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tune for the top 10 winni entries that will air on c-span starting april 1. you can watch every winning studentcam documentary any time online at studentcam.org. >> this is michael davis joining us with southern med this -- un. a professor to talk about the international banking joinings with southern methodist university. a professor to talk about the international banking regulations protecting with events last week -- particularly with events last wk. orow a lman wod look at it. gut: i aa bit of a gadfly, i spend a lot of time thinking about how e government interacts with business and regulation and i have written a little bit about banking regulation.

and, what did you see, particularlysbv,svb -- what youk about the government's thoughts about it? guest: there is a lot of stuff that we don't know and there is always a tendency to think there has been a disaster and let's find someone to blame. i am finding -- about finding someone to blame but i am not sure who that is. all of us need to take up -- a deep breath and think abo what is going on because this is too important to politicize. the other thing about this mess, that contradicts what i said that we don't know what is going on, we know that if we had required banks, all kinds of banks to carry out -- a higher level of capital, that would have given us something to

protect against the downfall so whatever theolution is, im convinced it is going to be requiring nks to carry more capital. host: we have seen back early on -- someone -- something was supposed to take care of a t of things specifically with making and including their fiscal and liquidity ability. you think the law protects something like this or is it a relevant? guest: it didn't work. we had a bank fail. there were mistakes made and we can get into the weeds here d we should. but there is some obvious mistakes made by the bank and the fact regulators do not pick up on that, we have to figure out why. host: the top mistake would be what? guest: ok, i promise i won't get my powerpoint off in the

lecture? -- lecture. banks have to acquire funds and investments -- invest funds. there's a lot of risk with the acquisition of funds and there is risk assocted with where you invest and a lot of nking is risk management and svb did a turn -- a terrible job with risk management and they did not manage the risk on the deposit side and they did not do a good job managing their risky investments. atever the regulations in place work, they did not work to force a ba like svb to clean up their act. host: one of the requirements

was to have capital and pretty requirements and that -- in that. guest: the capital requirements, all i have to do is going to what happened lastriday. the requirements were not adequate and the other requirements are liquidity rules. why didn't they work? i don't know the answer to that. i will be -- when congress or whoever has hearings, i want c-span to broadcast them. host: already announcements from capitol hill calling for -- for hearings. gues i think fbi c is a victim in some ways --fdic is this -- a victim in some ways. the insurance system was

designed to protect small deposits. there's a cap, $255,000. deposits up about that are -- deposits above that are supposed to be insured. on sunday evening, it was announced all the deposits at svb would be covered in the -- anti--- and the fdic, that wasn't supposed to be covered. there is a guarantee in place. host: has the fdic acted in this matter befor guest: they deal with these failures all the time and we have many commercial banks in the u. and sometimes they fail. you mostly never hear about them because the banks tt they'll

usually are smaller banks but when they fail, the fdic swoops in and they usuly arrange the salef a faed bank to another bank. host: as far as covering deposits over $250,000, have they acted in this matter before? guest: we have seen in the fecteau --defacto sense, they have. they will come in and arrange the sale of the bank to another bank and the big depositors usually don't see a difference and they don't have to take a haircut. that is the way the system is

supposed to work. it hasn't worked well in this case. the ss i read and you can tell me if i missed the memo, they are trying to auction off svb. host: our guest iwith us at 10:00 and if you have questions about svb, you can call at (202) 748-00 four democrats, (202) 748-8001 four republicans and (202) 748-02 for independents. you can textt (202) 748-8003. are there ripple offense -- affects to the events last week? guest: there are tsunami effects. i've been seeing where we are with the markets this rning but thank -- bank stocks are

down. investors are saying, whatever the government is doing, it has not solve the proem and there is an issue with banks -- a potential issue th banks and the stocks are taking big hit. the other thing that is scary is how this will affect what the federal reserve isoing to do with interest rates. can i take a minute and explain why am thinking about it? host: please do it. guest: of course, we know the fed has been raising interest rates rapidly in order to control inflation and we know that inflation is not under control and we got the latest inflation numbers yesterday or mond. showing that consumer prices are rising and the inflation rate is above 6% and core inflation is around 5%. that is not good, so the federal

reservender normal class -- times would say we will increase interest rates and that is what they would do in the meeting next week anthe problem with svb, when interest rates go up, that squeezes commercial banks. svb would not have failed if we had the interest rate environment we had 18 months ago. i am shari for the long-winded answer but -- i am sorry for the long-winded answer but it is something the bed is work --fed is worried about. host: our guest is michael davis. we start with ann. caller: thanks for taking my call. i want to say i thought in 2018,

they change part -- changed part -- so keep partsould be less oversight for banks and that is causing these things to happen again and for them, risk for money --more money because they have less oversight. it is not that the issue -- is not that the issue? est: that is something i have been thinking about and in 2018, some of the rules surrounding got frank --were relaxed and that was more a less a bipartisan movement -- more or less a bipartisan movement. there were democrats --t is true that svb was a big advocate

of that regulatory refm and that looks fishy. this guy is saying, we don't want all this regulation and five years later is bank -- his ba fails. maybe there is something to that and maybe if the rules haven't -- had been changed, we wouldn't have this oversight in this mess with svb -- and this mess with svb when -- have would not have happened. i have been reading commentary from smarteople and they say even with the old docs frank -- dot frank rules were in place, it would not have fixed this problem. i am glad you brought that up and i have -- we have to think about if that reform happened. it is not obvious.

host: we have some tape om the event where the rollback happened and president trump talked about what he intded to do with that. we will listen to what he had to say. [video clip] >> the legislation i am signing today walls back the regulations that are crushing community banks and credit unions nationwide. they were in such progm -- trouble. one side fits all. they don't work and the bank should be regulated in t same way and you have to look at this. they should be regulated the same way with proviso for safety as in the past. they shouldn't be regulated the same way as a large complex financial institution. that is what happened. they were put out of business

and they were not lending. since its passage in 2010, d frank has made a huge blow in community banking. i place we should rescue these community banks from dot frank, and we are all committee -- all keeping that commitment. host:hat isresident trump from 2018 directing comments to community banks. guest: there is a lotf things to unpack. community banks were unr presre butot jusbecause of do frank. there is a lot of great things in the community that they can do b there is disadvantage relative to figure banks. -- bigger banks. it wasn't dot frank threatening

communy banks. the other part that president trump was saying his own point. the only reason we did dot frank because we were concned with systemically important financial institutions. these are the big banks that j.p. mgan ban and wells fargo and forth. if those banks failed,t would be catastrophic because the risk of a failure of a big bank like that would -- it will be over the economy. that is why these institutions have to be put into a high level of scrutiny. the commity banks don't meet those level -- don't meet those

levels of scrutiny. it was bipartisan. they were saying we don't need to impose the same rules on these smaller banks that we do on the bigge banks and that made good sense. host: from bill in buffalo, new york. republican line. you are on, go ahead. caller: people aren't aware of the stagnation of the finanal crisis in the country before 1929 and there was something put in place by roosevelt torevent gambling in the finanal industry and it was not one problem until the 85 when neil bush, there was a long scandal and -- we have had many financial pressures.

commercial bank like mnc is not allowed gamble in the stock market. they are allowed to gamble in the stock market. host: that is built in new york --bill in new york. guest: if you ever want to go to bar fight -- some people will agree with you completely. some oth people will say it is irrelevant so it is a great bar right it -- rights if you like bar fights. i haven't heard anyone say that glass-steagall was a problem.

it is a smart comment but probably not revant to this particular incident. host: it was announced that ody's dngrade the rating of signature bank to jump territory and putther banks in review? what does that mean. --? gut: it means we have otr banks in review. we have many other banks in the country and i saw the movie thing to. --mody's thing. moody's had been issuing warnings to svb. whatever after -- happened to svb, no one should be surprised. people knew that there was a problem.

from bridget in south carolina. republican line. guest: -- caller: good morning and thank you. i was reading up on this over the weekend. yotouched on this topic about the sib. the systematically important banks. i never heard that term and i don't read a whole lot about banking. can you explain a little more about systematically important banks and was svb considered an sib? gut: yeah. i admire you not reading a whole lot about baking and you probably have a more interesting life than i do. so, svb would probably not be considered a systematically

important bank. the asset level that engages the higher level of scrutiny under dodd frank was 250 -- $250 million. svb was under that but whether we call it a systematically important bank or not, what matters here is when the betting happened, when svb failed, it was treating -- treated as if it was a six chemical important financial institution -- systemically important financial institution. the government stepped in to handle the deposits. we could argue if that is good or bad but if the government treated svb as if it was systemically performing. -- important.

host: in virginia. guest: -- caller:hat needs to be put in plac is that you cannot take any depositors money and invested in anything without their solicit permission and the bank should take its own money and do that and i think presidents of the banks need to be arrested and the overseers that work for federal, they should have been watching after that -- this and they need to be arrested because somebody wasn't paying attention. any deposits on -- under $50,000 are going. --gone. we had -- if we had laws like this that restrict, this wouldn't happen. if they want to take their own money, they shouldn't do that but not the depositors money.

thank you. host: professor davis? guest: i have a friend -- think about what she was saying there and the thing that rang true to me is that we want people who own these banks to have a stake in their decision. she says we want to play with our own money and i say we want them to have higher levels of capital in their bank but it amounts to the same thing. host: recently in the wall street journal, taking look at the fdic actions. they said this, calling it a defect of baibelf the thinking seven as regulars have been telling us the economy is great, the unpleasant truth that washington not admit ny years of relatory mist --

es and many officials will pay for the mistakes but they were encouraged by easy money and misguided regulation and it go on from there. guest: there are two things in that, both at this that i agree -- both at this that i agree on. part of it is what they are calling misguideregulation. the regulatory system failed. the other part of what they are commenting on is the monetary policy. remember, we hareally easy money for a fairly long time? certainly during the pandemic and that was probabl appropriate during the pandemic. the fed maintained and easy -- an easy money policy long after we were economically recovering from the pandemic. we -- the fed kept interest rates low for a long time. that encouraged a lot of

risk-taking we saw at svb. the other part of this, when the fed slammed on the banks and set of raising interes rates, they slammed the banks -- breaks really hard. that rapid increase of interest rates was part of the problem. host: we heard the president and thousand -emphatically say that taxpayers will not be on the hook on the actions the federal governor -- government took with svb. you believe that? -- guest: presidents have to say that. and -- in a technical sense, he is right. the government will not write a check using taxpayer dollars but the fact is this money has to me from somewhere. there is no free lunch so someone has to pay for this bailout. it will mostly be depositors and higher pmiums on fbi see --

fdic. taxpayers are off the hook but we are on the hook. host: let's hear from bob in temple hill -- temple hills, maryland. guest: i have -- caller: i have one for the guest. i can't help but think that this has a lot of -- to do with ftx. i can see bankman-fried stashing money in the svb. we are finding out now that that is a lot of active investigation so when they gave him $250 million bills, --bails, we find that different people in different universities have to come up with that money. and also, what he gave them and what we find right before the

election, the donations and contribution and even some people who represent california and the house of representatives so i think that this has a lot to do with those people and making people hold who lost money doing ftx. what are we saying, that they didn't lo any money. really? is up to $250,000 and after that, you have to take a l. i hope a investigator with the federal government is listening and might go with the theory. host: that is bob and please explain the technicalities. go ahead. guest: i am what the color in that the extension i am with the color in the extent that ftx was a nightmare and sam

bankman-fried was a piece o work. -- i am with the caller in the extent that ftx was a nightmare and m bankman-fried was a piece of work. maybe there is connection and i like the idea that we need to get some forensic accountants on the case. there is a bigger question and that is the role of crypto in the failure of not ju svb other banks but -- but other banks. they -- there were a lot of crypto depositors in the northeastern banks and when crypto crashed, the deposits were at risk. st: do these usually end up with some type of satisfactory results?

guest: sometimes yes and sometimes no and they end up with a lot of academic artics from people like me to get published in some of skirt -- journal that no one -- -- se obscure journal that no one will read. it will take a lot of investigations to get spun up and maybe they will show is interesting stuff or not vote they will not enlighten us anytime soon -- but they will not enlighten us anytime soon. host: vincent from flora. independent line. caller: i have a couple comments and i would like you to expound on the. --them. i believe the majority of the problem with svb and the signature banks are the financial leaders on the board. none of them d any baking

experience except maybe one or two. a lot of them with svb are obama and clinton appointees. big donors, i should say and it seems like the mood hachanged from hiring people with knowledge and experience to hiring people with diversity and equity and trying to get ts welcome program --woke program forward and i want your take on that. thank you. guest: yes, it -- so, i think we need to be careful in saying the problems at svb were a consequence of some emphasis they said on dei stuff. maybe yes or no but i went to see the connections -- want to sethe connections. you race another -- raised

another connection in your call that i think needs to be said. i have been talking about the regulators, where were the regulators? a fair question but you should be saying where was the board? the bod of directors shouldn't just be getting -- giving the management carte blanche to do what they want to do. the board of directors can read a balance sheet and knows what moody's is saying. how come those people -- maybe they weren't and they were ignored but board actions are imrtant. host: the president is commenting on this and calling on congress or the expectation to go tcongress for more rules and oveight. are ther other roles that could prevent from this -- prevent this from happening again? guest: there is something that

happens that is weird. it seems like it is a debate between, there are people who want more rules and regulation and scrutiny and then you have people over here who say, we can't overwrite -- overregulated these banks -- overregulate this banks -- these banks. everyone thinks financial is duchenne's need some level of regulation. -- financial instituons we some level of regulation. what kind of relationship we have? -- regulation should we have. i prefer less looking over your shoulder supervision's and less stress tests and more higher capital requirements imposed on banks. there are

>> c-span'washington journal every day we are taking your calls live on the air on the news of the day and we discussed policy issues that impact you. coming up, we take a closer look at china, it's growing military and geopolitical influence in the world and the threat that the chinese communist party poses to the west. tomorrow we discussed the potential security risk of china's investment in the u.s.. and then, wall street journal reporter, on washington's response on the failure of silicon valley bank and what for the regation might be on the horizoto shore up the banking system. watch washington journal live on it c-span, or on c-span now. oufree mobile video app. during the discussion with your phone calls, facebook comments, text messages and tweets.