♪ good thursday morning. i'm sara eisen with carl quintanilla. san francisco president mary daly moments away calling for, quote, a couple more rate hike this is year, plus lessons learned from the svb failure. thomas sho is with us with banks on deck. charles schwab's liz ann sonders, what she's calling frothy sentiment. decent action in stocks today as ppi basically reflects

cpi yesterday was not a fluke. today the spread -- actually the spread between 52-week highs and 52-week lows was the biggest in about a year or two. >> recession trade is underperforming. real estate as a sector, utilities, even consumer staples. i'm watching pepsi as well, what it tells us about the overall environment. pepsi beat on the quarter, raised guidance. now expects 10% organic sales growth they had a strong first quarter they raised the outlook to the 10% growth i talked to hugh johnston, the cfo and he said he's not seeing much of a slowdown in u.s. consumers and they're seeing a ton of growth outside the homes, in convenience stores, up double digits, in food services like restaurants, up 20%. that's a sign there's still a lot of growth out there in the services part of the economy also while he says inflation is

moderating, nowhere near 2019 levels may not even get there. >> i don't think you want to see it roll back four years. that would definitely be a bad signs. looking for more signs of disinflation our next guest thinks july could be the last rate hike, keeping an eye on signals like more temporary employment, people holding multiple jobs joining us, liz ann sonders. you pointed to hours worked getting cut and may be a tell what the back half of the year could bring us in payrolls. >> the june report did have a slight uptick in hours worked but that's in a downtrend. it's in keeping with the narrative around labor and also tied into that is the fact that nominal revenue growth has been so strong. real revenue growth is nil nominal revenue growth has been strong that's been a support for the labor market and for companies

that's why i think second quarter earnings season, we know earnings are always important, beat rate, all of those metrics. i think the analysis on revenues, unit sales, what that means for profit margins and the cost of labor as a component of that, i think those messages are going to be equally important as it ties into the macro environment versus just the earnings stories >> do you think right now -- airlines, actually pepsi, too, may be great examples of where input costs have provided a lot of relief. it's not necessarily getting passed through and that's a margin story at a time we're wringing our hands on earnings you feel good about that from a corporate perspective? >> we're in the midst of this margin story depending on what version of margins you look at, whether you look at it just for the s&p or a broader measure of companies, you're down 2 to 3 percentage points from what was profit margin highs last year in some cases, all-time highs. that is a bit under pressure

now we've got, again, the revenue side in real terms in negative territory nominal revenues coming down it's sort of the other side of this inflation story which has been a negative broadly in terms of the fed story. i think impact on things like consumer sentiment but it's been a positive for many companies, certainly via the labor market channel. now that that's coming down, there may be more attention on the potential negative side. equities live in a nominal world and bonds live in a real world i think that distinction may be coming into clearer focus in this environment now of negative real revenues. >> liz ann, are you still sector neutral or ambivalent? you know, i'm looking at the performance year-to-date, technology and communication services are up 40%, health

cares are down, financials are flat it has mattered what sector you're in. >> you can also get to performance via factors not just sectors. i think monolithic sector decisions don't help you as much as focusing on factors a lot of the factors we've been emphasizing, like strong free cash flow, healthy balance sheet with ample cash and low debt, positive earnings revisions, positive earnings surprises, a lot of those names that have powered the market higher in areas like the growth trio of tech, communication, services and consumer discretionary, you get exposure there but you're doing it through a factor screening approach versus trying to make a monolithic either sector approach or a broader, say, growth value index style approach >> and when you're looking at companies that are doing that, especially growing earnings in this environment, do you factor in a recession in the next year.

>> we talked about it on your program. we've been calling this a rolling recession. there are pockets of the economy that have had recessions there's no doubt about that. housing related, manufacturing, a lot of the consumer goods that were huge beneficiaries of the lockdown phase of the pandemic they absolutely went into their own recessions it was just offset by the later strength on the services side of the economy. services is larger employer, that's helped support the labor market in addition to nominal revenue, which we already talked about. to me best case scenario is more nuanced than just soft landing we continue to see a roll through such as if and when services in the labor market get hit, you have offsetting resilience and/or strength in areas that have have already had their recessions most recently, housing is a perfect example of that, having gone through the recession and appears to be on the other side of that. this is just a rue neek cycle.

i don't think we can look at it in simple recession versus no recession terms. >> how about all-time highs, liz ann? we've been talking about this note out of goldman got written up on the wires today that clients are asking, could it happen in the back half? one voice on the desk says yes are you counting on that >> wait, so -- a correction? >> all-time high >> i think the pain trade is still higher sentiment is frothy. as we all know, sentiment can get to an extreme both in -- toward despair and toward euphoria it can last for a long time. i think based on positioning, the pain trade is still higher i do worry about sentiment in the context of a potential negative catalyst. for all the euphoria around the better than expected inflation data this week, perfectly justified, we have to remember that the comp two a year ago was

june of 2022 with 1% month over month. fast forward to next month, you have the comps against july much tougher. i'm not saying i think we're going to have a disappointment but to the extent we don't continue this disinflationary trend, the fed has to jaw bone that, hey, july is not the final hike given euphoric sentiment that i think represents a risk in the second half of the year. >> yeah, that's definitely the takeaway that some of the easy work on those comps is in the past we'll see what the next few months bring liz ann, thanks. >> you, too. san francisco fed president mary daly is next on "squawk on the street."

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welcome back time for one of our interviews of the morning a deep dive into what's next for interest rates and inflation with our next guest. joining us in an cnbc exclusive san francisco med president mary daly and steve liesman is joining us good morning to both of you. president daly, you said at the beginning of the week you thought a couple more interest rate hikes were needed this year that was before we got the cpi report and the ppi report. cpi was a lot softer than expected only 3% on the headline. do you still think we need a few

rate hike this is year >> what i said, that's a reasonable projection. i think the most important thing about a reasonable projection is it preserves optionality there's no doubt the good news on inflation is good news, in indeed mostly for american consumers who are going to have some relief in their pocketbooks for high inflation but i think it's too early to judge. steve has heard me say this more than once, it's really too early to say that we declare victory on inflation this month of data is very positive i hope it's part of a downward trend in inflation but i am in a wait and see mode because i am resolute to bring inflation down to 2%. >> president daley, could you talk about the sorts of things that some folks thought might alleviate the need for you to hike more, things like bank credit tightening and also the lagged effect of monetary policy one of your colleagues thinks we've seen the effects we're going to see

do you still see more from the 500 basis points you've raised >> the way i think about it is, and i start with the research evidence that comes out of the economics profession what we find again and again is the lags in monetary policy, there is no real consensus but a rough estimate they're between 12 to 24 months. if you think about when policy first became restrictive, it was middle of last year to september of last year that means they're still in my judgment cumulative effects of monetary policy to work through the system and i think that's part of the slowing we're seeing right now in the labor market, in inflation, in consumer spending these things are all consistent with the lag still working their way through. but i also recognize we can't just hold out hope lags are going to solve all our problems, which is why we have to remain resolution to do enough, bring the rate up to a sufficiently restrictive place and hold that rate for the time it takes to

bring inflation clearly back down to 2% >> how about bank credit tightening, is that something you see slowing the economy? >> that's a great question right after the initial banking stresses, my initial thought is that could be important, worth about one or two rate hikes. at this point when i talk to banks throughout my 12th district and look at the aggregate banking numbers throughout the united states, you really don't see that kind of credit tightening you don't see right now credit tightening that's far in excess or even in excess of what you would expect given a slower projections for the economy and economic growth. i take that as there isn't as much credit tightening as i thought. i do think from the research literature that this takes a while to show itself i think we're still looking into the fall before we would have a declarative statement to make about the extent of credit tightening and the effect on the economy. >> so far so good, as you say on that front, president daley.

if you look at that and you look at some of the recent data, the fact housing looks to be picking back up again, the growth figures are pretty much intact the consumer is not falling apart. the unemployment situation is not really a problem it's still a tight labor market. does it make you worry that inflation could bubble back up here and you might need to go even farther to protect that scenario from happening? >> i'm certainly mindful of the fact that while we put over 500 basis points of tightening in the system over a rapid period of time, we still have an economy that has a lot of momentum and this is why we continue to say, well, we are going to keep working on rate hikes until we are sure that inflation is on a path to calm down to 2%. it's one of the reasons, as you mentioned earlier in the program, i said two rate hike this is year is still a reasonable projection. it's for that very reason you said it is a risk that we

undertighten it's a risk we overtighten that's why data dependence, meeting by meeting decisions is so important right now >> and i would imagine wage growth in tarl how much do you weigh that as a factor and what do you see happening there? >> one of the things that is an underknown fact is wage growth often follows inflation. and so it's really hard to say that wage growth is going to lead inflation down. we do know firms are paying a lot more to compensate their employees. at the same time, and this is the irony of this particular expansion is that firms tell us they pay more to get workers and workers are telling us their wages can't keep up with inflation. it is ultimately the job of the fed to bring inflation down so that we have a normally functioning economy where workers get paid, firms feel like they can still make a profit and workers don't feel like they're falling behind on a treadmill each day because inflation chews away their wage earnings that's what we're trying to do

>> president daly, i want to shift gears and talk about the demise of silicon valley bank which was in your district it was in the san francisco district we reported here on cnbc that bank presidents are not in charge of the supervision of banks that size. but i do have a couple questions from the reporting i've done is, were you aware of the interest rate of the -- of the flaws in the interest rate model at silicon valley bank even though you did not have direct supervision over the bank? >> the way supervision works, it's a really good opportunity to help your viewers understand how fed supervision works. it is directed by the board of governors. the supervisory framework is in the board of governors and the reserve banks, i have teams here in san francisco, supervision teams, and they report to the board of governors this keeps me ring-fenced, rightly so, from the day-to-day operations of supervision so that we can have greg becker,

for instance, sit on our board and not be concerned that there is crossover so, one of the things that the viewers, i think, need to know is bank presidents don't have a direct role to play in supervision. in fact, that's a feature of the situation that prevents -- if you're a bank in north dakota you're treated as the same bank in california. i'm not regularly aware of these things >> you weren't aware of the problems at silicon valley bank. when i did that story, mary, i talked to several former bank presidents they said it's a few tour of the system that bank presidents aren't involved in the supervision but they also think it's a flaw of the system. should bank presidents who have the local knowledge and are in the area there be more involved, is it a problem that the bank supervision is really spread out, diffuse and ultimately decided in washington, in some

cases, thousands of miles from where the bank is. >> i think it's a feature of the system that a bank in north dakota feels like it has the same sprvlgsry program as a bank in texas, california or new york that is a feature. it also ensures that they understand who is accountable for this as chair powell has said the, that's the board of governors. i think that's important for the american people. the other part of your question is, is it important for the board of governors and supervision in general to hear from reserve bank presidents on what things are affecting the economy. there we do have an opportunity to voice our concerns about things like interest rate risk, credit conditions, commercial real estate. one of the ways in terms of the credit conditions question that sara asked me at the beginning, we learn that from talking to our bankers and at ceo

roundtables, councils and board meetings and we get that information from that source and i think that is critical so, the learning i would take from this is that more of this dialogue between reserve bank presidents who are collecting this information and the board of governors who really oversee supervision, vice chair barr in particular, i think that's critical we're always learning. in is the thing about the federal reserve and the fed supervision is we're always learning this is a good opportunity, unfortunately, to really learn a lot. and i like what the independent review vice barr did and found that here are the things we need to specifically focus on, but one of those things is ensuring we have a culture of dialogue where we're looking around the corner and i think reserve bank are uniquely positioned to look around the corner and say, what are the emerging risks and how can we mitigate those before they are a real problem? >> fed barr's report did trace

the problem to, quote, widespread managerial weakness you just laid out that it wasn't under your purview and you couldn't be directly involved but your team was as supervisorses. how come managerial weakness and negligence wasn't spotted? >> the first thing to know is that there are over 4,500 banks in the united states that did manage their risks well. and three banks, silicon valley being one of them, did not manage its risk well as the vice chair's report squarely starts with, that's the management of silicon valley bank supervision, and i would say fed supervision, board of governors working collaboratively with the federal san francisco bank team. two things that are critical are the two things identified in the report first, identifying emerging risks. the firm was growing quickly and becoming more and more complex,

moving through the fed's tailoring or tiering system. and we as a collective need to identify those risks, look around that corner and take mitigating strategies. the second is when you identify those, and many were identified, be more forceful in ensuring management is fixing those issues so the kind of things that happen at silicon valley don't happen if you ask why did silicon valley bank fail it ultimately failed because depositors lost confidence and decided within the course of a day to withdrawal its funds. that's a failure recipe to the bank we can trace it first back to management and there are a lot of things we can learn about how to supervise more effectively as we look forward into the risks and manage those properly. >> i wonder if one of those things is that there has been a lot of focus and supervision on the bigger banks that was the last problem.

that was the financial crisis. in your district you have wells fargo where they've been a bit of a problem child lately. were there more resources a allocated to manage that bank than a bank like svb >> you referenced it and it's true, institutions are working hard to fight the last war that's why i'm focused on, let's make sure we are looking around the corner to what the next emerging risk might be president the vice chair of supervision who does oversee this and makes decision, he's referenced that building up supervisory capacity, ensuring we have the right number and the right intensity of supervision, especially in rapidly growing firms as they move from smaller institutions to midsized institutions on their way to larger institutions is one of the critical findings of the review and one of the things we'll collectively be focused on as we work every day to improve

supervision in the fed >> can we shift back to the inflation interest rate story, if you don't mind here i just want to get back to this issue of where are you aiming for? and one of the things -- first thing i learned covering the federal reserve a couple of decades ago, you learn about real rates when i look at the projections, i see a real rate projection of 1.5% leading to a real rate projection of 1% in 2025 and a long-run real rate of 0.5. all i'm doing there for folks who want to play this game at home is taking the p -- the core pce projection and subtracting that from the funds rate could you tell us how you think about this, president daly, when it comes to real rates and do you see the economy or see the fed getting tighter and tighter as inflation -- or if inflation continues to fall and will you maintain that level so you get a higher real rate >> that's a terrific question.

and i think you and i have talked about this on a previous program. the real rate is something we absolutely follow. we don't estimate the real rate very well. there's a lot of uncertainty around this. but the current estimate, the median of the summary of economic projections is 0.5 as the neutral real rate we're aiming for you have 2% inflation and that's 2.5% we'll get to in nominal terms. what's the path to get there my own view is you need to move rates up to restrictive territory. that's our rate hiking we've been doing then ultimately what happens, as inflation starts to come down, the real rates just naturally rising because you're taking that inflation off so we can then, as you look out into the projections you see rate cuts. well, the rate cuts aren't really because n my judgment, we think inflation is already at 2% you can look at the projections and see that's not true. it's because we're trying to keep the real rate in many ways more or less study to coming

back down to a normal level as the economy gets closer and closer to 2% inflation so my own path right now is you continue to raise rates. you get the restriction you need then as you see inflation coming down, you can lower the nominal rate so you can bring real rates down to that neutral level at about the same time that inflation is coming to 2%. does that help >> it's -- yeah, definitely. it's funny that, you know, next year at some -- for a lot of the years it seems like it's a long way away we're already past june. next year is less than six months away. tell us the preconditions. what does the world look like, president daly, when you start to cut rates is inflation at 2% at that point or somewhat before that? >> that's a great question not in my forecast not in my forecast not how i think about monetary policy let's go back to this idea that we don't want to overcorrect

if you wait until inflation is 2%, and you know monetary policy has lags, you have all that restriction coming in long after inflation hit 2%, so my own judgment su want to start h heading towards the neutral rate as you approach 2% the key, though, is to get us on a sustainable path that we're confident in that inflation is truly going to go down to 2% over a time frame that's reasonable that's what we're working on right now. while i know it isn't that far away to think about when might we start cutting rates, right now all of my attention is on decidedly if we need to hike more and how much more we need to hike in order to really get inflation heading down to 2% i'm thinking of the people on this treadmill, this proverbial treadmill of continuing to make good earnings and not have those earnings actually pay for things month to month they expect to be able to afford that's where all of my attention is you're absolutely right. at some point we can normalize

we're just not there yet >> i don't understand why you didn't raise rates in the last meeting. the minutes showed a lot of you wanted to raise rates and a majority think rates should be raised even further, one, poernlly two more times. and maybe even more than that. can you talk about the internal dynamics going on at the fed >> sure. i'm glad you asked this question because i think it's critical. so, the standing pad at the june meeting, and i was a very strong proponent of this, fully support this decision, that is about slowing the pace of hiking as we get closer to our destination. we hiked rates over 500 basis points i'm sure your viewers do remember this. we hiked rates over 500 basis points in short order. we moved from 75 basis points at a meeting to 50, to 25 basis points at a meeting. so, we could have done 12.5 in june and 12.5 again in july if

you thought that was penciled in another way to slow the pace is to stand pat for a meeting it also allows you, and i think this is really important, prudent policy right now requires, it demands we not declare we know when we don't know we actually don't know a lot of things what would happen -- what's happening with inflation is this really good news yesterday, is that going to president. where are the credit shocks? are they truly behind us or do we have more to come what are the cumulative impacts of monetary policy, the lags when you're less certain and i feel much less certain about all of those things, you the to move more slowly. that's prudent policy in any tightening cycle especially now when we've tightened so rapidly it takes a while for the economy to digest those things i don't want to error on the side of overdoing it because i'm impatient and i don't want to make an error of underdoing it

because i too quickly draw the conclusion we're finished. >> the market thinks one and done is that wrong? is that too excited? >> i think the market might be really focused on yesterday's cpi and the slowdown in the labor market and just projecting i can't say because i don't know what they're thinking exactly. i do absolutely have more optionality. but i have a lot of meetings left in the year and i have a couple weeks before the next meeting. i'm reelg right now optionality is where we want to be and not being declarative. >> can i ask you about your own district and your own home base, which is san francisco more and more conversations i'm having with business leaders are revolving around the crime statistic, which is widespread, but san francisco even worse them having to make decisions about whether to close up shot we've seen that in some instance with whole foods, for example.

how do you think about what the local economy is doing a lot of it involves return to office and post pandemic conditions and what to do about it >> well, you're absolutely right that san francisco, the bay area, you know, we -- after the pandemic, businesses didn't come back in large numbers. it's left business -- small business leaders -- small business owners, rather, closing for a variety of reasons some reference crime others referenced they're just worn out they don't have the customer base returning without the support rolls off they feel there's not a profitability mechanism here it really depends on where you are, too every time i go and read a newspaper about some other place, whether it's new york, by the way, i read about san francisco, it always is the more extreme version. i actually work in san francisco. our employees are coming to work we have lots of businesses open. and i see more and more people returning to the office, more

and more people investing in their communities. i live in oakland and that's a thriving area right now. i think it's a little like mark twain, rumors of my death are greatly overstated i think rumors of the death of the bay area are really overstated but we do have challenges ahead one of those challenges, and i don't want to beat this horse too much, but one of those challenges is inflation is hard on businesses. add other things to them and they shudder and say, i'm out of here that's too bad we need to get this fixed. >> we thank you for taking time with us this morning, the wide-ranging conversation. >> my pleasure. >> and thanks to steve liesman for joining me as well >> thank you. when we come back, kbw's tom michaud joins us

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welcome back i'm pippa stevens with your cnbc news update. moments ago a pennsylvania jury decided the man who killed 11 people inside of a pittsburgh synagogue is eligible for the death penalty. the jury reached their verdict in just two hours. the killer was convicted on 63 federal charges in the october 2018 massacre. today a british jury heard from kevin spacey for the first time in his sexual assault trial in london. he denied the charges against him and suggested he was just a, quote, big flirt and he said one of the men said he would withdrawal the charges if he would just pay him lebron james put retirement rumors to bed at last night's espy awards. the basketball star said he

would return for his 21st nba season despite hinting at a possible retirement earlier this year james has said he hopes to play alongside his son who will be eligible to enter the league's draft in 2024. back to you. >> pippa stevens, thanks. jpmorgan, citigroup, wells fargo set to report results. leslie picker here to explain. this one looks messy. >> it appears to be a little tough, even for the largest banks. bank executives have been guarding the market lower and analysts have been slashing their earnings estimates left and right. the street has taken down their q2 projections for the big six by 20% on average from the estimates they had laid out just at the start of the year that's thanks to rising funding costs, banks needing to pay depositors more for longer rates and loan growth is slowing those dynamics are crunching

margins. all of these headwinds come at a time when bank regulations are quickly changing and the direction of the economy is uncertain. banks are likely to hold onto their capital and put away reserves to protect against some of those risks and unknown out there. much of this is already priced into bank stocks with valuations well below historical averages kbw says this is what the trough looks like so, if that's true, maybe any hints of green shoots from the reports and conference calls may help generate renewed investor interest in the group. we'll see you tomorrow when three of the big money center banks, jpmorgan, citi and wells fargo report i'll be sitting down with citi's cfo mark mason tomorrow afternoon. >> lt, thanks. for more on what to expect as earnings kick off tomorrow, we are joined by tom michaud. set the table. what is the most important thing

to look for this round >> i think the first thing is profits are declining. we're looking at 7% decline year over year. we're resetting the earnings estimate because of the historic change in interest rates i think that's going to be on the table and that's probably going to play out in the next couple of quarters the market's watching very closely on credit. we think credit costs on the first and second quarter will be up 20% up 20% from zero so, still, very benign i think the market wants to know what about credit. and so i think those are the two biggest themes and investment banking just like kelly just said, which is -- it's going to be a terrible quarter for investment banking we think it's turning and we have been recommending investment banking stocks. >> yeah. it's coming in dribs and drabs now. at least the either early tells or anecdotally reporting about maybe a turn in the first quarter or sooner. i don't know what do you think? >> there are two things to look at one is capital markets, which is follow-on equity there's a lot of pent-up demand,

especially at a private equity to sell shares as the stock market's been holding in there and been rallying, it's almost like sector by sector you see the on switch turn on that's actually going to be a good quarter the second thing is, investment banks get paid when mergers close, not when announced. the gap between announcements and closures is widening which means we're getting more announcements, which means we should get more revenue in the second half of the year. that's building. so, that makes us feel better. >> what about some of the other stuff. delinquencies down to real estate >> real estate is the big issue. and you can get even more specific all the time. you can say it's commercial office buildings, it's the big buildings and it's in the cities our commercial real estate research group believes there's 30% downside to valuations in the cycle and that we're about halfway through. but there's going to be more writedowns in commercial real estate we think you'll see it in the goldman quarter because they have a lot of equity investments

in real estate they'll probably be writing that down >> who else is exposed >> well, you know, first of all, one of the stories is how much credit, and there's a whole other theme, is not in the banking system since dodd/frank was passed, the banks have lost market share to nonbanks i think you'll see a lot of it in the nonbanks. the bigger banks tend to have the bigger real estate projects. so, wells fargo tomorrow, they've already been talking about increasing reserves. they may have, we think, a 9% reserve against their large office building portfolio. that's actually a big number so, i think that's going to be part of the topic around this commercial real estate theme >> do you think the industry -- the lobbying groups have been vocal on capital requirements saying it's going to hurt access to loans or increase hurt to borrowers, do you think it would be painful for the industry? >> i think if we take a step back and just look at it quarter by quarter and look at it in multiple years, the nonbanks are

gaining share. and the more expensive you make it to manage a bank, that's going to accelerate that trend going forward. the more expensive it is to run a bank, the more a bank will want scale to afford those investments that they're going to want to consolidate it's a very predictable chain of events and also i did, i had a chance to testify in front of congress this quarter one of the things i said was, there are unintended consequences from overreacting silicon valley and other banks failed because of liquidity, not because of capital i think these higher ratios probably would not have stopped them from failing. and i think if silicon valley hadn't failed, maybe signature and first republic don't because it was a contagion that expanded i believe the first steps should be deposit insurance reform. not increasing capital ratios. the fdic actually laid it out in the report and they have a hybrid proposal that i think is excellent.

i would say that should be the first step not raising capital ratios because that's going to have a whole dynamic on the bank/nonbank - >> did you hear our conversation with mary daly >> i did >> was she right there wasn't a big supervisory failure on the part of the federal reserve and the san francisco fed specifically >> i believe that there are multiple contributing items when something like that goes bad and what happened was circumstances that hadn't happened before that would have been opportunities for many participants inside the bank to be able to make changes. and at the end of the day. the depositors got more nervous about the mark to market on the bond than anybody else did and so i think that's ultimately what led -- what led to the pressure at the bank then what we learned - >> that's a nonanswer. >> well, what we also learned is they had $13 billion of deposits in their top ten relationships, which is staggering and a number i never would have guessed so, coming off of this, there's

going to be less concentration, more focus on funding. and i think what we learned is the held to maturity portfolio was not the safe harbor everybody thought it was and i also would applaud vice chairman barr for wanting to bring more mark to market into the regulatory regime. >> to the degree there is consolidation, do you feel like the goldilocks picture on mega cap tech m&a will translate to financial m&a? >> i also thought you have to bet on the power of the economics. the power of the economics are consolidation needs to happen. right now we have four really big banks. the question is, will we have 15 banks that can equally compete so, these other banks want to come together to compete with the big four banks they're not allowed to we'll just have four banks meanwhile, nonbanks are continuing to pick up market share. so, i think, yes, because of the power of -- we'll have more

diversification of risk. i think you'll have more profitable banks, which will make the industry more sound one of the big challenges, though, is because of the changes in washington, it takes twice as long as it did 2 1/2 years ago to get an answer on a merger application there are more obstacles to thinking about that as a strategy. >> we're getting used to some pretty long windows when things are announced. we'll see what happens in the morning, tom thanks for helping us set it up. on that note, be sure to tune into this show tomorrow we'll talk to the cfo of wells fargo right after they report their quarterly results. be right back with the dow's gains flipping, up only 35 there are some things that go better... together. burger and fries... soup and salad. like your workplace benefits and retirement savings. with voya, considering all your financial choices together can help you make smarter decisions. voya. well planned. well invested. well protected.

getting a news alert on former celsius ceo kate rooney has more. >> more details will likely come to light in a doj press conference going on. it is set to start at noon the ceo and founder of the bankrupt crypto company celsius. federal prosecutors set to unveil several new charges against the celsius founder, including misleading investors and market manipulation. department of justice charging him with securities and wire fraud and conspiracy to manipulate the price of a cryptocurrency created and managed by the company called

the cell token charged with securities and wire fraud. the ftc announced a $4.7 billion settlement against that exchange that won't be paid out until creditors and investors have been made whole in the bankruptcy process mishen ski was one of the most high profile crypto executives during the bull market the company said at one point it had $12 billion under management it was offering interest-bearing crypto accounts with yields as high as 17%. the ceo is known to promote that platform on youtube and at conferences. he often wore his signature t-shirt that said banks are not your friends cnbc has investigative team first reported there were internal issues at celsius years before that bankruptcy, according to internal documents and former employees we spoke to, who accused celsius of market manipulation and misusing customer funds we reached out to attorneys for

the company and no word back it's the largest charges in the cryptocurrency after ftx and binance. >> what a news year. market prices not reacting as some would have expected. reacting as some would have expected. kate rooney. coming up, microsoft's activision deal not out of the woods just yet the ftc filing an appeal to block that, though microsoft one of the better performing dow components more details when we come back

ftc chair lina khan appearing before the house judiciary after the significant si announced last night it will appeal a decision to let microsoft have activision go through. our steve kovach has been listening. >> reporter: chair khan focusing on the investigation into twitter for violations of a privacy settlement after elon musk took over the company asking the court to eliminate that settlement. the ftc has gone absurdly far beyond the mandate granted by congress ethics concerns, khan when she didn't recuse herself for a case against meta though an ethics official advised she do so

the losing record blocking mergers and pointing out ftc is 0-4 when merger challenges and why the ftc brings those cases to courts. take a listen to that exchange >> we fight hard when we believe there is a law violation and, unfortunately, things don't always go our way. we make determinations -- >> are you bringing cases you expect to lose >> absolutely not. >> meantime the ftc in a legal filing last night telling the court it intends to appeal the loss in its case against microsoft seeking to block the tech giant from buying activision expecting the ftc to file that full appeal later today. timing could be worse for microsoft, though. it agreed with activision to close the deal by july 18 and is under a temporary restraining order not to buy activision until 11:59 p.m. tomorrow. now can the 9th circuit make a decision before that order lifts? and if it can't, will microsoft

go ahead and close the deal anyway overseas regulators in the united kingdom gave microsoft an opening to alter the terms of the microsoft deal putting its case on pausesaying it will pick it up if the new terms don't satisfy. if microsoft can't get this wrapped up by july 18th, it will either have to renegotiate terms with activision or abandon the deal and pay a $3 billion break fee. carl, lots of moving parts here. it's all coming down to the wire >> a steady diet of drama. congress is getting a grilling today. there's talk about whether or not there's a rift regarding leadership versus the staff. i'm just trying to think which constituency she is winning with >> that's exactly right. and to her -- if you want to take her point of view on this, even though that losing record with mergers, they see that as a win because the ftc under khan, their posture in this, carl, is

that, look, the laws are antiquated when it comes to this new era of antitrust, and they're trying to encourage congress to change it. that's their view. >> all right, steve. thank you. steve kovach keeping it interesting there with all those deadlines. wall street buzzing about bob iger today and the comments he made from david's exclusive interview this morning more details after the break we planned well for retirement, but i wish we had more cash. you think those two have any idea? that they can sell their life insurance policy for cash? so they're basically sitting on a goldmine? i don't think they have a clue. that's crazy! well, not everyone knows coventry's helped thousands of people sell their policies for cash. even term policies. i

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unions making a buzz today hollywood actors voting on whether or not to strike after failing to reach a deal last night. this would mark the first time the actors and the writers unions have gone on strike at the same time since 1960 citi looks back at past protests and estimates it could cost the industry about $150 million a week they think that's somewhat management iger did talk to faber about the impact the strikes may have on the industry >> there's a level of expectation that they have that is just not realistic.

and they are add to go a set of challenges this business is already facing that is, quite frankly, they disruptive >> interestingly that saund byte is getting circulated among the actors a day after iger's contract was released with sizable bonuses. >> they couldn't find box office data from 1960 they think that the impact is actually pretty, as you said, negligible financially >> looking for a resolution in the fourth quarter we'll see. the judge is in town carl, thank you very much. welcome to "the halftime report." i'm scott wapner live today from the american sentry championship celebrity golf event in beautiful lake tahoe more than 90 big names across sports and entertainment are here for bragging rights and a purse of $600,000 and, importantly, this event also raises millions of dollars for local an