this is "gps", the global public square. welcome to all of you in the

united states and around the world. i'm fareed zakaria coming to you from new york. today on the program, panic in the markets as the banks need rescuing again. i'll ask one of the people who was at the center of the storm the last time around, the former ceo of goldman sachs lloyd blankfein about whether the system is stable. and is your bank account safe? also, how did it come to this? did we learn the wrong lessons the last time? i'll talk to gillian tett of the financial times. then, don't mess with the french people's retirement plans. that is the lesson from weeks of strikes and protests that sent chaos in parliament as government pushed through their policy anyway. which brought the outrage right back to the streets.

we'll tell you what you need to know. but first, here is my take. on his trip to saudi arabia last year, president biden made an emphatic declaration about u.s. policy in the middle east. he said, we will not walk away and leave a vacuum to be filled by china, russia or iran. last week's meeting between saudi arabia and iran brokered by china suggested that this is precisely what is happened. the reestablishment of relations between iran and saudi arabia is not a seismic event. they broke off relations only seven years ago. but last week's revelation exposes a deep-seeded flaw in american foreign policy. one that has gotten worse in recent years. in 1995, the journalist and scholar joseph offy yet a essay

for a strategy after the cold war. he called them bismarck or britain. the first was to emulate britain by building alliances against any rising powers that seem hedgea monnic but otherwise to say uninvolved. he argued that this balance of pow strategy would be impossible for america as a pre-eminent power and linchpin of the international order. instead he advocates as strategy as the broker, to unify german and made it the leading power in the late 19th century. bismarck depicted the ideal situation for germany as not that of the acquisition of territory, but a total political situation in which all powers except france need us and are kept from coalitions against us as much as possible by their relations with each other. the associated doctrine is

called the kissinger diktat, and in a remarkable case of historical resonance, henry kissinger, a century later, was animated by the same idea. in making the opening to china, while siemtly pursuing the soviet union, he ended up that washington ended up with better relations two beijing and moscow than they each had with each other. in fact, many of the american policy centered around this bismarck-an idea. america had better relationships with israel and the arab states than others and it caused yugoslavia and romania away from moscow and had better relations

with iran and saudi arabia than with each other. today, however, washington has lost the flexibility and suppleness that would inform just this sort of strategy. our foreign policy today consists of grand moral declarations that divide the world into black and white, friends and foes. those statements get locked in place with sanctions and legislation making policies more rigid. the political atmosphere becomes so charged that merely talking with a foe becomes risky. there is now a whole slew of countries with which the united states either has no relations or only limited hostile contact. russia, china, iran, cuba, venezuela, myanmar, north korea but the effect is to create a rigid foreign policy, one if which we're unwilling to talk to everyone in the room and unable to show flexibility, presumably based on the idea that it is

best simply to hope for the overthrow of these regimes. this is not really a criticism of the biden administration. but of american foreign policy as it has developed over the last decades. america's status has corrupted the country's foreign policy elite. foreign policy is all too often an exercise in making demands and issuing threats and condemnations. there is very little effort made to understand the other side's views or actually to negotiate. the obama administration tried to take a different path. it negotiated the nuclear deal with iran which seemed to bolster the moderates within the regime and could have led to a more workable relationship with that country and engaged china while pushing back on economic espionage with some success. it began a process of normalizing relations with cuba and even russia. but the political climate in washington was largely hostile

to this kind of kissinger diplomacy and once donald trump entered the white house, he pulled out of the nuclear deal, slapped tariffs on china and tightened sanctions on cuba and tried to overthrow the venezuela government. now they are so firmly established that they are extremely hard to change. biden campaigns on undoing many of these policies. but once he took office, he found it politically easier to just go along with the tough line. all of this evoked the inertia of an aging empire. today our policy is run by an elite that operates mouthing rhetoric that pleases constituencies and is unaware the world is changing and fast. go to cnn.com/fareed to a link to my column this week. and let's get started.

a little over a week ago, the 16th largest bank in the united states, silicon valley bank, collapsed. customers panicked after the bank aunnounced it would sell several billions dollars in shares to cover huge financial losses participating a classic bank run. the bank's failure threatened to wipe out many tech start-ups and venture capital firms and other businesses large and small that kept deposits there. something in the neighborhood of $150 billion held at the bank was not backed by the federal government because it was in accounts larger than the fdic $250,000 limit. the panic looked like it was spreading to other banks and could pose a risk to the broader financial system. so last sunday, the federal government stepped in to rescue silicon valley bank and another failed institution, signature bank. all depositors will be able to get their money, even big

accounts. the biden administration insists this is not a bailout, because the depositors, not the shareholders, are the ones being rescued. does the government do the right thing and is the banking system secure? my next guest used to run goldman sachs, one of the country's largest and more influential banks. lloyd blankfein, good to have you back. >> fareed, good to see you. thank you. > >> fnow, i don't want to give yu ptsd, in 2008, how is this crisis different from 2008? >> well, a crisis is a crisis. but has different roots and characteristics and very different. we'll see if it gets to the same dimension. for one thing, in 2008, the banks had bad assets on their books or least in many cases investors, shareholders, the

government couldn't assess what the value of the assets were. you member sub prime mortgages, were they worth anything at all and what were they worth. here you have the asset side is good. most is government debt and the government prints the money, so that is money good, but the problem is they took duration risk, they insisted in long-term bonds and when interest rates went up, the interest rate that they got on their bonds and inventories went down in value so in this case, and so that sparked a bit of a concern among creditors and depositors and so deposits left the bank. so in 2008, there were asset problems, and the current market, it is really people pulling out deposits but in the assets are money good but they've suffered a loss of valuation in between. the context is different. banks today, financial institutions in general, are much better capitalized.

i think the regulators post 2008 could take credit and so we're starting in a much, much different place for the financial system as a whole. doesn't mean there wouldn't be issues in one institution or another as the case with silicon valley bank. >> when you look at the situations right now, what -- and it is a moving situation but what the government has done right now, can most americans, most depositors, all depositors feel our money is safe, we don't need to go not bank to withdrawal? >> i think the answer is kind of yes, with an ellipse. because the government is partly as a result of the forms, you could query whether it was a good or poor reform, took away the power of the fed to just give -- issue a blanket guarantee of all deposits in the

system, which they did in 2008. instead, it left them with the power acting in concert with the fdic and the treasury to -- if they find a systemic emergency, to guarantee the deposits of entity by entity, bank by bank, i think what we heard from the fed, that in this moment, this fragile moment, they are implying that they will regard any event or any run on a bank as systemic and the implication is that they will use that authority that they have but they can't announce that in advance and they can't declare it. but they've come as close as they possibly can to do it. but they don't have the power to issue a blanket guarantee. but i -- i would think -- i think you're able to rely on it but there is a tail risk in that

lack of absolute certainty. >> now there is a lot of people who feel this is in some way a bailout and one more example of capitalism for the poor and socialism for the rich. that is the whole bunch of these tech companies, where the cfo's should have been managing their accounts properly and left huge amounts of money in uninsured deposits, roku had $500 million in cash in -- in an account. presumably there are other regional banks that made the same mistakes that svb made that are now going to get backstopped by the fed. is it fair to say that the government has helped a lot of people who in the normal course of capitalism made mistakes and should have been wiped out? >> well, clearly, people would have lost money, wouldn't lose money so the answer is yes.

i think they weren't aiming at this one or that one or this group or that group, they were aiming at all of the depositors with the eye to the systemic risk for the entire system. so the dragnet picks up everybody when you do it. but it opens up to what you're asking, what i think, is really the policy question of guaranteeing deposits and that is something that will have to be worked through. we have a $250,000 cap with the government guarantee, how sensible is that? the word that gets tossed around, the expression that gets tossed around is moral hazard. if you protect these depositors, they and other depositors in the future won't be so careful where they leave their money and if they're not so careful, this situation is likely to reoccur. and the implication, the suggestion is that people should do their homework and do research on which are solvent

institutions. now i won't deny that an institution capable of leaving $500 million in a single depository in a single bank has the wherewithal to do that, but in our financial system, do we really expect, do we want to make it the duty of depositors to do that kind of forensic accounting analysis on banks? we don't make people do analysis of airplanes when we board them. we rely on the faa, if it is certified, we get on them. and we do the same thing for drugs that get sold. if they are tested and approved, we rely on, it people aren't doing the forensics by themselves. we need to think to a great extent, to deposits and raise that limit but that is a policy decision that will take place. >> stay with us. when we come back i'm going to ask lloyd blankfein whether these bank crises will tip the economy into a recession and if they do, what should the federal

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and we are back with lloyd blankfein, former chairman and ceo of goldman sachs. lloyd, i want to understand what the future of banking looks like, what the business model as it were, if the federal government is ensure all deposits, in a sense, the whole business of banking used to be that you've managed the fact that you're taking short-term money and you're loaning it out at long-term -- for long-term investments. if the forward federal government is going to guarantee, what is the model of banking, is it a utility highly regulated for everyone? >> well i don't think there is anything on the table to guarantee banks and their income and their solvency.

we're talking about -- we're talking about depositors here. but, look, there is a lot of wide policy debates are going to flow from this. clearly if we don't do this, look, the biggest -- the biggest banks, the few biggest banks have very, very high capital standards and liquidity standards and stress tests. and the regional banks, even large regional banks like silicon valley bank are -- have a much lower level of regulatory scrutiny and therefore kind of safety. let's be honest. and if you just left it like this, the lesson that people may walk away with is that their banks, their money is only safer, maybe only safer with the largest banks and so they're exercising their discretion in moving those things. the end of the game might be more consolidation which was never an objective to the

system. there is big policy decisions here. you ask about the future of banking. is it a virtue that america has well over 4,000 banks. most countries have a few big banks with branches. we have branches that are dedicated to regions, that focus on particular industries, silicon valley bank is an example. it may be the oil patch. particular groups like some community banks and loan associations and connected to unions. we also have the fastest growing large economy in the world and i'm not sure that that is not a reason. our credit system for the largest economy is in the communities and in the industries and in the various sectors and that is probably a good thing. i wouldn't want to experiment then and withdraw that. but if we give people -- if we incentivize people to only go to the biggest banks, the sector will consolidate beyond what people think is an attractive thing. >> so, lloyd, the federal

reserve has been raising interest rates and while it won't explicitly say this, what it is been trying to do is engineer a soft recession, by making money more difficult to borrow, it is been trying to slow the economy down. it is highly likely it seems to me that this -- all of these banks crises are going to do some version of that. so should the fed stop raising interest rates? >> you know, the market as we -- as we speak here, the market is projecting better than a 70% chance that the fed raises 25 basis points. i personally -- i personally think it would be okay to stop here. to your direct question about with respect to the current situation and the effect on the economy, it is a certainty that this situation will cause -- will act in a way that is similar to a rate rise in some ways. banks will have to -- because of

the tension because of the pressure an uncertainty, banks will husband their equity. do less lending on the deposits they have and so already there is less credit, less credit means and less growth. so some of the mission of the fed in trying to slow the economy will be done here. >> lloyd blankfein, always good to have you on. thank you. >> thank you very much, fareed. next on "gps" we're going to focus in on the collapse of silicon valley bank. what about the culture of silicon valley? was to that blame? my next guest will explain. i'm off to america's best i heard what you said about not overpaying for glasses. two pairs and a free, quality eye exam i heard what you said about nostarting at just $79.95?. bucks. i mean, people deserve breaks, rht? ah, brakes...! [out of control] book an exam today at americasbest.com.

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back now with the bank crisis that has rippled across the world. silicon valley bank's fall was one of the fastest in history. the reason, some argue social media caused some of the panic that resulted in history's

largest bank run. my next guest has written about the curse that has underpinned this modern crisis. gillian tett is from the financial times. and welcome. and i want to ask you to put your head on as a anthropology, and the way this works culturally because what happened here was triggered by social media and by the kind of virality or the speed with which a communication happens today. is that at the heart -- at particularly the speed of this bank run? >> well, the roots of the credit comes from the latin meaning to believe and finance without trust is worth nothing. and one of the problems that bankers and regulators that grappling with is we live in an

age of cyber flash mobs. because of this news could flash around the world and you get explosions of passion that flare-up and die down. now we saw the political implications with the arab spring and the implications in the fashion and music world where suddenly things become trendy and then disappear from sight. we've seen it in social interactions. i mean, last summer a teenager i know had a pizza party for about a dozen kids. someone mentioned it on social media and within minutes there were hundreds of teenagers there and the party was ruined. but more seriously. in the banking world, banking runs are not new. panics are always at the heart of any bank collapse. but the difference between now and the 20th century was that in the 20th century they took a long time. because people had to go to a bank branch and cue up, and see people in streets and get pieces of paper and it would take days or weeks.

now it is so fast, it happened before you even know it started. $43 billion fled off of silicon valley bank in a matter of hours because people were posting panicky tweets and messages on social media and it spiralled. and the problem for regulators is what do you do in this hyper accelerated worlds when cyber flash mobs could explode and be hard to quench. >> and that is a fascinating question. do we need a different model of banking for the future? >> well, there are things that you could potentially do to stop these cyber flash mobs from escalating. so, for example, you could make it difficult for people to pull out money quickly in digital means. you could have a cooling off period. you could basically say that people who post, you know, scary messages on the internet as many people did beginning of the last week, you could say that could be prosecuted for creating panic. but frankly speaking, i'm not

sure that is going to work. because in an age where we're free too order whatever pizza we want on our phones at any time, we don't want to have a situation where we can't take our money out of the bank because that is a curtailment of freedoms. and it is hard to say what is or is not, you know, fear-mongering messages because one could argue that some people felt they are a public interest to warn about the daengers of bank rather tha keeping in the hands in the tiny elite. the only way you'll counter this world of mobs is to make sure the banks are trustworthy. >> you write a lot about culture and siloed cultures and tech culture in silicon valley is very siloed and they think of themselves as a real community. but what is striking to me is that all of these guys, the minute they got a whiff of a problem, they panicked, they --

as say they in game fury, they defect and pulled mir money out precipitating a bank run that could have been avoided if they all just stayed, stayed calm and slowly worked it out. people like peter teal led the charge. it feels like this is partly an indictment of the culture of silicon valley. >> well, there is two issues here. the first is why did techies not see this coming. and it is partly because the people have been working in silicon valley are so dazzled by computer science and so addicted to the idea of being anti-establishment, moving fast and breaking things, to quote mark zuckerberg, trying to disrupt everything and essentially hating washington and hating wall street, that they've been very, very scornful of things like old fashion the banking. and they spent far more town at the founders the start-ups thinking about computer science and never bothering to look at this banking relationships or

asking whether it was a good idea to use silicon valley bank to heavily and put so many eggs in one basket and they didn't see what other people saw which is silicon valley balance sheet was sitting on enormous and streamly dangerous losses which would be threatening. that is part of the problem. but the other problem is that when the crisis started, essentially the silicon valley community, if you like, panicked and, yes, they tweeted and, yes, a number of them did pull their money out fast. it is important to understand that anyone running a venture capital fund have a fiduciary duty because the ceo of silicon valley himself had told them that there were problems at the bank and if they left their money in the bank and the bank had then failed, those heads of venture capital funds could have faced legal liability for not being fiduciarily responsible. and i spoke to peter teal last

week about what happened. and, yes, his venture capital group founder's fund did pull their money out and in advice that was advicsed to pull their money out. peter teal had $50 million sitting in silicon valley bank of his own money. which he did not pull out. not because he was trying to be noble. but because he actually hadn't been tracking that closely what was happening to silicon valley bank. he wasn't that close to it. and didn't act fast enough. so, the point is that many people who are supposedly some of the brightest people in america working in silicon valley turned out to be unbelievably stupid when it came to looking at basic finance and banking. >> wow, on that sobering note, gillian tett, always a pleasure to talk to you. >> thank you. next on "gps", macron's government used a special constitutional provision to push

through legislation to raise france's retirement age this week. already heated protests have intensified. what will this mean for france and for emmamanuel macron when come back? maybybe try switching your car insurance to progressive. you could save hundreds. that's a great idea, tv dad. but i said the exact same thing. some day when you're a father, you'll understand. i'm his father. it's not a competition. listen to your tv dad. drivers who switch and save with progressive save nearly $700 on average. if you still have symptoms of moderate to severe rheumatoid arthritis or active psoriatic arthritis after a tnf blocker like humira

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are rigorously inspected to live up to the highest of expectations. upset has turned to outrage in france after president macron's government used a special constitutional power to force a controversial bill through the legislature on thursday. at issue is something near and dear to the hearts of french men and women, their retirement. now instead of retiring and receiving a government pension at 62, they will have to work an extra two years and get it at 64. macron said the form is needed by rising life expectancies and the decreasing ratio of workers to retirees. in the 1960s france had four active workers per retiree paying into the pension funds. in 2020, that was only 1.7

workers per retiree. but two-thirds of french people say they are against these reforms. joining me is sophie pedder, the economist bureau chief and author. sophie, first, give us a sense of what it means that macron used this constitutional mechanism, presumably he couldn't get a majority in the lower house. that has now provoked, as the french term goes, a vote of no confidence. will it succeed? could this government fall? >> well, that is the question we're going to be looking at on monday. because there are, in fact, to votes of no confidence that have been tabled. and each of them will be voted on separately. they need to have a majority of seats in the lower house of parliament. so it is not a majority of

people present but a absolute majority of seats in parliament. in the national assembly. that technically is perfectly possible. if all of the opposition parties were to combine and vote in favor. i think what we're likely to see, however, is that you will see the extremes, that will be marine le pen will vote in favor and the left wing alliance will also vote in favor. but the key to this vote is the republicans. the central right republicans party. they are being told by their leader not to vote in favor but some of them are rebelling and want to vote this government down. so, it could come down to the votes of 20, 25 republicans, whether or not they decide to try and bring the government down. i think that they won't. but i think no one is feeling confident about that right now. >> what does this mean for macron for the rest of his term? because it seems as though he's had greater opposition than he

expected and it must wound him, right? >> i think that is right. i think that even if technically his government survived these two votes of no confidence, politically the government and the president has been really badly wounded by this. it means looking for rest of his second term, he hasn't even been in office for one of those five years. it is going to be extremely difficult. there is a general debate here about whether or not it is democratic to use this constitutional provision. it is constitutional. but is it politically legitimate? and that is going to make his time, i think, certainly in the next few months and probably longer than that, extremely difficult. i mean, there is even a question about whether this government itself and the prime minister could survive in the short run. >> so help us explain, sophie, how the french view this. because at one level, they lowered the retirement age in

france in 1980, i guess it was. since then, life expectancy has gone up about 10 years. meanwhile, as i said, the ratio of workers paying into this fund has gone down dramatically. i think about 30%. so so the math clearly seems to suggest that you need some adjustment. every other european country has made these adjustments. germany retirement age is 67, not even 64 which is what macron is proposing. are the french just sort of blind to this and feel france is unique? >> you know, i think it is got to do with the sense in fence that the rolling back of the time you spent in work is part of what makes france french, it is part of french civilization. and you mentioned the retirement age from 65 to 60 and it was a

socialist government that brought in the are 35-hour working week and what the french feel is a civil lized way of organizing society and these are social preferences and i don't think they buy this argument that it is -- it is an accounting need or a democratic need and they don't really buy the argument just because other countries have done this, they have to do it too. so i think it is very complicated. probably even more so post covid where people have reevaluated their work and that is why the french feel this is not part of what makes them french and they are resisting it. public money has been against this reform right through the beginning of the year when the government first presented it. >> and what about finally, why has macron been so unyielding on this? he, too, has stuck to his guns even though it was clear that he

didn't have a majority of the people with him. >> i think for the president macron, i think he sees this as a real test of whether he could continue to modernize and reform france which is what he tied to do during his first term in office. reform is in his dna. that is what makes his president. he feels he could do things to try and change france, reform france in ways that haven't before. but you only have to look back in history, you remember it was under jack shirac when they tried to reform pensions and brought down that government and there were -- and the parliament was dissolved. so it is something that touches the very heart of what the french believe in and it is i think macron felt or feels still that he could do what past presidents haven't been able to. and it is a real gauge of whether he is still the reformist president that he

certainly was in that first term in office. >> well, you're right that if he gets it done, le do something that no french government has been able to do for 25 years. sophie pedder, thank you so much. >> pleasure. next on "gps", one piece of good news came in britain's new budget. pub-goers will save 11 cents on beer which is part of a new brexit pub guarantee. how else is britain doing on brexit? not so well. i'm explain in a moment. okay everyone, our mission is complete balanced nutrition. together we support immune function. supply fuel for immuneells and sustain tissue health. ensure with twenty-five vitans and minerals, and ensure complete with thirty grams o. >> tech: when you have auto glass damage, trust safelite.

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and now for the last look. finally, the british people are seeing the benefits of brexit. this week the chancellor presented a budget that contained a brexit pub guarantee.

from august, the tax on draft beer and cider will be up to 11 pence lower than the tax on beer and cider in supermarkets. he was keen to claim, this would have been improbable to enact when britain was part of the european union. he voted to remain but feels he must band hardliners. it is worm recalling that the benefits of brexit were supposed to be a lot more than a bar beer subsidies. boris johnson and other brexit-ers, wanted a lightly taxes global behemoth, a singapore on tems that would break down and take back presidents on the global stage. of course that didn't happen. having broken away from the largest market, britain is the only g7 country whose economy hasn't rebounded to its pre-pandemic size. in january, the imf predicted it

would be the only major economy to shrink this year. and it is a mirage. as noted in the ft in november, britain is starting to look more and more like a pail imitator of europe. post-brexit, they have presided over significant tax hikes an the budget on wednesday included a rise in the corporate tax rate from 19% to 25%, by 2028, the tax burden, the tax revenue as a proportion of gdp will be risen to nearly 38%, up 5 percentage points from 2016. according to the u.k. office for budget responsibility, this will make the tax burden britain's highest since world war ii, spending will rise to the highest levels since the 1970s. the other great mirage of brexit was that would it lower immigration. in the years before brexit,

niger feradge said they were a scourge criminals and spoke of brie serving british jobs for the british born. so it is curious that last year saw record high net migration in 2022, 500,000 more people to britain's shores than left it. none of that comes from the european union. more left the u.k. than migrated there. it comes from refugees from ukraine and a visa program for people fleeing hong kong. but as a fascinating piece by the financial times makes clear, the increases is also due to policies put in place after brexit that make it easier for companies to hire certain workers from outside of europe to chefs an butchers and home health aids and because the government has described them as shortage industries, lacking the labor pool to fill them. and the chancellor didn't

mention this in his speech, his budget document lays out a new shortage industry, construction. that means the ranks of foreign born bricklayers and carpenters are likely to rise. this change in policy means a surge in visas for workers and a shift in the country of origin. as the f.t. reports, the u.k. saw seven times as many workers coming from nigeria in 2022 compared to 2019. it is a 25 times as many from zimbabwe. hundreds of thousands from outside of the u.k. came to britain last year than the year before. now immigration is a good thing for the economy. the office for budget responsibility said migration to the u.k. could grow gdp by half a percentage point by 2027. but the rise in migration last year hardly matched the rhetoric about preserving britain's resources for the british born.

it is fair to say that in just a few years since brexit has been implemented, things have turned out the exactly the opposite of the predictions of brexit-ers. no wonder they want a do-over. thank you for being part of my program this week. i will see you next week. >> don't forget if you miss a show go, to cnn.com/fareed for a link to my itunes podcast. of te fuels that keep ththings movin. today, we're producing renewable diesel that can be useded in existing diesel tanks. and we're committed to increasing our renewable fuels production. because as we work toward a lower carbon future, it's only human to keep moving forward.

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