30 billion in and effectively prolong the pain, if you will, or not >> i think it's a good question. i mean, hindsight will truly tell if you look at the way that this process was structured and the way that it worked and i think to joe's point, it does seem a little bit more orderly. it seems a little bit more under control in terms of just this idea that they -- the fdic seized it immediately, seized it and then immediately sold it, potentially by giving them that lifeline, giving that time to

figure things out, it may have caused some pain for shareholders certainly over the course of those few weeks that that could be pain they would have experienced anyways obviously given the outcome, but the fact that they were able to kind of get this deal done in a somewhat orderly manner would suggest that maybe giving those deposits, which don't appear to be losing any of their value over time, wasn't such a mistake as it allowed for everyone to kind of get their ducks in a row and come up with this kind of an outcome. >> leslie, it may have been a bigger deal from the contagion perspective because there were so many questions about so many other banks and we have not seen shares of many of those other regional banks affected at all over the last couple of weeks. if you looked at the deposit base on that, first republic had 176 billion in assets at the end of the year. by march 31st, that number was down to -- what was it it was 103 billion, but that

included the $30 billion that had been put in from these other banks. without that, you would have been talking about 176 billion, you know, down to 73 billion, and that would have been complet completely disastrous, even as it was when it came out at 103 billion. now they're talking about $92 billion that jpmorgan takes over and deposits. that included the 30 billion you're down to $62 billion from 176 billion at the end of the year over the space of four months' time that is a phenomenal disappearance of funds i wonder if it bought time for other banks and for people to look through what the other banks had and didn't have. maybe it worked from that perspective. it sure didn't help at all with first republic >> go ahead. >> oh, no, i was just going to say i think the downside was significant had they not put those deposits in, but in terms of actually ring fencing and accomplishing the goal that they

stated they wanted to accomplish by putting those -- by infusing those $30 billion worth of deposits, it seemed to just simply kick the can down the road again, it could have been worse had they not done that, the cont contagion, the fear, all of that had spread to a greater extent than it had done we can say that with hindsight it will be interesting to see as things progress over time if there was more to come. >> leslie's going to continue to follow this for us this morning. in the meantime, joining us is larry mcdonald. he is the founder of the bear traps report we've been talking for a while about what might happen here, why jpmorgan maybe came in when there were potentially other banks in the running what have you been hearing >> well, that's a good point i think that's the key point you just made because there were other banks in there over the weekend. if you think about it at the end

of the day, und ultimately whate fdic chose is to allow jpmorgan to take over 10% of the deposits of the united states of america. so there was a special exemption there. that tells me it was a little bit of a desperation situation where i guess the bids from u.s. bank and pnc were so low, in other words those banks are not really -- i don't think they were strong enough and my client, our clients, a lot of our clients around the world, don't think those banks were strong enough to do this deal, so at the end of the day, you had to go to papa jamie, you know, and put more than 10% of deposits of the united states of america into one bank. i mean, it does speak to the situation, i think >> there's a lot of hope that this will kind of put a coda on what we've seen so far with the banking turmoil, that this was the last big unknown resolution. charlie munger out over the weekend with "the financial

times" just saying they are still concerned, he's still concerned in terms of what he sees in terms of commercial real estate and the potential at some of the banks for bad loans there. what do you think? >> exactly this is -- i was just going to bring that up. nobody's closer to buffett and munger than you are. for charlie to come out unsolicited for the second, third time in the last two months, he's making a statement there, and if you look at the insurance companies, one thing that i made very public in february, a point that i made, is that the banks were underperforming the s&p 500 by a very large margin. that's kind of a canary in the coal mine. now the insurance companies are under performing the s&p since early january by 14% that is one of the largest under performances in that short period of time you got to go back to leeman or covid. so it's very clear, i think and from what i'm hearing from clients is about $2 trillion of

losses on the commercial real estate side because most of the financing was done at 1, 2, a little under 3% over the last decade on all these commercial real estate transactions those loans, i think a lot of them are dramatically impaired with a 5% risk free rate that's being put forth by the fed funds rate so the fed is up against inflation, but everything they try to do to kill inflation is actually further impairing a lot of banks on the commercial real estate side. >> so do you think -- and the only thing i'll say on charlie munger, i don't know that he was trying to make any specific point. he was giving a pretty broad ranging interview to "the financial times. obviously what's happening in the banking sector would be front and center among the questions they'd be asking him i think he's just talking and speaking his mind ahead of the annual meeting for berkshire hat hathaway larry, what do you think this d does, if anything to the federal reserve, and with the fed coming out on wednesday with a decision and then the commentary, what

we'll hear from the fed, fed chairman, what's at risk for what this means for other banks? >> well, in talking to clients around the world on this commercial real estate problem, you really have to get the fed funds rate back down to 2%, and when you talk to the big consultants that work for the insurance companies, work for the banks, work in the commercial real estate risk side, they claim that inflation a year from today will be back under 2%, and that the fed over the next year and a half can bring that fed funds rate way back kdown, and once it's back down, then a lot of these bad loans on the commercial real estate side will start to look a lot better but the problem is if you look at the atlanta fed wage tracker or anything on the wage side, it's very clear that inflation -- i'm sorry, yeah, inflation's going to be more elevated in that 3 to 5% range over the next year and a half. so the fed has to -- the fed's going to basically have to really tone it down a lot, maybe

project that this is the last hike because anything they do on the hawkish side will really cause much more financial instability. >> but if you have to get down to 2%, and that's your goal and you're sticking to it, you may talk a smoother game but really your actions are going to be damn the torpedos full speed ahead >> yeah, and that's what the bond market -- if you look at the last couple of weeks, right, look at the transports, look at oil, look at copper, look at bonds. pretty much a lot of those indicators are telling you that this banking crisis is leaking over into the system, into the financial system, the tertiary financials dramatically underperforming, capital one, synchrony financial. the fed is going to talk a tough game, but they know they really have to stop that's what the market behind the scenes is telling you. >> one quick question for you, somebody tweeted in and said the fdic by law has to have 1.35% of

deposits and holdings so that would basically be $135 billion. do you know if that's correct. >> you know, i'd have to make a couple of calls, but that's one thing a lot of the clients that we're talking to in our institutional chat this morning are asking that question i've got to make a couple of phone calls to the team in washington. >> let us know what you hear larry, thank you >> okay, thanks. let's get to dom chu for a first look at this morning's premarket movers hey, dom >> let's kick things off with a check on those regional banks, especially the west coast based ones it's been a while. ultimately we did see the failure of first republic, the second biggest bank failure in u.s. history, and the third high profile one this year given silicon valley bank and everything else. if you take a look at first republic, we've shown you the charts jpmorgan chase a beneficiary in some ways of a 3 3/4 percent if you take a look at western alliance and the regional bank etfs those are some of the ones you want to keep an eye on

also getting some analyst calls in with some early attention this morning from traders and investors. general motor's stock is up 2.75% call it at this stage around 40,000 shares of premarket volume it's being helped along with analysts at morgan stanley led by noted analyst adam jonas. they're updating the automaker they raised the target price to 38 bucks it was 35 before they cited among other things that the stock has been under performing as of late and now has priced in the difficulties in making money in electric vehicles a stronger franchise making internal combustion engine we'll end with a call on oil giant exxon mobil. analysts have downgraded it to a neutral rating from a buy. it's down about 1.25%. they cited a nice run of out performance leading to better opportunities elsewhere in oil and gas. so andrew, keep an eye on

western alliance and pack west those are a couple of those west coast regional lenders that will be in focus today. thank you for that all eyes on jpmorgan this morning as we work through and sort through this deal and its implicationis and the dominos that may come after it. coming up, the list of companies announcing layoffs growing amid economic uncertainty. we're going to talk job cuts and much more when we return, a big two hours of "squawk box" on deck >> announcer: this cnbc program is sponsored by truist wealth, where meaningful relationships matter most.

introducing the next generation 10g network only from xfinity. the future starts now.

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.

take a look at shares of sofi this morning, up by about 7.5% after the company reported its quarterly numbers. sofi lost $0.05 a share during the quarter. the street was looking for a loss of $0.07. adjusted revenue came in at $460 $460 million the ceo said that total deposits grew by 37% during the quarter. >> after a month of layoffs from some of the biggest companies, employees struggling with how to react. in the meantime, there's an increase in anti-work sentiment. artificial intelligence revolutionizing the way people work and the future of remote work, which is uncertainly joining us now is jessica kriegle, culture partner's chief

scientist of workplace culture i didn't even know that that job existed, but i like it, jessica, and i wondered about it until i saw things that -- i mean, you know things i don't know there's something called quit talking. what is that on tiktok when you talk about -- can you explain that there's other interesting things here that are in the culture now that are kind of new >> yeah, as you said, anti-work sentiment is growing people are seeing the lack of equity between ceo pay and front line worker pay. they're seeing the mass layoffs that are happening people are being treated like commodities, and they're fighting back. they're doing things like quit talking, which is that they live quit their jobs on social media for all to see they're also doing things like getting second jobs and third jobs, full-time remote jobs without telling their employers so it's a secret second job and

third job so they can make more money. they're taking the power back in any way that they can. >> and because the workload would be harder, one of their employers is getting chatgpt generated work from them they're cheating >> yeah, many people are leveraging chatgpt and other ai tools to automate all aspects of their life, calendaring, writing copy and software development even people in i.t. support there's a lot of ways they can now use these tools to be more productive instead of giving all of that productivity to one company. they're feeling these companies aren't transparent with me i'm going to leverage these tools to make more money that's how they're taking the power back. >> there's virtual layoffs and the whole world has changed a little bit but jessica, companies over hire during the pandemic, and this rationalization we're seeing from that is it's not -- i mean, it maybe isn't exactly like things that have happened in the

past, but it's very similar to it, just done a little bit differently i guess this time around, but you know, there's boom times and there's bust times in any economy, and that's followed by over hiring, and then firing and layoffs. >> yeah, and i think that there's this bit of a disconnect between the reality of the economic situation and the way that we're seeing the mass layoffs play out right now what's true is that you cannot have innovation in the same environment that has fear. there's a massive lack of psychological safety for employees with all of these layoffs happening, and that's making them less innovative, which you're noticing with these companies. i mean, amazon and meta, they're historically known as being innovative companies what have they done lately that's very innovative i think the culture of fear is taking over, and they're suffering as a result. >> this is not -- i mean, we're looking at recent layoffs, but once again on friday, we're expecting a continuation of a

pretty strong labor market, signs of it, and that's what the fed is looking at. i mean, we're at historically low unemployment rates, so it's kind of weird that we're talking about that this is the beginning of a trend of how people are responding to getting laid off with some of the best employment numbers ever. >> that's also what employees are looking at, and that's why they're so frustrated. you're going to start to see increasing increasing unionization efforts, and the reason this is important for ceos to think about is because their brand is getting affected when people quit talk it's negative for your reputation as a brand consumers are going to stop buying your products because they're getting a bad taste in their mouth about what they're seeing as far as how you treat your employees culture and brand are merging in a way they haven't before thanks to social media. >> the producer just told me

that we need to quit talk, jessica. >> we're out of time >> yeah. >> got to make some dough, advertising dough. >> we do >> thanks for having me. >> did you see stefan? jessica, you see stefan at moderna? 400 million. god bless him. >> there it is >> not bad work if you can get it see you later, thanks. >> thanks. by the way, just reading up on this, it is actually the law, the fdic has to hold 1.35% of all insured deposits in the banking system that it covers to pay out in case of bank failures that was put in place by dodd frank. guess where they were at the end of 2022, 1.27% been below it since 2020 because deposits have soared so much and swelled during the pandemic. we'll look more into it. when we come back, in a year when ev adoption was expected to soar, the latest report on car buyer sentiment shows a growing percentage of people say they

have zero interest in buying an electric model phil lebeau will tell us why i know. and then former s.e.c. chairman jay clayton and former national economic council director gary cohn will join us to talk banks, especially what just happened with first republic jpmorgan. we'll be right back.

at t-mobile, your business will save over $1000. what are you going to do with it? i could use a new sign. with t-mobile for business, save more than $1000 versus verizon. and with our price lock guarantee, we'll never raise your rate plan. ever.

welcome back tosquak box, in a year when ev adoption was expected to soar, the latest report on car buyer sentiment says a growing number of people have zero interest in buying an electric model this is an interesting development. phil lebeau joins us with more on it. >> good morning, andrew, we've talked about this for some time. the early adopters, those willing to pay up to buy an electric vehicle that's becoming a smaller part of the market and increasingly when you see more people who are asked about this -- and by the way, jd power tracks attitudes about ev investment and ev adoption every month it's not surprising that the latest results show that 21% f those surveyed say they're very unlikely to buy an electric vehicle. we should point out almost 27% say they're very likely to buy, and that's similar to what we

saw in february. evs account for 6.2% of the auto sales. that's what they accounted for in the first quarter now, that's expected to get up to 7, 7.5% range this year as we continue to see it track higher in the years to come remember, the average ev transaction price, what is paid at a dealership, is almost $58,000 according to edmonds it might be a little bit lower overall if you factor in the tesla model 3 and the model y. it's still over $50,000, and that's the number one reason why people are saying, you know what i'm not crazy about the idea of buying an electric vehicle the reasons that they give first and foremost, price, 49% say that's the main reason lack of charging stations, on a longer trip, 49%, then you see the range per charge as well as the battery charging time. still hurdles out there, guys. as you take a look at shares of ford, we get the ford results tomorrow the reason i'm bringing that up is one of the things people focused on now that they are

splitting out their different divisions, what was the performance of the electric vehicle division at ford, and then the ev startups, and i'm talking about rivian, fisker, lucid, they report their q1 results next weekment that will be interesting because all of them have been losing money. what are those losses as we see them, rivian has one model that qualifies for the new ev tax credit you don't get that at lucid, nor do you get that obviously at fisker, they're not for sale in the u.s. yet because they're made in europe they won't qualify for the ev tax credit lots of interest in evs if you can bring that price down, guys. if it's high people are saying i'm not that interested. >> phil, it's a fascinating development. the question i'd ask, do you think this changes anybody's -- both from sort of the tesla or even the classic fossil fuel companies or fossil fuel car companies, do you think it changes their outlook in terms of how they're going to invest

or not in evs? >> we've already seen them outline their plans to come in with lower priced models gm has the equinox electric versions we'll start to see small numbers of them later this year, early next year. they realize you've got to get down into that 35 to 45,000 range. i'm sorry, but you continually ask people to pay over $50,000, there's a very limited market there, and that's why you need to come in with that lower priced market. gm knows that that's a good example of them coming in with those lower priced models. when you don't have the ev tax credit, they're put at a disadvantage to those who will have the tax credit like general motors, like ford. obviously the domestic players including tesla. >> okay. phil lebeau, we appreciate it. fascinating. thanks. >> you bet. still to come, more on jpmorgan taking over first republic bank. fwgearing up for apple earnings we will have the latest on what to expecwh t tt enheech giant

reports later this week. stay tuned you're watching "squawk box," and this is cnbc or the 200-year-old tree in the backyard. or their neighbors down the hill. but one thing they did know is exactly how much they'd pay. because vrbo is different. you see the total price up front. of course, it's good to leave room for some surprises. boo! ♪

welcome back to squawk regulators seizing first republic bank and accepting a bid from jpmorgan to assume its deposits and assets.

jpmorgan releasing details of that deal just in the last half hour it is the wbig deal of the morning. we hope it ends what might have been contagion what are you seeing? >> a couple of things, i'm still absorbing the news as we speak i'm updating the story on cnbc.com just a few seconds ago. my observation is jpmorgan, the big is getting bigger. they won the 2008 financial crisis by acquiring bear stearns and the banking app system, and they are a winner of the 2023 regional banking crisis as they acquired, you know, a lot of the assets and deposits of frc so they're getting effectively 200 billion in the troubled balance sheet of frc, and i th think, if you look at the details, it's costing them

approximately $13 billion to that deposit insurance fund, and that is a lot less than the high figure that was circulated in the days ahead of this deal, that figure being about 30 billion, and so i think the fdic had some decisions to make they said they could have given it to pnc or citizens or another regional bank, and that perhaps would have been politically more appealing. but they decided to go with another premise, which is we're going to do the deal that has the lowest impact to the fdic deposit insurance fund, and that was the most capable purchaser, which is jpmorgan, andrew. >> okay, hugh, we appreciate it. we're going to continue this conversation now we've got two deal makers here who actually lived through 2008 and were on all sides of it. former s.e.c. chairman jay clayton is here, a cnbc contributor and executive chair of apollo, american express board member and senior policy adviser for sullivan and cromwell, and gary cohn, ibm vice chairman and former

national economic council director and of course mr. goldman sachs during the 2008 crisis so what do you guys think of this is this what you expected? i mean, i think there were so many people who were concerned after 2008, actually, and the experience at jpmorgan went through in terms of legal liability, there was a view that some of the big banks wouldn't want to touch something like this. >> i'll kick it off. i think this is what was expected, but i'm surprised that it took this long to get here. in fact, i think one should be shocked it took this long to get here i think everyone knew that first republic was in trouble three or four weeks ago and the assets just deteriorated deposits continue to leave the bank the bank put out earnings, which the regulators knew what the earnings were long before they put them out i think it would have been much more prudent for the regulators to have stepped in pre-earnings. >> it was waiting to see what the deal was going to be the regulators wanted a private deal the private investors are like,

forget it, we want the best deal we can possibly get. >> we talked about this, the longer you waited as a buyer, the better deal you got. >> exactly which is why we didn't get the -- until 3:45 in the morning. >> should have this been -- i guess where you're going with this and a lot of people are going with this, this should have been forced three, four, five weeks ago there's some question as to whether this $30 billion program if you remember when all the banks came together led by jpmorgan, in fact, should have even happened? >> yes, look, the question is have we created the new moral hazard, and the moral hazard now is never buy a bank until it goes in the receivership. >> we already knew that. that's what happened in 2008. >> you're going to get a much better deal when it goes into recei receivership everyone knew that first republic was going to transact three or four weeks ago. you weren't going to get loan sharing, loss absorbing, you weren't going to get a line of credit from the fdic when the fdic takes it over and puts it into a receivership,

it's a whole now deal. >> wouldn't you say that part of this was lessons learned from 2008, whether that be bear stearns or anybody else? why would you want to step in as a big bank knowing all the bad things that happened last time around >> i think this is different than 2008 in some respects, and jay would have a very strong opinion with that. in 2008 you were taking over mega mortgage servicing portfolios, and the mortgages were the culprit of the time the issue going on right now is a deposit run and a mismatched duration interest rate book. there's a lot less ramifications from a mismatched duration and interest rate book than there is in originating mortgages that maybe should not have been originated. >> becky's right, the structure of this deal has embedded in it the lessons of 2008. they structured the deal to avoid some of those liabilities that basically came along unexpected liabilities. >> let's talk about those liabilities. are there legal liabilities that

come with the transaction once it's in receivership, effectively can shareholders, can individuals, can the government or governments' agencies sue you meaning jpmorgan, over things that happened at first republic over the last decade? >> that question was lit fwigatd coming out of 2008 and as usual in the world of what i would say is legal liability, factos and circumstances matter you can tell here this was structured, and it should be structured to avoid those things >> so you think those liabilities are now off the table? >> if you want a buyer to come into these kinds of situations and do due diligence in the space of, you know, three or four weeks, you can't say, oh, by the way, you've got to take as is, where is including all of the liabilities. otherwise what's the price if you have to -- if you have to discount for those liabilities, the amount of support the fdic is going to have to come up is going to be much larger. >> you made a note to yourself, what was the note? >> it has nothing to do with

this >> he's always a step ahead. >> i'm one step ahead. >> do you think there's legal -- we don't know there's no legal liability. >> we don't know there's no legal liability. let's just take a step back. should the buyer be assuming th liabilities in these kinds of situations it will skew the price lower by a substantial amount. >> i have a strategy question, which is to say, do you -- the bank, jpmorgan saying this is going to be accretive to them, frankly minimally accretive to them do you think this is actually a good deal for them the reason i ask a lot of deposits frankly were already going to jpmorgan, right they were already there. they don't really want to be in the super jumbo mortgage business they've sort of gone away from that business, to the extent this is going to help their wealth management business, they already have a pretty healthy wealth management business how does this help them relative to a pnc bank of america it sounds like dropped out promptly i think on saturday how do you think about sort of what this does or doesn't do to the bank >> i think it's a good deal for the system, right? i mean, and if you're --

>> i don't disagree with that. i'm saying a year or two from now are shareholders of jpmorgan going to say i'm so glad that jpmorgan and jamie dimon stepped in or are they going to say prefer they -- >> relative to the size of jpmorgan today, this is not that relevant i don't think shareholders are going to notice three years from now. you're talking about a multitrillion dollars bank buying a bank with $100 billion in assets. it's a really small, small transaction. >> maybe on the wealth management side. >> do you see -- you say maybe on the wealth management side? >> maybe on the wealth management first republic had a great wealth management franchise, great connections. >> does that wealth management franchise hold up, if you can't offer them, you know, basically ridiculous mortgage prices longer term, what do you think in terms of other dominos? are there other dominos after this we've talked about commercial real estate affecting so many regional banks is there some bank where all of a sudden everyone's eyes were going to go, we were over here,

now we're over here? >> i think this is not the end i don't think we're going to get three and done crises don't sort of end this easily there will be other issues out there in the banking world we've seen an interest rate move that's unprecedented we've gone from 0% to 5% the fed will most likely move again this week. the unintended consequences of that on banks and balance sheets is fairly substantial so we will see something in the commercial real estate market, but that's what we're talking about what you learn in the banking industry, it's usually the problem you're not talking about. even wants to talk about commercial real estate there's probably other things in the banking books right now that are probably going to be more problematic than the commercial real estate. >> like what because i bet you know. >> i just think it's never what you think it's going to be you know, i'm almost equally as concerned about the consumer you know, we've seen this massive consumer strength. we've seen consumers living off of stimulus payments we see the stimulus payments winding down

once stimulus payments wind down, we secret quality deteriorating in the united states we see the consumer still out spending they've got to remember to stop spending when their savings runs out. there are other factors besides commercial real estate the commercial real estate is not the hardest one to deal with because you're dealing with big assets you can amend and extend those loans. >> we were talking offline you talk about stress tests. how do you measure the health o'ao a bank say what happens if the consumer stops spending and looking at what that does to liquidity and assets on the balance sheet. that can be some of the most valuable exercises that people do. >> this is the moral hazard question you're raising, assuming this is not the last domino, we've now seen jpmorgan step in because they can offer the lowest costs, effectively lowest cost money, why would anybody ever bid in the future for any of these banks if, in fact, jpmorgan, maybe bank of

america, maybe jpmorgan, are the only ones who can actually offer a deal at these kinds of prices. if you're pnc you're saying i'm not going through this process again. >> he was ahead of you on the notes. one of the consequences of dodd frank is the bifurcation of our banking system we have the extremely large banks and then the regionals -- >> maybe we are like canada and australia and everything else, right? >> yep look, i think we've got to look back 14 years later, what did dodd frank give us it gave us the too big to fail banks. they put this gigantic deep mote around them, it made them impenetrable, it made them so big that we have to protect them but it also made them the buyer of last resort for everything when everyone else disappears and no one's going to question their ability to buy because we know how highly regulated they are. we know how deep and broad their capital base is. the question is what did it do to the smaller banks it may have made them tougher to manage in many respects. >> it means that nobody else is going to step -- my point is --

goldman sachs, which wants to build this wealth management business could have been the kind of bank that might have bought a first republic. now almost impossible. want to pivot the conversation, you had a fascinating op-ed out last week about sort of the regulatory environment, especially around transactions and the like and how we had bobby coe dics sitting here last week this idea is that it effectively was upended not by our own regulators, at least not yet, but by the uk and what we from the u.s. perspective should or should not be doing about it you want to explain? >> sure, look, we have global companies that are centered here in the united states, huge market share in the united states, hugely important, and we're shifting in some areas financial services, tech and the like to allowing what i say is the regulatory tale, lag the

substantive -- why would we outsource the fate of a transaction? now i'm not going to -- whether the transaction's good or bad, let's just put that to the side. why would we let a market that saves 1, 2, 3% of total turnover for two companies determine whether that merger should go through, particularly in the areas that are so important to the united states. we've talked about this. you know, tech, health care, financial services, aerospace. >> what do you think -- i mean, it's very possible that the -- this administration has the exact same perspective and view on these transactions as the europeans do. >> they do >> and so effectively they're saying you do it so we don't have to take the hit the same way. >> and look, andrew, we think this is the issue. the administration has a very ambitious social goal and social agenda the legislators have not legislated that into law, so the regulators that oversee transactions whether they be the

ftc or any of these other regulators that are supposed to oversee these merger transactions, they do not really have the tools to administer the social agenda into corporate deals. now, the europeans do. so if they kick the deal to europe, europe can enforce the social agenda, and then the u.s. can say, oh, the europeans opined on this, let's accept their ruling because we want global harmony, even though we don't have those rules on our books. so we're actually importing the european regulation, when we're the dominant economy where the vast majority of these companies live. >> you picked "the new york times" because you don't need to preach to the choir in the journal. these are people you need to clue in to what's actually going on. >> we wanted to reach a diverse audience. >> they think it's the way to go over there, i think, don't they? >> look, we appreciate that the times published the piece. >> i know, you speak to those people instead of in your own little echo chamber. >> do you think this is an issue

of this administration in particular, which it may very well just be, or do you think there's a larger systemic issue that needs to get sort of codified into law to prevent this type of behavior in the future >> yeah, look, i'll be fair. this did not start with this administration, but like anything, i think that this administration is amplifying, on steroids, this approach. and the euphemisms of global harmony, those types of things, they can be a smoke screen for a social agenda. >> do you guys think the fed needs to go with all the credit contractions that you guys just talked about is there going to be ramifications for what happened, what we're doing now there's no small banks >> the unintended consequences from the bank failures in the last month are having a much more dramatic impact in the market than what the fed has done >> are you writing down i want to be feds >> no. >> we got to go. last week we had a big debate on

this set about coin base which is now being investigated by the sext and brian armstrong, the ceo, came out and said this makes no sense because we went public, at the time we went public the sec had to look at our business and decide whether we were allowed to go public doesn't it make no sense for them to come back two years later and decide that parts of our business basically are illegal. what say you as the former head of the sec in. >> i need to preface by saying my firm sullivan and cromwell is involved in the matter but it is a practically appealing point, you are my regulator, you permitted me to engage in this activity and now you're telling me i've got to change my business >> my question is what the sec by allowing you to go public,ing are they opining on that if you look at the prospectus, it says the sec has not decided

everything going on is copasetic and it's criminal to say that it is >> the sext c does not indemnify the information in the prospectus it always will be the responsibility of the company. >> but there's an implicit something, no? >> of course there's back and forth and you would expect that. but as a legal matter you have it >> i still don't think we resolved it. >> i don't think we have >> thank you, especially on the big news >> especially you, gary. >> we're going to talk markets, preview apple and so much more when we meco back. take a look at the futures we are in the red across the board. big hour ahead

still to come, shares of the world's most valuable company have been rolling in 2023. that company is going to report quarterly results later this week we're talking about apple and we're going to preview all of what to expect this week when this company reports earnings. and a preview of the fed's week with mohamed el-erian.

♪ ♪ the biggest ideas inspire new ones. 30 years ago, state street created an etf that inspired the world to invest differently. it still does. what can you do with spy? ♪ ♪ (vo) verizon small business days are back. april 27th through may 3rd. get a free tech check and special offers. like a free 5g phone. get started today with verizon business. it's your business. it's your verizon.

apple expected to report earnings later this week joining us, gene monthser, deep asset managing partner you would have to say tech has been standout and there's a reason why we've got the s&p really near highs and probably led by a small number of companies, some of which are tech do you expect that to continue with apple, good sflults. >> i d-- good results?

>> i do. i would highlight that there is some risk to the june numbers, specifically the revenue number. just to quickly hit that point, joe, the street is expecting just under 2% growth in a quarter. this is the point where revenue will basically be down 1 or 2% in the march quarter, so an acceleration up to 2%. this is where we see the energy start to dwindle with the iphone at the end of its cycle in the june quarter it typically its weakest quarter and that has been carrying the company over the past couple quarters i think results are going to be in line. i think the guidance could be a little bit punky they do give guidance on their call they give an outlook i would caution that piece but i don't think it changes the bigger pictures about strength in tech. last quarter we saw something

remarkable i covered apple for a long time. they've missed their numbers three times in the last decade the last miss, not only in the december quarter, not only did they miss the number but they missed the miss. it's something that just doesn't happe happen the stocks started to perform better and up 13% since they reported when they gave their active device number of 2 billion. they don't give that out every quarter. that was up 8% year over year. that's a huge growth number to put that into perspective, facebook meta grew by 4% and then you started to see the stock trade better as soon as that metric came out. i believe this is what's going on and it's going to be the key t takeaway from investors. it's going to be more about the active device.

hopefully they give it again and really start to change the narrative around apple and its investment case of services company, which has been the narrative the past five, ten years to more of a staple company that's going to demand a higher multiple. the setup here is more about the strength of their ecosystem versus any metric on the march quarter. >> we could trade at a new high, a new all-time high. we're not far at all i'm wondering what that says about everything, gene >> you talked about the strength of tech and you also mentioned it hasn't been broad based it been the companies you can sleep well at newt owning. i think this gravitation to companies that we're spending more time on is going to continue to draw more investors. the benchhark, to fill in the

banks here, consumer staples, coke, clorox, procter & gamble, those three companies are expect to grow just under 2% in 2024. apple is probably going to grow 5, 7, 9%, much higher. when you lay that work on, if in fact the investment thesis changes on apple to this device ecosystem that they may not upgrade this quarter but they're going to upgrade next quarter, this could be a low 30 multiple stock and i think you could see it well above 200. >> great, gene we're going to leave it there. so many other things happening but that is something to look forward to this week with the job numbers and everything else. 2.6 trillion it going to be almost 2.7. that's going to be a $3 trillion company someday i would think, right? >> i think so. >> could be this week even but maybe not.

thanks, gene >> thank you it is just after 8 a.m. on the east coast and you are watching "squawk box" right here on cnbc. we're live from the nasdaq market site in times squares regulators seizing first republic, making the embattled regional bank the third american bank to fail sits march. jpmorgan will acquire all of the deposits nothing going to the shareholders and nothing going to bond holders, at least of what we're aware of at this point. joining us to talk about what this means is mohamed el-erian is there anything about the details of how or what happened

that surprised you >> it tells us a lot, becky. thanks for having me on. and well beyond what it's like to have a mismatch in the balance sheet, lapses in supervision in regulation by the fed. this was an unusual situation in the sense that all the incentives were aligned among the actors the banks, the fdic and the fed. you had an unusual alignment and yet what comes out has all sorts of unintended consequences and collateral damage. we're making the big banks bigger we're changing the conventional wisdom of what was a safe bank the banks viewed at too big to fail and too big to manage are now the safe banks 11 banks had tens of billions in the banking system it tells you we are so deep in the world of second best that whatever we do will have

collateral damage and unintended consequences. >> when you say the moral hazard was increased here, 11 banks had $30 billion that they put in to try and shore up first republic, that's something that you don't see happening again? the government wanted them to do that, i think, because it showed a sign of confidence in the banking system you think they'll be reluctant to do that again >> they may be reluctant but defacto now we've extended deposit insurance to everybody between what was done on silicon valley bank and what was done here, the message is very clear, every deposit is guaranteed, including the supposedly uninsured deposits of the bank themselves >> that's a really big problem there's a bunch of stuff i didn't know about the fdic before this morning.

the fdic under dodd-frank is required to hold 1.35% of allity posit -- all deposits that are insured to make sure they can pay it off you start taking in all the uninsured deposits, too, which was like 90% of what was uninsured in signature bank and a huge portion of silicon valley bank, too, that's a much bigger number if you start looking at all of those things. is the fdic in a position where they can't pay this out or are we hoping confidence is going to talk that away >> that's not going to change because the law is going to change what is going to change is the practice the fdic is not forced to change what it does in terms of what it holds. the reality is what's happening on the ground is not consisten with the law how do you reconcile this? two ways one is the fed declaring a

sys systemic risk exception and you turn small banks into systematically important banks and, secondly, by giving favorable deal to whatever bank takes over your troubled bank as what happened with jpmorgan. look at the share price today. jpmorgan has gotten a good deal. they negotiated well, they waited out the process and they got a really good deal once again. >> did they get a good deal or not? we've also had people saying it's not going to be substantial to their bottom line, it's not going to be, you know, maybe slightly positive to the bottom line, maybe. i mean, if you're still arguing about whether it's positive to the bottom line, it's hard to say it was a sweetheart deal at the time i don't know if i'd call it a sweetheart deal or a great deal. >> oh, i would it is true that jpmorgan is huge and will get bigger.

so if thisthis doesn't move thee in a major way first republic was one of the most envied banks. why? it had very rich depositors. it was able to make jumbo mortgages to very creditworthy clients and it had what was viewed as the best client experience, the best customer service. all that is now acquired by jpmorgan at a cost that's only marginally more than what they would have lost in the deposits at first republic. so for jpmorgan, that is a great deal and you see that in the stock price. will it make a huge difference to the bank? no but at the margin it is undoubtedly and unambiguously beneficial to jpmorgan >> and again, i don't want to push back on the idea that it's a bad deal i don't think it's a bad deal at

all but i think a couple of things a, so many of those high net worth depositors were already moving their money to jpmorgan or were clients in some other capacity frankly because they couldn't get the jumbo mortgage from jpmorgan at the rates these folks were providing them. two, do they keep all the branches, what happens to all of them there's questions about the wealth management business, how much does it help them or not long term. no >> yes but there's also the benefit of the real estate they're acquiring. the market is telling you it is a good deal for jpmorgan jpmorgan is now -- >> you say real estate acquiring. how much real estate are they

e acquiring. how many rental agreements do they need to get down? >> we'll know that the market is plummeting i think you'll be surprised. the other thing which is really important, andrew and you know this more than anybody else, is this is changing the narrative on big banks big banks are no longer viewed as a social systemic risk, they're viewed at stabilizers. they are not being viewed as too complex, they're being viewed as diverse enough to absorb ironically the troubles of those viewed safe. it turns out first republic is not diversified enough the other big advantage for jpmorgan, which is very difficult to measure, is the narrative about big banks is changing and in an important fashion. >> some people will say that's a good narrative change. others might have other views.

but it's great to get yours. appreciate it very much. when we come back, we'll continue this conversation and a writers strike looming in hollywood. we'll tell you what shows could be delayed, what it means for filmmangthki, e media landscape and so much more "squawk box" returns after this.

ready to shine from the inside out? say “yes” to nature's bounty advanced gummies and jelly beans. the number one brand for hair, skin and nails. with two times more biotin to bring out more of your inner beauty. get more with nature's bounty.

it's hard to run a business on your own. with shopify, you have everything you need to setup your online store, to connect with customers, and to bring your dream business to life. because when we work together, the future is bright. these days, your customers are not just down the hall. they're all over the world. so cute. 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.

welcome back to "squawk box. the futures right now are quiet. too quiet. mixed, though, down 15 on the nasdaq you can see the dow eking out a slight gain and the s&p just off a little but we're definitely at the high end of the range and well off the october lows. treasuries, you got to the 2-year back above 4% and there is something happening in crypto and bitcoin. pretty big percentage loss in bitcoin this morning it says 2% there depending on where you -- what you use as the close i've seen it down 4 1/2% on, for example, coin base. >> meantime, the clock ticking

towards a writer strike in hollywood. this could be one of those hollywood thriller moments a key deadline at 11:59. pacific time tonight it could shut down production for most television shows, at least where there's writing still going on the writers guild voted in favor of a strike. as of yesterday the sides still appeared to be part apart. the guild saying its budgets have soared and writers say its pay has fallen it could be impacts, delays to the fall tv season there seems to be a bit of a debate as to whether some of the big media companies would frankly prefer a strike because it would actually reduce their budgets in terms of spending in the calendar year and if everybody has to do thesome

thing, it's not a competitive mismatch it would appear to benefit content ready to go and might be able to withstand a longer period with new content. coming up, democrats reportedly divided over whether the president should negotiate with speaker mccarthy majority leader chuck schumer accusing house republicans of moving the process backwards that's next.

and this is ready to go online. any questions? -yeah, i got one. how about the best network imaginable? let's invent that. that's what we do here. quick survey. who wants the internet to work, pretty much everywhere. and it needs to smooth, like super, super, super, super smooth. hey, should you be drinking that? -it's decaf. because we're busy women. we don't have time for lag or buffering. who doesn't want internet that helps a.i. do your homework even faster. come again. -sorry, what was that? introducing the next generation 10g network only from xfinity. the future starts now. we moved out of the city so our little sophie could appreciate nature. but then he got us t-mobile home internet. i was just trying to improve our signal, so some of the trees had to go. i might've taken it a step too far. (chainsaw revs) (tree crashes)

(chainsaw continues) (daughter screams) let's pretend for a second that you didn't let down your entire family. what would that reality look like? well i guess i would've gotten us xfinity... and we'd have a better view. do you need mulch? what, we have a ton of mulch. some democrats have reportedly been pressuring president biden to negotiate with the speaker on the debt ceiling. i want to thank you for joining us you think there's a negotiation that's going to happen at least now or are we going to wait till the last second? >> i think we're going to ramp up over time it's not going to wait till the last second. but they're not there yet. you alluded to majority leader schumer's comments before that it's a step back the house vote wasn't a step

backwards, it was a step forward in trying to get negotiations going. but a deal will happen at the last minute but negotiations will slowly ramp up before then. >> and what do they look luike when they happen >> news is always going to get what it wants. republicans put out a very aggressive plan on cutting various programs and capping spending going forward they're not going to get close to all of that at the same time, the biden administration has been saying he's not going to negotiate at all. that's an untenable position as well i expect you'll get a rollback of unspent covid funds, some clean energy permitting reform, some odds and ends like that but it's going to be a fraction of what house republicans put forward last week. >> when do you think the negotiations begin, though i know you said it's like a slow

roll what is the tipping point given that we're still with nothing here >> the house is out of session this week and so until the house gets back, i think it's -- i think negotiations probably pick up right before memorial day and then start to ramp up through june we're still waiting to hear back from treasury about when the actual x date is going to be. >> what do you think the real x date is and how much padding is in there >> no one knows. if can you get to june 15th, you get more corporate tax receipts coming into the government and that gives treasury a little bit more time, probably into july. so it's a floating target. we don't know. treasury telling us, giving us more clarity about when that would be would be very helpful and i think once treasury says that, that's another event that will get the two parties going if treasury says it's going to be july, then that memorial day

date that i just gave you is probably on the early side and they wait until of a memorial day to really engage if treasury comes out and says, yeah, it's going to be june 11th, just to throw out a hypothetical number, i think when the house gets back in a week or so, then it really ramps up >> this is a big yawner so far in terms of the number of phone calls and emails you're getting from clients asking you to opine to them about it, what are you seeing as a barometer on all this this. >> i would say a slow ramp there has been a jaded view, a very skeptical view of washington, they're going tho get a deal done at the end of the day. i think there is a sense within -- among investors that i'm talking to that slowly they're coming to the realization that this is going to go to the last minute and there is actually more of a possibility that they have

thought previously they were going to get past that x date without a deal and then what happens? how do the fixed income and financial markets function who is getting paid and who is not getting paid what are the economic ramifications. people are starting to to pay attention to this slowly sloely but surely >> they're not going to default. some are saying it's going to take a market crash before they do anything. that's very unlikely >> it is i think treasury and the fed have plans in place, they've tried to game this out since 2011 and 2013 on how you my or ti prioritize after that it gets dicey

is a check to a social security recipient going to be missed nobody knows the answer to that question is an payroll check to the government going to be missed? when it's a government shutdown, the defense department is considered essential and those folks are paid is that the same this time around i don't think we have clear answers to that. and then you get into the area of government contractors and vendors. when payments start getting delayed and missed, do they in turn miss their payments that they have to make to their creditors, to their employees and others and how does that start to work its way through the economy. >> all right >> brian, want to thank you. appreciate it. >> thank you guys. >> all right when we come back, fallout from the collapse of first republic bank leslie picker has been on the jpmorgan media call. she will join us with highlights

next and you can get the best of "squawk box.

>> let's get right over to leslie picker. she's been on the jpmorgan call. what can you tell us >> a lot of questions on this

call no surprise here about jamie dimon, ceo of jpmorgan's views of what this means for the overall state, the potential for a recession and credit crunch. he said about a potential slow down in lending he said this deal stabilizes the system, you're clearly going to see some reduction in bank lending but he bleechs the kindbelieves the sth would be in the normal category he added this was nothing like 2008 and 2009 and he believes this deal with stabilize the system he pointed out the regional banking earnings reports that he said they had some pretty good results and he believes, quote, the american banking system is extraordinarily sound. he said obviously if going

forward you do have recessions and rates continue going up, things like that, you arewill se cracks in the system but he believes the banking system is very, very sound to follow up on a discussion earlier in the show, this idea of the fallout, the lessons learned from bear stearns and wamu and the potential unexpected legal problems that stemmed from the financial crisis in '08/'09 and whether they're concerned about that taking place here. they mentioned they have the appropriate indem it's in and that this is a very difference situation from the transaction that they did backduring the financial crisis so they didn't provide any specific details about those indemnities and where they came from but they said they got, quote, the appropriate

indemnities. >> thanks for continuing to updating us. we'll talk later >> coming up, we'll talk about the collapse of first republic and how the central bank could react and that kind of thing when we return he just didn't wanna do that. he was proud of the price he was charging. ♪♪ my dad instilled in me, always put the people before the money. be proud of offering a good product at a fair price. i think he'd be extremely proud of me, yeah. ♪♪ i'm so glad we did this. i'm so glad we did this. i'm so glad we did this. i'm so glad we did this. i'm so... ...glad we did this. [kid plays drums]

life is for living. let's partner for all of it. i'm so glad we did this. edward jones ♪ great estimations ♪ interesting piece. let me bring in my expert. mmm... so many scratches... oh those are from my car keys. such a rich history. yeah. this won't do well at auction. but at at&t, it's worth a brand-new samsung galaxy s23. wait really? mmhmm. what about this? at&t's deal is back. wow. everyone gets a free new samsung galaxy s23 with a galaxy phone trade-in. any year, any condition.

our customers don't do what they do for likes or followers. their path isn't for the casually curious. and that's what makes it matter the most when they find it. the exact thing that can change the world. some say it's what they were born to do... it's what they live to do... trinet serves small and medium sized businesses... so they can do more of what matters. benefits. payroll. compliance. trinet. people matter.

welcome back to "squawk box. take a look at the futures on a big morning as jpmorgan takes over first republic bank i want to get straight over to mike santoli what you got >> digesting a pretty gay two-dt two-day run. the s&p 500 over the last year has basically been flat over two years. right here when we were trading at these levels one year ago, the fed funds rate was about one half of 1% that's before we got 400 basis points plus of tightening and s&p 500 projected earnings for

2023 were $250 a share and are now 12% lower. if you said earning estimates were too high, you're right and yet we were held in check. at least lately the very largest stocks have been supporting the overall index. this is the 50 largest stocks in the market, the top 50 index against the equal weighted russell 1000 we have the bank stress episode in march, that's when you had the defensive turn toward the largest stocks they have added 3 billion in market cap it has been lopsided but that doesn't mean the overall index has to buckle because all the other stocks have gone down. it's also happening a the a sector level if you look within semiconductors, people were taking comfort in that and this is a modified market cap weight.

the equal weighted semis is buckled a little built and they're below on the year-to-year basis i would say if you had this clearing event from frc and maybe the banks get relief, usually small caps will move with that it could help out the breadth numbers and by the end of last week there were broader rallies than we're used to >> appreciate it >> let's get to rick santelli for the bond market. would you have been able to deduce it? >> i would have to say no. there are some signs, interest rates have ticked higher and a move to safety so reversing that should be something that we can

pick up. but it isn't huge. we're talking seven to eight basis points in the front end and half that in the longer maturities the bigger issue seems to be some of the dynamics that much of europe is out with may day, we have a big deal coming to the market out of meta they're going to have five different maturities, size is unknown but it's probably going to be rather large and we have initial claims before the jobs reports this week. and it popped to basically the lowest level since spring of '21 and claims pop to the hypest level since november of '21. joe, we went from being afraid of too big to fail banks to having them be the kind of superheros in this forced marriage so to speak in many ways, we ought to be very careful about how we

proceed at this juncture and be cognizant of the fact that there's a lot of unknowns. it's much different, as many have said, between the credit crisis from '06 to '09 but that doesn't necessarily mean it a more palo altoable crisis. maybe it doesn't include toxic mortgages but it does have the possibility of more toxic loans. we have rollover risks of paper that has been set forth and issued and released, interest rates that are in the rear view mirror all this has yet to come home to roost. i have to give credit to jamie dimon, to be partners with the government definitely takes courage, in my opinion >> all right, rick now let's get to this week's fed meetings joining us is former executive at the new york federal reserve and current special adviser to the ceos at cls bank international

do you see any developments over the weekend that give the fed pause for what they're planning to do this week? >> they probably should have some pause but i'm not sure that it will. they've given every indication they're going to continue to raise interest rates and i just came back from europe and the ecb is sending the exact same signals, we've got an inflation problem, we're going to continue to tighten policies despite the banking crisis we've seen there. still the same messages. i'm not sure we're going to get a change in view but maybe we should because this is -- now we'vehad the second largest bank failure in our history and the third all within a couple of weeks time to the point rick was making, should we assume that this is it why can't who remember 1994,

there the fed raised from 3% to 6% by the end of the year, you know, orange county was declaring bankruptcy, mess co was in crisis and you had derivative and bond boomts on the the street blowing up. owe is this it hopefully but we shouldn't assume >> we know there is still duration risk. the 25 basis points is not a lot. i'm just wondering whether it would affect assets that have duration risk more than the positive effect we get on the demand somehow it will slow the economy a little bit more which means inflation comes down a little bit more the benefits -- i don't know if there are any. >> part of this is the fed took

a credibility knock because of transitory and now they're kind of -- probably feel they need to make up for it, reestablish credibility and show they're not going to be dissuaded. so they're probably going to keep muspushing it a little bit more we spent ten years with negative real rates and now real rates are roughly give or take zero and probably going to be in positive real rate territory soon with inflation coming down a little bit and interest rates still going higher so, you know, there's probably going to be more stresses that show up. to your point, it's not just the banks. it's probably some finance companies, some insurers, other business models that the market will sniff out who was reliant on low interest rates who is now going to be caught off sides that's what they'll be hunting for. >> the fed knows this, right they have to

they have to know a lot of this stuff before we know it. do you think they're giving enough concern to this when they're in the room or are they just so worried about inflation still they they feel have to -- >> you're really identifying the trade-off. when you say "it", it's the duration and the interest rate mismatch >> and tightening credit as a result >> they see it in their own balance sheet because the feds' own profit and loss has gone an they understand that lending has been trimmed back. that's in the data and this isn't going to help this news over the weekend but they've got to sort of make that balance between do we prioritize inflation or economic growth in the near term? i'm kind of in the camp that thinks we're going to have a recession by the end of the year but the forecast -- >> already there >> the forecast does not show that look at the dot plots and

speeches the members are making. they're not there yet. >> now they're going to keep, you know, laying it on whether they need to or not. i would think that the down side is more than the benefit you get from another -- if it's one and done, don't even do it if it is. >> i'm with you. i think the last time i was on i said the same thing. i said they probably will continue to tighten but probably they shouldn't because of the tightening that's in the pipeline is going to show up, you know, a few months from now and by that point it will be -- >> half expectations and -- >> to be fair, if steve liesman was here, he would point out it was inventory and all that >> i know. >> i'll be looking for the ism number i guess later today right now that is pointing towards weak

it's not a good indicator of the economy three, six months ahead. i'd be looking to are that right now we're looking on a slowing trajectory and that's, you know, again, these banking issues are not going to dissuade them >> he's on weekly or every couple weeks >> when we come back, jpmorgan holding a call about the first republic deal right noum for investors and for analysts we'll talk more about that deal and what it means for the fed with nick from "the wall street journal" next. 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. (cecily) you're looking pleased with yourself. (seth) well, not to brag, but i just switched my whole family to verizon. (cecily) oh, it's america's most reliable 5g network. (seth) and it's only $35 a line. (neighbor) i got that deal too. (seth) oh hey, bragging buddies! (neighbor) my man! (cecily) this i don't need. (seth) you should give me a call! (vo) with verizon, your family gets the network they can rely on and the disney bundle with disney+, hulu, and espn+ included. all for just $35 a line. that's a savings of $240 a year. the savings you want. on the network worth bragging about. verizon

[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. breaking news, regulators have seized first republic bank. the man who knows the fed very well, people call him the fed

whisperer. we assume the fed is watching the market's reaction to all of this is that a safe assumption? >> yeah, becky it feels a little bit like ground hog day you have a shot gun bank, feels like we were there six weeks ago because we were. this does clear the way for the fed to raise rates by 25 basis points, which they had pretty strongly signalled they were going to do. the focus will be on what the fed says in their policy statement on wednesday afternoon. >> so forget about it, there's no way they're looking at this and saying there's too much stress in the banking system, they see this as wrapping up one of the most stressed pieces out there. they are going to raise rates. how hawkish do you think they'll be there was a note out from mike wilson saying they're pretty hawkish. that could be a down side for

the equities market, that it could react badly. >> i think you're right. first republic was seen as a bank on weak hands on friday and stronger now because of what the government and jpmorgan did. when it comes to how hawkish, i ask compared to what i don't know what your priers are. i think the question here on the statement and i think the focus going to be on the statement at this meeting, there aren't pro jebs projection rates on this meeting. how much do they die or not on a june rate increase do they keep that in there do they do what they did in 2006, in their second-to-last move, they ardded the word "yet" those are the code or buzz words they're playing around with to get it just right. they don't want to lock themselves into something if

they're not sure they're going to move but they don't want to signal a pause either. i don't expect to see what the bank of canada did in january where they put a very clear pause into the statement there will be a timing bias i expect coming out of this meeting but the question is how hawkish do they make that signaling. >> jamie dimon was already making comments in the call with reporters earlier talking about how there is going to be a further reduction in bank lending. it's kind of obvious we've been seeing it how does the fed measure that and are they okay because they're mot they're more concerned about getting inflation under control? >> i think you saw they knocked a couple of hikes in their terminal rate projection in the summary of projections but it's not really clear what more we've learned over the last six weeks as it pertains to the lags of this credit crunch so if you were a dove and you

were already worried about the lagged effect, the cumulative effect of these hikes and now you have a banking stress event but you don't have a lot of hard evidence you can point to, you're going to rely even more on those concerns about the lags and the same could be said for the hawks. you don't have something hard you can point to you can look at the inflation data, the wage data last week, still pretty hot so if you weren't that worried about the lags before, it's hard to see what would change your view now so it's -- i think it's hard to say exactly how you -- you can't really quantify this in terms of how many basis points is all of this bank stress going to be worth? >> nick, thank you we appreciate you getting up early with us this morning >> thank you >> let's get down to the new york stock exchange. jim cramer joins us now. i think this is going to be a new 52-week high for jpmorgan. does that make sense today, jim?

>> yeah, makes tons of sense they got a great deal, 10% they can fire people really fantastic client base and good for the whole industry. the fdic is no longer on the hook for 30, for morgan stanley for wells fargo, so it's good for the industry, and jamie did well >> do you think, just looking past that, do you think that the fed, the apple numbers, or the employment report sets the tone when we look back on this week >> well, i think it's going the fed, because if they say they can pause, the market has a huge run. if they say, look, we're just going to remain vigilant, and we got to get to 2%, then i think the market stalls. >> yeah. i mean, you -- normally, you don't like basing anything on the fed, jim, so you picked that one. how about the jobs number? it would -- inflation's still

sticky, but we're under the impression that there is some evidentiary slowdown in the economy. >> i think so. i mean, the construction business is going really strong for commercial real estate -- for apartments, for single family home. commercial, there's a slowdown, but not nearly as bad as the bears would say. so, i just think that the real slowdown may be concentrated still in tech. you might have bed bath, i don't know but tech remains a real problem except for maybe that's not bad because they're the richest people, and we don't want them spending like they have been >> if apple trades at an all-time high, does that mean other parts of the market are going to catch up? >> yes >> did that -- it does? >> it means the semis will be strong because a lot of people feel that the semis are a black hole here, particularly the ones that go into telco i heard someone on frank collins's show say the ones that

go so telco are doing well i wish that were true. i think that apple can talk about how there's okay growth. i don't think they're going to say anything big somebody said they're going to forecast lower growth the second half they never do that, so i don't know why people are saying that. people say a lot of stuff about apple that just doesn't matter, but they say it anyway apple's a real black box >> okay. all right, jim cramer. >> thank you >> we'll see you in eight minutes on "squawk on the re."stet and "squawk box," which is on before "squawk on the street," will be right back

power e*trade's easy-to-use tools, like dynamic charting and risk-reward analysis help make trading feel effortless. and its customizable scans with social sentiment help you find and unlock opportunities in the market. e*trade from morgan stanley. 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. e*trade from morgan stanley

welcome back, everybody. the futures this morning, barely budging at this point. dow is up by about ten points. s&p, down by 2.5 the nasdaq down by about 19. joining us is barbara reinhart, head of asset location at voya management and the markets have been hanging in pretty well, especially when you consider what's been happening in the banking industry last week was another up week for all three of the major averages you've got the fed meeting this week, jobs coming up what are you watching, and what are you thinking >> this week, it's really two things it's the fed earlier in the week, and then it will be the employment report on friday.

we think there was a big change at the march meeting for the fed, so after svb failed, the fed had said that they are going to let the market do some of the work for it with the tightening in credit conditions, and that was a very big change for the markets. it meant that if the macrodata was a bit stronger, the markets would have less sensitivity to it in part because the fed is likely not to take rates as high as the market had expected previously >> and that's why there's a little bit of the all-clear, even though we may just be getting some troubling signs on the economy? you think that's already been factored in? >> yeah, the slowing of the economy is a good thing. last year, very strong economic growth was seen as relatively bad news because it meant inflation would stay hotter than expected this year, the slowing is actually welcomed by the markets and had been well anticipated because the fed rate hikes over the course of 2022 were actually starting to bite you need slower growth, indeed,

to get inflation down, and we think that's what's likely to transpire over the third and fourth quarters of this year >> all of your positivity, is that kind of contingent on the fed saying we're done here, or as long as they're not super hawkish, you still kind of stand by this thesis >> look, the may meeting is probably too early for the fed to say all is clear, but we would expect likely the language to a point to a pause at the june meeting credit conditions are indeed tightening the fed will have the senior lending officer survey, which is a very important piece of economic data before the may meeting this week. it won't be released to the public until after, but we think the crisis in the banking industry is likely to cause a significant tightening of credit conditions a lot of that is in the price. look at small and mid cap stocks they have been punished unduly by the market since svb failed we think a lot of this has been incorporated into asset prices we think that we're range bound

for equities, though the lows that were made in october of last year were very important. we don't think they'll likely be breached, but bonds are looking much more attractive at this point. if the fed pauses at the june meeting, that says it's all clear for bond yields to stop climbing at this point, and that's relatively good news, not only for the fixed income markets but also for the equity markets and the equity risk premium. >> how much of this is a base case -- where do you think the economy's headed what's your base case for that is it garden variety recession is it avoiding that? >> yeah, look, it's really a very slow roll towards a recession. the u.s. economy is a very big economy. it takes big shocks in order to kind of push it down so, we think that the economy really lurches towards recession, but it's likely not until 1 q of 2024. that is an added consensus call. most of the forecasters on the street tell us that the economy will be in recession in 2023, but we note that the labor market has been still the

underpinnings have been relatively strong, and while some of the things like job openings have been slowing down and indeed weakening in parts of the tech sector, we do think that it's going to take longer to transpire, which is why risk markets are unlikely to fall precipitously. >> you like the united states better than the rest of the globe, why is that >> we think a lot of the good news is in the price for europe. last year, everybody thought there would be gas prices. you had the ukrainian and russian war on their eastern front. it was relatively bad news, but the thing is, most of that bad news didn't transpire, but the thing is, for going forward for europe, you need inflation to come down dramatically you need wages to come down dramatically and the ecb is still behind the curve in terms of raising rates. we think in terms of where we think the markets are going to go, the fed is likely to pause

long before the ecb. that's likely to mean that the dollar is going to stop falling, and also, we have more earnings visibility in the u.s. than there is in europe at this time. >> okay. barbara, thank you very much by the way, we should point out we were just on some boards of trading in europe. the footse is closed european markets are closed for labor day there. that does it for us today. make sure you see us back here tomorrow we'll see you later. ♪ good monday morning, welcome to "squawk on the street," i'm carl quintanilla with jim cramer at the new york stock exchange david faber at the milken institute global conference in beverly hills. futures pretty steady here as we kick off may with a big week ahead. jpmorgan buying most of first republic we'll get 20% of the s&p reporting earnings, including apple, fed decision, j.o.l.t.s. and a jobs number. our road map begins with the first republic failure, jpm taking over after being iz