google, numerous platforms to collect personal data. we found users precise locations purchases you make an additional data. companies can provide this information to advertisers and show us personalized. >> this would be like someone following you every single day as he walked down the street watching what you do, where you go, how long and with whom you are with. all of us at c-span, would like to express gratitude, teachers, parents support and encourage their students throughout the competition. congratulationsll o the winners and be sure to stay tuned, top 2021 will air on c-span starting april 1. you can watch every student cam documentary anytime online at studentcam.org.

back in june, the supreme court new york law requiring proper cause to obtain conceal carry gun permit. tonight, and impact of that decision and other regulations with gun safety advocates and scholars testified before the senate judiciary and watch the entire hearing starting p.m. eastern on c-span2. on c-span now, free mobile video up or online at c-span.org. >> michael davis joining us university professor in the top school of business here to talk about regulations, federal government particularly with funds last week. thank you for joining us. >> thank you for having me. >> can you tell us about your specialty? you tell us how you look at the events last week compared to the rest of us?

>> i'm interested in all kinds of things but i spent a lot of time about how the government interacts with business and regulation in a written about banking regulation sbb think, what did you see him with the federal government involvement? >> i have two big thoughts about this one, there's a lot of stuff we don't know is always a tendency in these things to think there's a disaster and tha' blindness and blame all about not exactly sure it is right now and i think all of us to take a deep breath and really figure out what is going on because it's too important to politicize.

the other thing about this whole mess and some ways it contradicts what i said we don't know what's going on, we know if we had required things, all kinds of banks to carry a higher level of capital, that would give christian that would protect us against this down. whatever the solution is here, i'm already convinced it's going to be requiring thanks for capital. >> we have seen early on the passage was supposed to take care of a lot of things when it comes to banking including their physical ability and liquidity ability, if you think the law protected thing like this or was it irrelevant? >> really didn't work in this case, we have the bank fail, there were mistakes made and we can get into the weeds here in a little while and probably we should there were some really

obvious mistakes made by the bank and the fact that the regulators didn't on that, we've got to figure out why. >> so that would be what? >> okay so i promise i won't get my powerpoint out and lecture but thanks have to do two things, require funds, sources of funds and have to invest the funds, that's how they make money. there's a lot of risk associated with the acquisition of funds where you get your deposit and also risk associated where you invest so an awful lot of banking is risk management and sbb did a terrible job of risk management, didn't manage the risk on the deposit side and they didn't do a good job managing their risky investment.

whatever the regulation in place,n apparently it didn't wok force a bank like svp to clean up the way they are supposed to. >> going back to one of the requirements was toave capital and liquidity requirements within that. >> gap at the capitalre requirements again, all i have to do show what happened last friday. the capital requirements were clearly not adequate. the other liquidity rules and so forth, again, why didn't they work? i don't know the answer to that and when congress or whoever has earrings, i want c-span to broadcast so i can watch. >> some on capital hill callingc for hearings. professor, give you a sense on

the deposit insurance corporation and the role they played in this. >> in some ways i think that the i see is a victim, the insurance system is set up and we can talk about how it's set up and when the money comes from and so forth but the insurance system was designed to text small depositors. there's a cap, $250,000 deposit below that are insured above that aren't supposed to be and what happened, and losing track of days, sunday afternoon, sunday evening it was announced that all of the deposits at svb would be covered. the at the i see, that was the deal, it was supposed to just cover the deposits of the $250,000 so now we have this other guarantee that took place. >> has the fdic's active in this manner before this time?

>> if the i see helps deal with these types of failures all the time. we've got not quite 5000 commercial banks in the united states and sometimes they fail. mostly you never hear about them because things that they'll tend to be smaller community banks or maybe regional bank but when a bank fails, at the i see as part of a team that comes in and basically what they will try to do is arrange the sale of the bank to another bank he and in that way i can protect depositors will too much. >> as far as covering deposits over $250,000, how they acted in this manner before? >> we've certainly seen in fact is in the sense they have, what will sometimes happen, i think will fail and because the fdic

conjunction with other regulators will come in and arrange the sale of a make to another bank, even big depositors don't really see much difference the big depositors don't have to take a haircut so in general, the way the system is supposed to work and you will notice it hasn't worked very well in this case. the last i read and you can tell me if i missed the memo, they are still trying to auction it off, they still haven't found a virus. >> with us until 10:00 and if you have questions about the events of svb and signature bank, you can call and ask (202)748-8000. (202)748-8002. texas at (202)748-8003. are there ripple effect to the events of last week?

>> there may be a tsunami effect. we are seeing that already, you tell me, market opens this morning but thank socks were way down. investors are still looking and saying whatever the government is doing here, it hasn't solved the problem yet, there's still potential issues with these things and they are taking a big hit. that's part of the tsunami, the other thing that is scary here is how this will affect with the federal reserve is going to do interest rates can i take a minute and explain why i think about that? why i am worried about that? >> sure. >> of course we know the bed has been raising interest rates rapidly to try to control station. we alsonf know inflation is not under control, we just got the

latest inflation numbers i think yesterday or monday consumer prices are still, rising inflation rate above 6%. ... commercial banks that g have a lot of their interest sensitive assets on their balance sheet. fcd would not have failed if we still had the interest rate environment that we had what, 18 months ago? is a long-winded answer i am sorry for that. it's really something i have worried a lot about. the fed now is really juggling rktwo balls. it is a tough juggling act of requesting it's michael of

professor in the cox school of business. we start with and. and good morning go ahead. >> caller: good morning thank you for taking my call. i just wanted to say that i thought in 2018 they change part of the dodd frank so keep parts would be easier, less oversight for these banks. now that is causing these things happen again. for them to risk more money because they have less oversight. isn't that the issue? >> yes. >> level first question is something i've been thinking a lot about too. you are absently right in 2018

some of the rules surrounding dodd frank were relaxed. it is important to note there are lots and lots of democrats who signed on to amending dodd frank and 2018. it is also true svp was a big advocate of that regulatory reform. and that looks really fishy doesn't it? this guy is saying we do not want all this regulation and five years later his bank fails. so, maybe there is something to that. maybe if. the rules had not been change it we would've had more regulatory oversight. this whole mess would not have happened. i think we need to wait on that one though. i have been reading some commentary yesterday in the day before from some reallyy smart people.

they said even if the old dodd frank rules had been in place, dothey would not fix this probl. i'm really glad you brought that up. something we have to think about. rather the regulatory reform in 2018 mattered. but it is not obvious is not a slamdunk. >> professor will take a moment to 2018. we have the event were that happen president trump talked about what he intended to dota without. we will listen to what he had to say and get your comments after that. >> that legislation i'm signing today rolls back the crippling dodd frank regulation that are crushing community banks and credit unions nationwide. they were in such trouble. one size fits all. those rules just do not work. community banks and credit unions should be regulated the same way. you have to really look at this for they should be regulated ths

same way with proviso for safety as in the past. whether they are vibrant and strong. they should not be regulated the same way as the large complex i financial institutions. and that is what happened and there being put out of business one by one. and they were not lending. since its passage in 2010 dodd frank has dealt a huge blow to community banking. as a candidate i pledge we wouldn't rescue these community banks from dodd frank, the disaster of dodd frank and now we are keeping that commitment and all the people with me are keeping that commitment. >> that's president trump from 2018 directing comments of the committee banks and credit unions your thoughts on that? >> as a whole bunch of things on back there. part of what we need to unpacked is community banks were under

pressure. but not just because of dodd frank. there are a lot of great things the community can do relative to bigger banks. it was not dodd frank threaten community banks to the extent community banks even were threatened. the other part of what president trump was saying is really right on point. the whole reason we did dodd frank in the first round of dodd frank is was we were concerned withnc these systemically important financial institutions.. these are the big, big banks j.p. morgan, the wells fargo and so forth. if those banks were to fail it would be catastrophic. the ripple effects and the failure of the big bank like that would be all over the economy. we cannot have that.

that is why systemically important financial institutions have to be subject to a high level of regulation. a high level of scrutiny buried the regional banks or leave the community banks do not and that level of supervision. part of what president trump was sitting in the ghettos bipartisan. a lot of people are saying thisa is that hey, we do not need to impose the same rules on these smaller banks that we do on the bigger banks that made perfectly good sense. >> and bill in buffalo new york independent line. >> caller: this is built. >> you are on go-ahead. >> caller: people in this country are not aware this five by nature financial crisis in this country before 19209. so was put in place by roosevelt to prevent the gambling going on in the financial industry. there is not one problem with

that until the 85 when neil bush there is a savings and loan scandal gets in office and they work to take out. we have had how many financial crashes since they eliminated? did terry carry out any conversation without telling the people commercial bank like mmt is not allowed to gamble in the stockwe market. if you want to put your money and investment bank they are allowed to gamble in the stock market. when these companies when he took it out you did nothing because all these problems. thank you. quickset is bill in new york. go ahead. >> i love it. this is bill, right? bill if you ever want to get in a bar fight go to the annual meetings of the american economic association on ring it up. some people will agree with you completely for adobe a lot of other economists will say that

is irrelevant we do not need to worry about it. it is a great bar fight if you like bar fights. in this instance i have not heard anyone say the presence or absence was the problem. so it is a smart comment but probably not relevant to this. >> professor davis or at least yesterday was announced the ratings agency moody's downgraded the debt ratings of the signature bank to junk territory six other banks under reviewev. what does that mean or what could that mean? >> that means we have other banks under review which is not surprising again we've got almost 5000 banks in this country. i saw that moody's thing to that that was very interesting. it had been issuing warnings

long before this week or the week before last. whatever happened svp no one should say they were surprised. people from the outside looking svp he's in balance sheet and operating practices knew there was a problem there. >> from bridget in south carolina, republican line, hi. >> caller: hi, good morning, thank you. i was reading up on this over the weekend. you touched on this topic about the sib is systematically important banks. i had never heard thator term. i do not read a whole lot about you know, banking. can you explain a little bit more about systematically important banks and with considered an sib? thank you. >> okay, yes.

i kind of admire you not reading a whole lot about banking. that meansmo you have a more interesting life than io. do. so sdb would probably not be considered a systematically important bank. sort of the asset level which engages the higher level of scrutiny under dodd frank was $250 billion. it was a little bit under that. whether we called it a systematic important bank or not, i think what reallyrt matts here is when the bad thing happened, when it fails it was treated as if it were a systemically important financial institution.

because we know the government stepped in to guarantee all the deposits. so, we could argue a thousand good idea or bad idea for the fact is the government treated sdb as if it was systemically important. >> host: hell it i is in virgina democrats line. >> yes, was taken on 99 by bill clinton. but i think first it needs be put in place you cannot take any depositors money invested in anything without their explicit permission for the bank shouldd be allowed to take its own money into that. i think the vice president's and the presidents of both banks need to be arrested. i think the overseers that work for federal, this judgment watching after this. i think they need to be arrested. somebody was notot paying attention. any deposits over two and $50000 is gone i think that's the way it ought to be.

if we had more laws in place strict laws that you could not take a depositors money and a willy-nilly play with it, like they did then this would not happen. they want to take their own money, find let them do that. but not the depositors money. thank you. >> guest: i have a friend i think that really rang true to me is we want the people who own these banks to have a stake in theirr decisions. she says we want to play their own money. we want them to have higher levels of capitol in their bank. but in amounts to the same thing. recently in the wall streethe journal take a look at the fbi, these actions and other actions, professor. they said this calling at

syem even as regulators andnking officials have been telling u the economies grades, there is nothing to worry about. the unpleasant truth with washington will nevit its failure is a bill coming d for many years of monetary regulatory mistakes saying executives made mistakes and will pay for them they are encouraged by easy money and misguided regulation, and it goes on from there. >> there are two things in that both of which i kind of agree upon. part of it is what they are calling misguided regulation. clearly the regulatory system failed in this case. but the other part of what they are commenting on in that piece is the monetary policy. remember we had really easy money for a fairly long time. certainly during the pandemic

and that was probably appropriate during the pandemic. but the fed maintain an easy money policy long after we were economically recovered or recovering at least from the pandemic. the fed kept interest rates low for a very long time. that encouraged a lot of risk-taking we saw but the other part we saw when the feds slammed on the brakes and started raising interest rates they slammed on really hard. that rapid increase in interest rates was part of the problem as well. >> we heard the president emphatically say taxpayers will be on the hook for the actions the federal government took to cover it signature. do you believe that? >> in the very near narrow technical sense he is right.

the government will not exactly be writing a check using taxpayer dollars. the fact is this money has got to come from somewhere. there is no free lunch. and so somebody is going to have pay for this bailout it is mostly going to be depositors prayers would be higher premiums for example on fdic insurance. technically taxpayers are off the hook. but we are on the hook. boxes are from bob, bob is in maryland independentnt line. >> good morning everyone. i just have him for the professor there. i cannot help but think this has a lot to do with ftx. i could see stashing money and

they gave turn 50 million-dollar bail refined before the election those donation contributions, even from people who represent california and the house of representatives. so i think this has a lot to do with those people. also making people whole who lost money doing ftx. what are we saying? that they did not lose any money. really? it's up to two or $50000 and after that you have to take an l. i am sorry i'm just trying to run that over there. the investigator is listening and might go with that theory.

you have a great day too. >> that is bob you may have to expunge the technicalities that holly brings up a go-ahead. >> the first of all i am with the caller. at least to the extent ftx was a nightmare sam brinkman freed was a real piece ofn work. i am not so sure the connections mean specifically ftx and the issues we-- are seeing at sdb. we have so many are maybe there's a connection i like his idea there's some forensics on the case to see. there's a bigger question and that's the role of crypto and the failure not just of sv be at other northeastern banks. i am much familiar with those issues right now. there's clearly a lot of crypto

depositors and those northeastern banks. one crypto crash there deposits were at risk. >> on the front page says the department of justice securities and exchange corporation are going to launch investigations into what happened. these usually end up with some type of satisfactory results? sometimes yes sometimes no. a lot of academic goals articles to - get published in some obsce journal know it will read. it's going to take forever for the sec, justice department investigations, to get spun up. maybe they'll show seeing some interesting stuff, maybe not. they are not going to enlighten us anytime soon. >> from vincent in florida independent line for mikeno dav. have a couple comments like you

to expose on them. first of all, i believe a majority of the problem with sv be ine the signature banks were the financial leaders on the board. a lot of them are clinton appointees. seems like that mood has changed with diversity get this woke. >> it is -- me too be careful on

the eyes stuff. maybe yes maybe no. i want to see the connections. you raise another question and your call that really needs to ber said. i've been on my bully pulpit this morning talking with the regulators, or the regulators? where were the regulators? it's a fair question. where was the board? where was the board? where was the board? the board of directors should not just be giving management carte blanche to do everything giving the board of directors can read a balance sheet. the board of directors knows what movies is saying. how come those people warrant or maybe they were and they were ignored we have to know. actions are important here.

calling on congress the expectation to go to congress for more rules and oversight. at this point, are there other rules that can prevent this from happening again? >> yes. there's something really weird that happens in this kind ofs thing. it seems like it is a debate between their people who want more rules and more regulations and moreeg scrutiny. then you got people over here we cannot over regulate these banks and so forth and so on. it is not a battle between more regulation or less regulation. everyone thanks financial institution sees some level of supervision some level of regulation. the question is what kind of regulations are going to have? ii kind of put my cards on the table already this morning. i would prefer to have less

looking over your shoulder supervision. less in the way of the stress test. and much more in the way of higher capitol. higher capitol records a form of regulation just different kinds of regulations are being proposed now. >> host: mike is in new york democrats on go-ahead please. >> caller: hi professor. none on investors are on their way from investing in small banks. my question is, what will happen if they run away from investing in small banks? will call it a stock run. first republic banks will this have any effect of the day-to-day business? >> you know you could almost they were having stock run right now because we are seeing value

of homes. including probably some really sound well managed banks that are taking a hit inn the stock price right now. i am notot too worried about tht to tie the truth. a well run bank can still be profitable business. a bank with higher capitol built in still be a profitable business. there is a price for everything. we are not going to kill the t banking segment if we redo our regulatory system. >> professor you had spoken earlier in the bank and what happened at the bank's impact on the stock market. the stock market this morning is going down but that is because it's being reported that shares of credit plunging more than 20% in trading because the swiss banking giant acknowledged its quote material weakness and its financial reporting. i know this is just new spiky

paint that into the picture of how we should look at banks and its impact overall? >> i cannot speak at all to the issuance going on over there right now. i also need to remind everybody, including myself the stock market is kind of crazy on a day-to-day basis. you see these big drops in stock prices day over date sometimes you just have to s take a deep breath and say what see what happens of the course of three months not three days. with that said i think banks and all of the sudden worried about what is behind that cause that you cannot quite get open, as her something in their quest or just for clarification story also says they're asking about past cash flow statements. minutes and report signature weakness and internal control over financial reporting being an issue.

>> yes. and again it's hard to say. this could prove to be a whole lot of nothing this could be some very technical violations. somebody forgot to file a form on time there 12 hours late. or it could be somebody loading up your gulfstream and headed to place that cannot be extradited but we just don't know. again not very comforting to say it but wait and see for. >> in ohio this is richard republican line go-ahead. >> i've got two questions. the president of the company will he get in trouble for knowing what was going on ahead of time?e? the second, janet yelled as an old fogey that has been in there forever. she iss nothing, no new ideas. she was talking with congress it takes her 100 words essay 10 words.

so janet yellen needs to go and get a new one in there. click must be careful here, janet yellen is an old fogey college professor i am an old fogey college professor so we tend to stickll together. she does support as i can tell she was all in favor of insuring all the depositors. and i do have an issue with that. >> from arkansas is tim and arkansas he's calling us underline for independence, go ahead. >> good morning pedro, good morning c-span. i am with you on that. i do not know under what authority they are going to blow up the fdic's by draining it dry. if you do not pay the percentage to belong to ftse you pay a percentage on it. these people with millions date

need to absorb the risk. they went to a bank -- mccue did not believe esg nd i.e. had anything to do with this. i think it's got everything to do with it. they add nothing to the balance sheetla. when the federal government cannot get these policies put through by votes by representation, they do in other means but they convince their buddies in the banking industry or they convince her buddies like sam bank when freedoms use other people'ss money. it's okay to steal other people's money. federal government will come in we will make you a political prisoner, throw you in jail and throw away the key. i believe it is got a lot to do with politics. >> i'm shocked, i'm shocked to learn politics to be going on

here. i am not mocking you at all you are exactly right there is a big political element of this. just to be clear i am not saying concerns with equity and inclusion. the focus on that was not a distraction. i just don't know. it might have been but your anyone's going to make the case the bank was a victim, i want to connect the dots. yi went to see how that all gos for. >> also general professor reports one of the things the federal reserve is considering in light of this or tougher capitol liquidity rules as well as steps to beef up annual stress test. can you tell something test works and how they can be improved upon? >> no. i can tell you they do stress test because i look at things

the mechanics of exactly how they work is very technical stuff. i do not want to pretend to understand the details of exactly what it is they stress. i have been reading some interesting commentary just the past couple of days though that suggests a lot of the way the stress test had been working, they were not working for the rate riskterest basically, again this is all commentary that i'm reading from people who really do understand almost line by line the computer code to generate these tests. the commentary i've been reading suggests in a lot of ways the fed was fighting the last war. the fed was looking for the kinds of things that cause problems in 2006 and 2007 and 2008. they were not looking for the kinds of problems being caused

by this rapid increase in interest rates. you cannot just use stress test but you have to do the right kind of stress test. i feel like a broken record this morning. but the increased capitol requirements they disinfect a whole lot right there. >> coming up next on c-span2 a hearing regulation and public safety. testimony on the environmental protection agency proposal to limit so-called forever chemicals allowed in drinking water. later president biden highlights his administration's efforts to lower prescription drug prices. >> republicandential candidate haley and potential contenders south: senator tim scottr arkansas governor asa hutchinson will be in carolina on saturday hosted by the palmetto mily council watch live