>> we need strong bank supervision in all seasons. clearly, this episode indicates there is more to do on that front. >> the banking system is resilient. >> i think the contagion is limited for the same temples could cost more on the banks. >> entangled financial institutions is where that is fear. announcer: this is "bloomberg surveillance" with tom keene, jonathan ferro and lisa abramowicz. jonathan: we are almost there. good morning.

equity futures on the s&p 500 index, positive 0.1%. in america, ring our best to inspire confidence in the american banking stone. tom: it is not the crisis friday we saw. this is not over this morning in the same can be said for americans waking up in radio and television. it is real simple. credit suisse deserves friday scrutiny as well. jonathan: ubs does not want to be a dance partner. tom: the bloomberg team did some really nuanced reporting. we'll get into it with first republic bank. i think it's too real is almost where we are. none of this is in ctk's iconic money and banking textbook. >> we certainly were not talking about this two weeks ago and here we are this morning, reflecting over 11 banks in

america giving $30 billion into the beleaguered bank of first republic. it has been a real struggle. lisa a: i have been reading about the moral dilemma. on one hand, you shore up the smaller banks. on the other hand, how much are you transferring some of that risk to the biggest banks are systemically important. at what point are you taking a bank that otherwise would not be very systemic and putting the risk of bigger banks. then down the line increasing regulation? tom: i am so glad you brought this up. it is not that it is wrong by think we do not know our history. first republic bank taken out by bank of america. they got sick of it and unloaded it through 4, 5, eight permutations. the pull from the oscars is all quiet on the deposit front. john, these are not deposits.

right now, the five gazillion that james dimon is putting into the small shop, 22%. 0.002 of his department -- deposits. jonathan: how much did the deposits go up in the last week? tom: but do you believe it is 15? it is probably 30 or 40. lisa a: there is $115 billion put into money market funds over the last week. the greatest since april 2020. jonathan: have you seen the ft report? absolutely scathing. when eurozone official describe their shot at the total utter incompetence of u.s. authorities after a decade and a half of long and boring meetings, they have advocated to end bailouts, scathing. tom: you are 100% correct. i do not think we are staggering

to april yet, we are just trying to get through march. can you imagine the press conference? this might powell do monetary policy right as he raises hand and go, is it all quiet on the deposit front? jonathan: bloomberg reporting yesterday on what this may mean for the federal reserve. for most of the week, are they worried about the signal they would send if they did nothing? over in frankfurt, germany, fears anything but a half-point height would trigger panic among investors helped form the ecb's decision on thursday. according to people familiar with the matter, there was a concern that if it did not hike, it would send the wrong signal. lisa a: the debate was about a 50 basis point hike or no hike. there was no talk of a 25 basis point hike. but this indicates, and the market response edified their beliefs. you are seeing stability in

markets that might not otherwise be there if they had not raise rates in tandem with what they said and drain very stark decision between monetary policy and fiscal policy. jonathan: the italian bond market has not sold off. it rallied. tom: i thought you were going to say the tots won. jonathan: that is low priority this morning. equity futures are positive on the s&p by around 0.1%. first republic is lower in the premarket but now only by two or 3%. it was down way earlier this morning. crude has had a terrible week, still south of 70. lisa reflected on the ecb and what this might mean for the federal reserve. the euro-dollar is 1.0645, positive 0.3% are watching the shares of a number of banks and that will be the front and

focus. data used to matter. it does not anymore but if you care about it, we get the michigan sentiment survey. to build on the strong data we got, but nobody cares because that is backward looking and you are looking at potential tightening and financial conditions on the due political front. this is a peripheral story but interesting. german chancellor olaf scholz is heading to japan and with much of his cabinet will be there through march 19, talking about national security issues. this we can sunday night, finis xi jinping has to russia for the first time since russia's invasion of ukraine. vladimir putin invited him over. very curious to see these different alliances come to the front. peripheral because right now front and center is the banking system. jonathan: inducing the footage of the russian jet going over a u.s. drone and dropping fillon it? lisa a: a lot of stories percolating but it does not

matter. jonathan: wells fargo just published. you are going to see a law of this. we have a sneak peak from the likes of vicky and morgan stanley. wells fargo says recent markets are comparing the fed efforts to compare volatility. we look for u.s. real gdp to contract 1.2% later this year and into early 2024. they go onto say as businesses bareback fixed investment spending, you will see much more of that after the events of last week. the economist working at the bank see their compatriots shellshocked. they will have to adapt and dressed and you will see that as we look out to q3. all of a sudden, july, august, and september is a huge ministry for our guests. jonathan: thousand steps joins us now, equity strategist at bloomberg. we know you like european banks. do you still like european

banks? >> we have liked european banks the last couple years. that has been generally the right place to be in here. events over the last week obviously challenged that. when when we ran our numbers. you came banks in particular, we have liquidity coverage ratios in europe averaging around 150, 100 60%. the capital rebuild was painful, very painful. there is a lot law of excess capital. the banks look in reasonable shape and are trading cheap. if you look at u.k. banks, they are trading six times earnings. valuations are supportive, earnings are supportive. of course, you do not want to only own u.k. in european banks. we still think there is a place for banks in a valves portfolio.

tom: one measure of this, jonathan stubbs, in america after a bank of thursday, is it in the vicinity of 4000? i think this would surprise people given the angst out there. can you separate other sectors in their performance from the banking sector? >> you take the smp and the u.s. broadly. the u.s. is trading probably around 18 in terms of forward earnings. if you look over 50 years, the u.s. equity markets, and i have said this on your show before, the u.s. equity markets only traded above eight twice in 50 years. both times with liquidity field markets. u.s. equities are still trading very rich ahead of what is a likely recession of some form. as per your discussion before i came on. alongside all these political risks, the due political risks etc., the market is still

trading with risk. we think compared to global equity markets, the u.s. is trading too rich and we do not want to be trading -- chasing it. lisa a: a good portion is big tech. i wonder what your take is in the fact that the market has outperformed even as people are talking about outgoing rate hikes. >> tech is obviously the lead engine of the post financial crisis are very good reasons. tech provides growth globally. qe illiquidity gave us free write for technology. what most people do not understand is technology in u.s. technology was actually cheap relative to the rest of the markets on a free cash flow basis during an entire 12 year period. it is no longer cheap. the u.s. declares free cash for as the s&p. if you look at the nasdaq 100, the bigger tech stocks, their

meeting and free cash flow yields relative to rates average -- relative to two-year rates average hiebert are now zero. can go into the markets and get a yield pickup for over 10 years but now it zero. the text conversation is more complicated. at times like this, you want earn companies but because we have high rates andy risk is different, it is more complicated. maybe it is comparing banks are more resilient with tech companies. maybe this is a sensible way of playing this. jonathan: once a week it has been. he does not seem sensible any of this. just messy. as always, the nasdaq's of every single day this week. tom: i did not know that.

the character of the close yesterday was stunning. just amazing. to be fair to authorities, they have ring fenced the fear. i will borrow that from neil schloss referred to his bank years ago. fine, we have ring fenced it. but what about next week? jonathan: we see the ceo of morgan stanley drawing us in the next hour. s&p is unchanged, a welcome development given the volatility we have seen. lisa a: for now. it is always like who knows? jonathan: will it stick? it is a mystery. yields down three basis points, 3.5468. this is lisa m: keeping you up-to-date with news from around the world. with the first word, i am chinese leaders xi jinping will

travel to russia next week. his first trip to russia since it invaded ukraine. during the trip, xi is expected to discuss china's recently released 12-point blueprint for ending that war in ukraine. a document that was dismissed by most western governments. xi and ukrainian leader vladimir zelensky also will speak by video link soon. china's central bank cut the amount of cash banks must keep in the reserve in effort to stimulate the economy as it gradually recovers from restrictions. people's bank of china said they reduced the reserve requirement ratio or almost all banks, effective march 27. charles schwab had $8.8 billion in outflows from its prime money market funds this week. investors are rattled by turmoil at u.s. banks, putting even more money into brokerage assets with government backing. company data compiled by bloomberg shows clients pull money from two schwab money funds which come by for an $5

billion of assets as of march 15, representing the largest reductions in six. we work is nearing a deal for a major financial structure where they will convert $1 billion of debt into equity. sources tell bloomberg the new york-based working company is close to securing funding and capital commitments of more than $1 billion. the ceo has been working to cut costs and push the form toward profitability. global news, 24 hours a day, on-air and on "bloomberg quicktake", powered by more than 2700 different journalists and analysts in over 120 countries. i am lisa mateo, this is bloomberg. ♪ introducing j.p. morgan personal advisors. hey david! connect with an advisor to create your personalized plan. let's find the right investments for your goals. okay, great. j.p. morgan wealth management. ♪♪ what will you do? will you make something better?

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>> i can reassure the members of the committee our banking system is sound and americans can feel confident that their deposits will be there when they need them. this week's actions demonstrate our resolute commitment to ensure that our financial system remains strong and the depositors savings remain safe. jonathan: haven't done enough? that was janet yellen, the u.s. treasury secretary, testifying on capitol hill. equity futures this morning,

slightly negative on the s&p 500. it is not a drama full morning so far. let's see if it sticks. first republic is only down by 4%. i say only because it was so much worse overnight, got to around 33 in the premarket. think about where we were last week. this was a stock last monday that was at 123 at the open. a big change. development of the last 24 hours, 11 banks in america depositing $30 million to help the distressed firm. just parking deposits. you think this is like reciting some deposits coming to these institutions last week? tom: i get the idea annmarie hordern and more are reporting this morning within the 100 and 20 day window. what are they doing? lisa a: the interesting thing is none of them wanted to buy first republic. they do not want to take full reliability so this is a

peripheral measure and people are asking now, is it enough to shore up the credibility? jonathan: look at how j.p. morgan was treated back in the day after buying their tom. tom: for us to pontificate about this is different. to be talk to someone with experience? at new york university come along ago and far away in the financial crisis of 1998, was one of the streets best. allison williams was iconic at morgan stanley and is now at bloomberg intelligence and has been foundational in bloomberg intelligences global financial coverage. you and i can have a three hour conversation on this. i am going to cut to the chase. this bank is very tiny. it was rolled up by merrill lynch and bank of america. there were 47 transactions. they got rid of this dog. why are they saving it this morning? allison: i think a couple

things. first, it is that obviously this is an interesting transaction, as he pointed out. they did not buy the bank but we have six big banks that put a show of faith into the smaller bank. it does a couple things. let's say someone had purchased this bank, then the next question is what is going to happen with that one and the next one and the next one? i think this is a way for the banks -- i am not sure if this was confirmed that the government is involved for all bloomberg reporting has told us that. the government and the banks are saying that the big banks are well enough that they can give -- put these deposits in the smaller bank. i think this is a way for all of them to say we are going to -- tom: sorry to interrupt, but i

have too much respect for your work. are these deposits? alison: yes, they are deposits. tom: of who? alison: it is the big banks literally putting deposits into smaller banks. tom:'s of people watching this show this morning that have individual accounts at jp morgan may have deposit accounts at first republic? alison: i guess you can follow the string of the money. but at the end of the day, taking a step back, the government basically ensured the deposits of two smaller banks that failed last week. there is a broader question that means all deposits are insured. in this particular case, if the government is involved in asking the big banks to do this, we could assume the smaller amount

is insured. is also shows the government does not have the appetite to ensure the entire base of the banks but they will continue to do these smaller transactions to show that they will do what is necessary. jonathan: when janet yellen says things like, "americans can feel confident their deposits will be there when they need them". when the treasury secretary uses that, it seems almost like a trick. they are not addressing the fdic limit. it is almost implied after sunday that has gone away. do you feel american consumers will behave in that fashion in the belief that is the case. alison: it does not seem so. that is why you saw first republic stock turn back. we had the announcement that the banks were coming in and helping. then we had the announcement about what was going on behind the scenes and stock turned the

wrong way. because investors obviously have been pulling funds from the bank. lisa a: i love your response of what you think of what the authorities did. i was reading through the article that jonathan was flogging earlier in the financial times. this one member of peterson institute said from a financial stability perspective, they really killed the fly with a sledgehammer. do you agree? alison: i suppose that could be one way of putting it. at the end of the day, they are trying to, like many actions, send a signal that they will do what they need to. so it is not necessarily about you have a small amount of 30 billion by big banks but about the fact that these big banks and coordinate and did listen to the government and they will come in and stabilize things. as we know, with every prior

crisis, they keep doing things until we finally get something that investors say, ok, they both do what they need to do. tom: what ms. williams brings up is important. we are learning along the way from 1998 to 2008, that the europeans skating comments on america -- i am sorry, we are trying to have a pain-free banking crisis. jonathan: there is always a trade-off. you talked about it throughout the week. over the weekend, they failed to find a buyer for the institution and that was a big problem. they got into late in the evening and they had nothing left to do but come out with this. lisa a: initially people were saying the accident quickly because they learned their lesson from previous ics and wanted to come -- previous crises and wasn't to cover benefits before it became a crises but now they're saying they haven't done enough.

people are not sure how deep this goes in the response rate -- raise more questions than answers about the duration. jonathan: i still think they moved very quickly and authorities have learned from the past which is why we are seeing these reactions. i know it is difficult to judge but if these events developed pre-2007, we would have a very different crisis on our hands. lisa a: now people are talking about the moral hazard in the follow but we are not talking about a quickly spreading wildfire concert of confidence. at what point was it commensurate response versus something that was an overreaction? jonathan: just want to thank alison williams really quickly. -- set a long time ago that we are always focused on the shark closest to the boat. that is where the attention is. this morning, china cutting the reserve requirement ratio to boost the economy what is going on in the world's second-largest economy? we just had a massive reopening.

you would think the demand is there and now we are talking about the supply of credit? tom: buried in the news was that goldman sachs went a6 handle on gdp growth. fix percent gross and we are losing? i think these are knockout effects and global effect nations. credit suisse broke down eloquently to 1.94 which is a knock on effect to banks trying to say first republic bank. jonathan: credits was down 4%. first republic is also -4% right now. lisa a: people were worried and then they are not. it is going to all change. every second feels like a different story. jonathan: equity futures down about zero. ♪ that's decision tech. only from fidelity.

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jonathan: bramo was killing me in the break. [laughter] she is laughing and cannot keep it together. she had a question that went something like this, when is qt not qt? we will talk about that in a moment. good morning. this is what we do on the commercial break. just bramo. they thought. equities down 0.1% on the s&p. a big time on the week on the nasdaq 100, of every single day like nothing else has been going on. the nasdaq is up 6%, week today. lisa a: i never would have

guessed s&p 4000 on this week. jonathan: the 10 year has been all over the place. the two year, 4.1174. yields about five basis points at 10 year. .5298. i thought president lagarde did a decent job all things considered. it was clearly a tense governing council meeting over the previous two days. clearly some officials. -- president lagarde set it herself, some officials did not want to hike. tom: also dealing with bankers that do not want to make tough decisions you do what you have to do. i thought it was interesting that they still model out some form of disinflation at one-year or two-year. that is an overarching theme to the equity market. the disinflation is in place

according to the optimist. jonathan: we are talking about forecast into 2024. tom: 2025. where is credit suisse in 2025? jonathan: i pay this much attention to ecb forecasts right now. forecasts from any central bank are beyond next week. it's a problem for the fed. they do not have to just put out forecast for growth and inflation and unemployment vote forecast for where they think the policy rate should and will be by the year end. the problem is the previous s&p had the medium. at 5.1%. they can maybe leave it there and say we do not know where that is going. compare that to the conversation prior which is about will come up to around 5.50 because economy will not slow down. here we are banks breaking. equity futures a little negative. the euro-dollar looks like this. 1.0638, positive 0.25%.

this gives people the idea the fed may follow through with 25. i know it is not apples to apples, different situation in europe, have sliding in the effort to contain inflation versus the u.s. but a lot of people see it that way. a lot of people tuning in for that. if you are tuning in, welcome to the pub -- the program. first republic down around 4%. in america, 11 firms deposited $30 billion to try to backstop. that is a 33 in the premarket. credit suisse has been the other night to look at. down about 4.7%. we reported credit suisse is not interested in a higher with ups -- ubs. but ubs is close to strategy on where it wants to be and where it wants to go. tom: credit suisse employees make clear they agree with that.

i had technical veracity with credits was earlier in the week which is what we call soup where the technicals do not help. this morning, maybe i am shaping up a technical analysis of credit suisse. we will have to see. right now at 1.93. right now, the head of u.s. microstrategy at mufg and faith in credit is away from the banking distress at the moment. are your spreads, ratios, and dynamics within sovereign debt of any use or value right now or is it simply distorted by the set of financial crises? george: good morning. tgif and happy st. patrick's day. i think at this point, we have to take everything with a grain of salt. this sort of volatility we had this past week is unprecedented. i could do this for over 12 years, and this surpasses covid/2008 shocks we saw.

the race market is trying to get its footing and reacting to overall -- the rates market is trying to get its footing and reacting to the overall things. let's see how the we can go before we pass judgment. tom: when you see the news flow, including great work for our banking team, do you suggest the flows we are hearing, the deposit movements are not the true picture of the money moving in the money market funds? is it a much bigger statistic? george: this has been a phenomenon and is passed because most likely accelerated this but we are seeing money fed flows throughout the start of the hiking cycle. this is what happens when you raise rates and a beagle that can pass it through. the banks were not passing it through so that it's the challenge. with rates getting higher were staying where they are, you continue a phenomenon of migration out of the banks and into the money market. jonathan: i think it is farbast

on the terminal. leases favorite. let's talk about the far vast index -- farbast and ask. it is growing. can you tell us what is going on there? george: it's hope it is not qb 2.0 like what the fed had in 2019. there was targeted easing and providing liquidity and not necessarily doing qe. this is the artifact of extra liquidity that had to get put in place to help entities now in the hands of the fti see -- and the ic. there is some program as well like the tbfb which i sometimes have trouble saying. all i know is there has been a big use.

some discount windows have seen that at record levels. this is all new. i think that we have to get through this weekend and see what happens if there is really no announcements of additional bank failures or concerns around the bank there, then hopefully cooler heads prevail into next week at the end of the month and quarter and hopefully less usage of the program. lisa a: there is a larger question here. yes i do look at farbast every thursday around 2:00 p.m. to see how tightening has been working out. they have slowly ticked away around $600 of their balance sheets but than $300 billion added overnight that really undoes a law of what we have seen. you could make an argument these are earmarked assets and they have different purposes and do not percolate into the larger economy but does this signal the end of quantitative tightening? even if the federal reserve continues to raise rates, balances can remain at this

level in some the market. george: that is a great point and great question but we just do not know. at the end of the day, you need to provide excess liquidity. this is the old classic theory that you can lend punitive rates and argue it is about punitive rates but it is providing liquidity. that is the job of the fed in these crisis periods. the balance sheet has been tightening. we do not realize the reverse repo program was a cutie on demand. they took trillions of dollars out and are sitting at money markets. as long as we have the rrp, as large as it is, it is lucky of liquidity. lisa a: the response in markets to yesterday's decision was to rally. do you think the response will be the same in risk assets in

the u.s. if the federal reserve raises by 25 basis wins and says hawkish things like the you that this is not the end of the rate hiking cycle? they say they are going to continue to unwind there balance sheet at the same place. george: probably not. we had to ecb hike. the data still warrants a hike. the facility is relatively low. it has been used for the right reasons. we do not have any bank failures over the course of the week and things are hanging in. if the fed wants financial stability and they get it over the words of the next three years, they could hike but this is going to be a close call. i am still calling for a positive because look at what we had here. the rate try to sell out. there is concern around the banks and it comes down into stability into wednesday. jonathan: why did the ecb hike? george: the epicenter is not there per se.

it has obviously been priced into the market. if it is priced in, and them being much further behind on the inflation fight, maybe closer but they are more downward dependent as well. everything is down dependent. we do not know and we'll find out in the next two or three months and see but the dots give us next week. i am doing pretty much a no change which gives you ask ability for the june dots. if things go over and we look at may and june and things are more stable, the hike. five things are unusual, they rarely stop going. jonathan: a fantastic strategist out of london said emergency or when equals tighter lending, -- equals higher underemployment -- unemployment. george: i have been on the show a number of times and you always ask do i have a higher rate

profile but lower rate profile the second half of the year into 2024? ultimately, the typing was going to cost something to break. it will come through and hit the economy much more at the local level. it is pulling for the recession most likely. we still have that as our base case and the fed will have to ease. at this point, there is an inflation point it is important to see. they shall become more risk-averse your on out. jonathan: george goncalves of mufg. michael spoke about wells fargo, indicating the same thing. jp morgan and fernie all thinking about statements and process of tighter lending standards leading to softer growth. there is pushback against this theory. jay polonsky, t pw, still constructive. they looked at nominal growth. make the point all the time.

we live in high nominal gdp growth in america. for them, the fed will perhaps back off and that will be ok. that is the bullish theory. tom: as mr. goddard said yesterday, 5%-6% gets it done for a lot of financial america in terms of continuing growth where they naturally run into higher rates and then suddenly it changes. it is out there. lisa a: the issue i have is, has this been going on all along? is are something going to be tighter lending conditions because why? deposit risk? tom: on a friday, who knows? i would suggest we are slightly more accommodated in the last 18 hours. jonathan: do you want to take us to break? tom: princeton beat arizona so my bracket is ruined. jonathan: i did not even do a bracket this.

lisa a: i said i was going to do it than i did. jonathan: is that shocking? tom: that is the's team. jonathan: and they usually are not good at sports. bruce castor and, jp morgan joins us next. that was good. if sports segment on "bloomberg surveillance" this morning. [laughter] american sports just deadly. lisa m: keeping you up-to-date with news from around the world. with the first word, i am lisa mateo. north korea lost the most powerful ballistic missile in its arsenal just before a rare summit between japan and south korea with leader kim jong-un saying he wanted to strike fear into his enemies. he was on hand with his preteen daughter to watch the thursday launch of the intercontinental the listed missile. north korea fired about a dozen missiles in a month.

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today decided to increase three key ecb interest rates by 50 basis points, in line with our determination to ensure the timely return of inflation to our 2% medium-term target. jonathan: the ecb president christine lagarde going 50. then what, who knows? no guidance whatsoever and for good reason. just a quick snapshot of flavor. equity futures down about 0.1% on the s&p. up on the week for the s&p and up big time for nasdaq the week. 10-year yield 3.5336. two-year year, let's call it up 15. the euro-dollar is 1.0628. some people believing christine lagarde has laid the foundation for jerome powell to go 25 basis points next week. you made the point there is a

difference between what europe is experiencing and what the u.s. is experiencing. goes like the u.s. is the heart of the storm right now for the regional banks. yes, there is credit suisse but any not right now. there are differences, i get that. if it is a psychological point of they had to address the ecb that the fed will have to address as well, which is the single use and if you do not hike. tom: you saw it better than i did. i will give her high marks for stability within chaos. let us be clear that credit suisse cannot find a bid this morning. it is fractional to three digits but i am looking for a bid on credit suisse and it is not gloomy like two days ago but we need to pay attention to that. i am sorry that it is shaping up to be somewhat elegant on the chart. jonathan: it is the problem they entered the year with compared to the problems they have now. tom: we are not clearing markets , to me, is the heart of the matter.

we are going to find a pause on friday as we think about this into the weekend and we ask mobile wall street to really lean forward to a true student of all of this. michael mckee is with us. he is the only one i know who reads speeches at the homer jones lecture of st. louis. they have been going on for years. i am going to go back to anna schwartz, who was definitive on how the fed was built with milton friedman. i had a fractured lunch with her in her 94th year. anna schwartz wrote years ago a homer jones lecture on the misuse of the discount window. allan meltzer would agree with that. are we seeing a misuse now by the banking industry of the fed? mike: i do not think so. people do not want to go to the discount window. they use the discount window when they are trouble. it has always had a stigma.

it is interesting so many people went to the discount window in the last week. that may be because the new financing system was not set up until monday. people could not access it and there were a lot of withdrawals going on thursday and friday last week which the fed report captures. also, the discount window takes a wider amount of credit, different kinds of credit than just the new bank lending facility. so, it tells you the banking system was trouble. there were a lot of out those. the banks felt like they had to go that way -- tom: that is the key. we do not know what the outflows are on this friday. jonathan: they probably got a decent idea with the fed. mike: they will know much better than we are what is happening inside the banks because they have examiners at the banks. yes, there is question about whether they did a good job or not you can bet that starting friday, they were part at the

auditors at silicon valley bank and looking over books. jonathan: why is there a stigma associated with using the discount window? mike: it is the lender of lastly's work window. if you go there, you are seen as being perhaps a badly managed bank. people have perhaps not wanted to use it. the fed has changed it, trying to get rid of the stigma and it is still there. it is one of the reasons to have created the fed term lending program on sundays because they basically wanted people to go and borrow from them. this is one way to get around the stigma. lisa a: we are looking right now just to get a sense of the scope of what the use was like. the use of the discount window surged to a record of $152 billion, $152.9 billion, of borrowing. that compares to the all-time high in 2008 during the financial crisis.

does this suggest a crisis that is bigger in scope than we have understood or does this indicate the fed is petrified about financial stability concerns about a rate hike cycle that is not over? mike: i am not sure we know yet because it is only one week's data and it has been a crazy week. i talk to someone at the fed yesterday who pointed out that banks can borrow even if they do not need it yet and there may have been pre-borrowing, an effort to load up in case they were attacked. they do not know that for sure, but it doesn't show a lot of concern in the banking system. we do not know how many banks borrowed. if you had banks all across the country borrowing, that might scare the fed more, than if it was just some of the ones we know have been in trouble. lisa a: there was some indications that first republic countess for a big percentage of it. they put out a statement on that yesterday.

i am curious to draw the distinction between when this is adding liquidity to the financial system versus not. it seems like that is a confusing point. when he see the balance sheet the federal reserve puts you a hundred billion dollars. mike: it is a lot of concern on social media overnight here. while the act of the balance sheets, they will not have an effect on interest rates. [laughter] lisa a: twitter says it is qe. mike: we know that twitter is never wrong. [laughter] market operations are qe they are continually buying in order to push down interest rates. i was looking this morning and you are not seeing any interest rate reaction to this. have a lots in the two-year but the effective funds rate is still where it was. we are not seeing major moves in the money markets. we are still singing to trillion dollars a day in money being -- in cash being sent back to be

fed by the money market funds that have way too much of it, in order to get securities. it is not like this is an interest rate moving operation. it raises the balance sheet but is temporary. tom: if we are having a pain-free crisis, with the powell political overlay and all that, how do you see this clearing? at some point, we have to have creative destruction which i believe is french for banks have to go out of business, right? mike: i leave it to alison williams of people started -- people smarter than me but there is a feeling we are going to see mergers and acquisitions and some banks will not be strong enough to survive the elves. though baker wants to sell his bank so it may take -- no banker wants to sell his bank it make take a while. there are only two banks in switzerland and they do not want to go down to one.

know the trouble for credit suisse a used does ubs want them? no. it is not clear how that is resolved. once we see some of these banks may be get bought up by others, it is more common k2 these days because there are limits. it used to be that jamie dimon would go out, buy a bank, and take it home for his kids. [laughter] but now he cannot do that because they are so big. there are regulations against that that would have to be weighed. jonathan: to build on that, even if they could, why would they? just the way they were treated after the financial crisis. mike: that is probably why mr. dimon was meeting with janet yellen yesterday saying i do not want to buy a bank that i know that as the biggest in the universe, i need to do something. we come up with a plan to get all my friends to put money into first republic and maybe stops the bleeding. what is interesting about first

republic this morning, and people have been telling you more than b, it seems like now the problems with their stock are based on their earnings. the idea that because they suspended the dividend and you will not make much money as opposed to the idea they will go out of business. i wonder how that carried through the day. tom: can i channel my inner senator warren? [laughter] jonathan: please. tom: this is off the bank great website this morning. a jumbo mortgage of 7.02% on a hawaii $1.5 million home. you take out a one million-dollar jumbo, that is really what the bank does. mike: that is why people were concerned about first republic because they are basically a bank to high network individuals. tom: i am lost. mike: those people were not insured and had a reason to pull their cash out. tom: senator warren, i am lost.

jonathan: mike mckee, thank you. equity futures are slightly negative. ♪ lomita feed is 101 years old. when covid hit, we had some challenges. i heard about the payroll tax refund that allowed us

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>> we certainly need strong bank supervision in all seasons. clearly, this indicates there is more to do on that front. >> the banking system appears fundamentally resilient. >> i think the contagion is -- >> i think it is a much more complicated, entangled financial institution. >> inflation is not out of the woods yet.

announcer: this is "bloomberg surveillance" with tom, jonathan ferro, and lisa abramowicz. jonathan: good morning. going to say that every hour for you. equity futures on the s&p done about 0.1% on the s&p. first republic premarket down about 10%. 11 american banks come together to deposit $30 billion into the institution. we are trying to inspire confidence. have we done enough? tom: that is something we will have to see over time but what this comes down to is mysteries of, what are the flows? what is the stability of this very small bank? why try to emphasize at the beginning of the last hour is in the blur of it all, we go to p morgan, first republic bank. this is a tiny bank that used to be part of their lynch and bank of america. it was thrown out the doors through high network individuals. you have 30 banks wasting their

time this morning. jonathan: every bank is different. svb, but were told it was for tech grows. then the other bank over the weekend, that was crypto. the version bank -- they credit suisse over the weekend. it all as up. lisa a: especially because regional banks tend to have greater connections with real estate. these are the were vulnerable places, as rates rise more quickly. they have not necessarily have the same regulatory protections as larger banks. the question is not just, are the banks going to go under? it is also how much does this constrict lending? many of the basic places when lending is distributed throughout the economy. tom: i will go with that but i think this bank is as narrow as the silicon valley, waited to call them, brose? jonathan: but it was much more

than that. tom: this is important. here is the strategic plan, folks, or first republic bank. all the rich people are moving to wyoming, set up a branch. that is it. that is their business plan. where is the next wyoming? miami, i don't know. lisa a: if you take that further, then why do we carry? but then you have signature bank which was a crypto bank shut down. it is one of the dominant players for commercial real estate in new york. when you have banks that have concentrated exposure to specific industries, and you start to get many specific risks that regulatory skit concerned about. tom: the bottom line here as lisa mentioned is the unspoken is commercial real estate. it always is. jonathan: i do not want to make this conversation only about high network individuals in the usa. this is also about businesses trying to make payroll. asking the question -- way more

than that, that is happening across the whole country. why do you think they are coming to do this? it is not just about first republic but about the whole system. that is why janet yellen this week stood in front of the senate saying your deposits will be ok. the pushback is ok but of to what? is it the insured limit or are we now imply it is everything? tom: we are having the same argument they had with andrew jackson in 18 -- i cannot member the bank. this is big banks, small banks, and their institutions including the big banks trying to figure out how to do this in a new political way. jonathan: a bunch of economists are looking at this two ways. this does not have to be a disaster. let's focus on this. as the base case for most people on this. michael put out a statement this morning.

"bank emergency borrowing is going to lead to tighter lending conditions which will lead to a small business credit crunch which will lead to higher unemployment". that is the secret for a lot of economists out there. even if you do not believe a lot will materialize, for a lot of people out there, this is the base case. lisa a: in the meantime, you have every small business looking to make sure they have cash integrity. they can withdraw their cash anytime which is why we see a shift into some bigger banks. but we are looking at small businesses facing substantially more uncertainty than a week ago and that will matter. jonathan: want to inspire confidence and let's see if we can. you want to look at credit suisse briefly, down 6%? . tom: seconds ago, it became technically elegant and the elegance is south. this chart is not the credit suisse chart of yesterday. jonathan: not much reporting overnight.

we have reported credit suisse and ubs do not want to dance. i think it is ubs that does not fancy the dance honestly. 1.90 on credit suisse. i want to get to dan skelley of morgan stanley who joins us right now. wonderful to catch up with you. what a week. what stands out for you? it has been quiet. dan: it has been a really boring time not there. happy friday to you and your peers. but i would say is there has been a couple surprises so far. when you look at the u.s. equity market, we have not sold off that investment. we have seen growth and the nasdaq become a defensive play again. maybe some of this warns about strong balance sheet but the story remains the same that we have been talking about in recent weeks and months. the effects of the banking slow down lisa alluded to before have been yet to be seen. we do not think we are getting paid enough and the risk premiums of the equity market for this type of environment. tom: is the fed super

restrictive? if you take the sense of this -- can equity participants say they are working now in a restrictive central-bank environment? dan: you can. the reason is a few cow and think about historical precedent and historical context, since 1982, there have been 12 dovish terms and that is an inflection where in one month, the fed went from hiking to cutting. when you look at the backdrop and there are 12 different instances, inflation was running about 4% below fed funds rate on average. today, we are running around 1.5% above the fed funds. it is difficult to say we are fully restrictive just yet in terms of monetary policy. but as mike wilson aptly highlighted in the last week or so, you are starting to see long and variable life impact now. lisa a: how has worldview

changed over the past week in terms of risk aversion? how much more inclined to be in cash on the heels of the financial systems distressed? dan: not much. you nailed it earlier in terms of the environment. this is not a credit crunch and not a financial contagion repeat of 2008. ironically, some big banks are already reporting inflows of deposits. the system will hold. we do not see the draconian outcome. we are still sticking to the flame work -- the framework we have been talking about this year which is favoring credit over equities. equities being more defensive oriented, quality oriented, dividend oriented. the looking outside the u.s. into international ideas which have still trended higher relative. lisa a: michael earlier this week was almost john -- bob michele earlier this week was on with john. there are many more shoes to

drop. i'm curious where you think we are in terms of people getting wary of the growth prospects and read through to equity valuations. dan: we have a pretty tight framework in terms of what we need to see to get more aggressive. they're just not there yet. i go down the trackless, we need to see risk premiums at lease 100 to 200 basis points higher. yes, you have seen spiking in recent weeks but we are not there yet. we with the 300 or 350 on equity risk premium. need to see earnings expectations lower to 1715. low 20's on the fix yet is not there. you probably want to get 35 or 42 seymour n tory nature on equity fear factors. lastly, we need to see not just an incremental slowdown in hikes or a pause but see easier monetary policy. we forecasted early 24 at the earliest for that dynamic so we

are not there and in terms of seeing the framework adjust. jonathan: let's get to a word that gets thrown around on wall street. i want to play defense. lisa and i were talking about this yesterday, tom too. defense on wall street meant a bank about to fail. but it's defense in this world? dan: it is an excellent question. last year was the year of nowhere to hide in which rocks and bonds declared together a super anomalous event that is only in two years since 1926. our view coming into this year was the correlation in terms of a bond's effectiveness that would reassert itself. for the most part, you have seen that. it has been days and hours were you have seen everything correlate to one. on balance, bonds are starting to act like themselves again. give you balance and some diversifying benefit. that is largely a function of

how far rates backed up last year in terms of the margin of safety and evaluation opportunity. we would still say, within shorter duration government and high investment-grade credit, that is a defensive area of the bond market still. we still preferred that over equities at the moment. that will not last forever. i think we are coming into a window later this spring or early summer where we will be on to our next fiscal and financial crisis situation. we will probably get a better crack at the equity market later this spring. jonathan: thank you for that. dan skelly of morgan's -- of morgan stanley. this idea that you start planning recovery to a recession we have not had get, i hear a lot of that. lisa a: that has been the theme until it was not anymore. that is what people are starting to rethink it which is now. tom: that is the question of the

week. how do you play defense here? it is so defense that you have to spell it like the canadians and british do. it is so simple. that's what everyone is thinking this week. jonathan: i do not know how you do that. the pushback is anyone. they were financial institutions that were rate and investment height which should not have been based on their performance. credit suisse right is negative almost 9%. 1.80 five swiss. that name is breaking down still. tom: the chart is text but as of 20 minutes ago. jonathan: in the next hour, anastasio amoroso of next capital. lisa m: keeping you up-to-date with news from around the world. with the first word, i am lisa mateo. turkey is nearing ratification of fillon secession into nato. -- of finland secession into

nato. this brings nato a step closer to welcoming the 35th member as the effects of russia's invasion of ukraine spread across the security landscape. president erdogan is meeting finland's head of state later today. president xi jinping will travel to russia next week. it is the first step to russia since the invasion of ukraine. during the trip, xi is expected to discuss china's recently released 12-point blueprint for ending that war in ukraine. that document was dismissed by most western governments. xi and ukrainian leader vladimir solesky will also plan to speak by video link soon. slovakia to send jets to ukraine. the jets are in various states. the announcement comes a day after poland said it will send four soviet era fighter jets to ukraine. or maybe a new covid-19 source link to china.

raccoon dogs. a scientist says new research linking the animals in a wuhan way to market to the virus provides important incremental evidence covid originated in wildlife. samples connected in january 2020 yet the markets where many cases occurred found large amounts of raccoon dog dna. global news, 24 hours a day, on-air and on "bloomberg quicktake", powered by more than 2700 different journalists and analysts in over 120 countries. i am lisa mateo. this is bloomberg. ♪ ♪ investment research. introducing j.p. morgan personal advisors. hey david! connect with an advisor to create your personalized plan. let's find the right investments for your goals. okay, great. j.p. morgan wealth management.

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introducing j.p. morgan personal advisors. hey david! connect with an advisor to create your personalized plan. let's find the right investments for your goals. okay, great. j.p. morgan wealth management. >> there will be a careful look at what happened in the bank and what initiated this problem. i know the fdic look for buyers

and a merger or acquisition is certainly something they were hoping for as a way to resolve the institution. jonathan: janet yellen, a timely conversation on capitol hill. the new york times reporting this morning that the federal reserve pushback against including a line on sunday evening about regulatory short force. lisa, chairman powell is once again in the spotlight. lisa a: the only reason he mentioned regulatory reasoning at all in the statement was to say it was good and helped the port the banking system. it was all positive. this raises the question of whether the biden administration is pushing back and raising a given tory oversight and failures he argued were not supposed to be in the statement. jonathan: do not think this conversation is going away anytime soon. tom, you did an impression of

senator warren earlier. i think you will hear more of her. tom: i am going to give you an anecdote and then you guys can pick up the adult conversation with gerard cassidy, who has been fabulous with us this week in interpreting senator warren's comments. you and i have lived this. you are in massachusetts and you need a jumbo on the new place up the coast of maine in bar harbor. right now, there is an $11 million property up there and i need a 5 million jumbo. you go down washington street in wellesley and go into first republic bank and get a $5 million jumbo over a cup of coffee. is that what we are bailing out? gerard: thank you again for having me on the program. i would say i do not think that is exactly what we are bailing out but they are definitely a jumbo mortgage lender. but they are also a financial

advisor, a wealth manager which is part of it all. the key is it is more the contagion risk that people are worried about. that's if you allow any of the very large banks to become insolvent and the deposits are at risk, that you worry about the contagion rest which is what we worried about in past crises whether it was the 2008 or 2009 crises or the 1990 crises. jonathan: i think people are fighting communication from authorities to be somewhat confusing. they have implied at some level that all deposits will be made whole. they have implied at some level that regardless of size, was financial institutions at this country would carry this that there is still nervousness. what on earth can authorities do when it comes to tackling the issues? gerard: i think what we are going to need to see is each day beyond the failures of the two banks last weekend will give us

some calm in the market. people are still jittery but it -- in my conversations with bank managers this week, what we saw and heard was depositors were very ace on monday. as the week went on, things began to calm down a little bit. what we will see is time will help heal some of these wounds. we are right about the communication part. it has been at times confusing and i think they need to get a stronger message out there that, for the time being, in a period of uncertainty, the federal reserve and the fdic and head of treasury will be there more explicitly than they said sunday. jonathan: the public may hear numbers like $153 billion come from the socal -- the so-called dollar reserve. there may be people watching this program fighting this scary. our two facilities. the discount window that has been around a long time. there was a new facility

introduced sunday, etf p -- btfp. can you explain the numbers we heard yesterday afternoon? gerard: they are incredible numbers but if you just look at total deposits in the banking system, they are around 17, 18 $20. it is -- 17 trillion or $18 trillion. these numbers you just reference on the discount window borrowings that were announced yesterday are very large. but the economy and the system is extremely large. we are putting it in that perspective, the numbers that are more manageable. just seeing the absolute number of 150 plus billion dollars is a big number. lisa a: a one french policy experts quoted in the financial times highlighted insignificance relatively speaking in the scope

of some banks and rescued by authorities, saying this is the u.s. version of small venetian banks. you are always systemic for somebody. do you think that criticism is valid? gerard: to some extent, it is. we still have 4600 banks in the u.s. that's unfortunately fit the million dollar bank if there is any bank that were to go and solve it, it would not cause the reproductions that a $200 billion bank did. even though the $200 billion bank is smaller, relative to jp morgan or bank of america, this was the second largest bank failure in u.s. history. it is a big bank even though relative to big guys, it is not. need to put further and procedures. more capital may be required by the industry will see more regulation as a result of what

we came through. lisa a: is there a bigger problem that people are hinting at but not addressing directly? it amount of commercial real estate, as tom mentioned many times, of individual loans and riskier assets bigger banks have gotten out of, that concentration has regulators and authorities concerned about smaller regional banks and the potential contagion and the consequences. gerard: we are always worried about commercial real estate. if you go back in time before even tom and i were doing this in the 1800s, commercial real estate has always been a problem for banks during a crisis. it has to be managed effectively. to do that, to your point, you need to keep the concentration risks in manageable state. you cannot have a bank that has 75% of their assets in commercial real estate loans. commercial real estate will potentially be challenging in the urban market for downtown class b and c space.

overall, most commercial underrate is written conservatively. should there be higher delinquency, i think the system will handle it effectively with levels of capital in the system today. jonathan: next steps, options. what do you think they are? gerard: really good question. we anticipate more of the smaller regionals will be required to carry more liquidity. he might be familiar with something called the lcr, equity coverage ratio, where the banks have to hold up to 30 days of money that they run on the bank. these are our giant banks that they referred to like jp morgan or bank of america. after seeing -- i have seen more banks being required to do that. -- where unrealized gains and losses go for securities. for bigger banks, they deduct that from regulatory capital. we suspect that smaller banks will be required to do that as

well. third, we expect the industry will have to pay higher fees to the fdic to build up the insurance fund, especially with the rate limited to uninsurance on the deposits to $500,000 that will be put to the industry as well. jonathan: what did they say about a crisis and acronyms, tom? always. gerard, thank you. gerard cassidy of rbc capital markets. tom: this goes to the semantics of the moment. i take a issue -- i take immense issue with the use of the word deposits. we need to learn more now, away from the semantics. we need clear language from people, including the management of first republic bank. have we heard from them? jonathan: not much. sunday evening, they talked about how much liquidity they had. not much since then. credit suisse, down almost 9%,

1.85. tom: the way it is down, we do not need a technical lesson but all you need to know is all the trends are challenging. beginning about an hour ago. over suggests rebounds into the german two-year and ten-year. not linking them together but this is what they have at the same time. jonathan: there is risk developing, not an image or way compared to the last week but there. german two-year yield 2.54. right now, four point 09% yields and six basis points at the front end of the curve. are you singing again? are you about to take a week off? ♪♪ welcome to a new era of energy. what does it mean to be ever better?

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jonathan: looking to close out the week with equity features down a third of 1% a long way to go before we get you to the weekend. before we get there here's a snapshot of things for you. nasdaq 100 so far week today before today's action up around 6%, monster move. first republic, lisa wants to look at that too. tom, you mentioned have we heard from the leadership there? the suspension of the dividend, they did put out a statement last night. insured deposits on march 8 the

close of business on march 15 have remained stable daily deposit outflow the key line there is insured deposits. maybe an insured deposits exist so we would like some clarity on that too. focused on reducing its borrowing and the composition and size. consistent with this focus and during this period of recovery and the board of directors has determined to suspend it dividend. just kind of not much else. lisa: the support we heard from the other banks giving us clarity as to what the longer-term plan is. it doesn't forestall some larger kind of partnership of acquisition. jonathan: trying to shore up confidence in the institution and i would go one step further, not just the institution. really turn around and say we think the whole system is going to be up cap to.

lisa: the question is why such a big response and over to you, jerome powell, christine lagarde a sense that tings are as normal. let's take a look at first republic which shares are lower on the day. i do think it's interesting to talk about what we heard overnight with respect to the dividend. we are concerned about profitability. john mentioned this earlier they are borrowing at market rates that are significantly higher than they were a year ago while assets are pain yields what they would have earned a year or two ago it is mismatched creating a negative backdrop for them on just a simply profitability landscape. in other regional bank has been hit over the last couple of days. this is what we have been talking about. what was the expression again? jonathan: it's always the shot closest to the boat.

lisa: there are other issues. the good news, the margins were better-than-expected the bad news is at least for the economy they are cutting costs. revenues are coming down because shipping isn't as robust so in response they are grounding planes, they are causing a reduction but this highlights the economic question that we are all ignoring. thanks, banks, banks. jonathan: that's with the economy is picking up on this morning. moments ago be of a they are focused on the economy of this. away from the trauma -- drama. this will lead to tighter lending standards which will lead to softer growth. that seems to be the base case for a lot of people after the developments. tom: lower the development of the past quarters. accommodative to restriction. going to do a little history

here because it is most important with our question -- without question our most important guest of the day. he is former fbi seek vice chairman, doesn't describe his leadership of jackson hole meetings and also thomas honig is the voice of -- he is the former president of the kansas city fed. wonderful to have you with us today. the advent of your fed which was when united copper blew up in 1907 jp morgan set in a study about house built by felt much money and try to bail out the financial system that is the age old distrust of a agree in america with the fancy people in new york. it is -- is it history repeating itself and for that matter the fancy people in switzerland?

>> that is a bit of a stretch i would say what's really happening is the classic night that follows day because we had a lot of smart, knowledgeable people who pursued a policy that was highly accommodating with low interest rates for an experience -- extended period of time. when you do that for a long period of time and inflation of assets and prices rise you end up having to tighten policy and that means all these asset values take pressure and that is what we are seeing today. that is what we saw back then, that is what we saw in the 80's and the 2008 period. tom: is this because of the

financial is asian of america and some of these troubled inks are sort of kind of like catering to the elite? to the haves and have-nots creating mistrust in washington and away from where the elite live? >> what they are doing, i think, when you have this kind of speculative, this kind of speculation it's not just the elites. i'm going to take advantage of this whether you are in the midwest or on the east coast, you're taking advantage of this and when the problem comes, this is where the resentment comes. e.u. bailout banks. e.u. bailout some -- you bailout some banks. those who are in the smaller

communities who are not bailed out or lose their job, they become very resentful and blame it to some extent rightfully on the elites who supposedly know all this. they often ask these are really smart people you should just let them figure this stuff and i say well that's why we are in this mess. i think there needs to be a lot of humility in the policymaking business. it often goes south when you get too cocky, too confident. lisa: let's talk about the moment you have incredible expertise as head of the kansas fed. and the fdic and i'm curious whether your suspicion is that is a more significant risk authorities are trying to stave off. in other words what do you make of the criticism that they took a bazooka to basically an inch?

>> well, i would like to be able to say that too. that it wasn't systemic but with this event there was a great uncertainty raised about banks, especially regional banks, so i fiber sitting at that table as much as i would not want to do, you do what you have to do. i would go along with that. i think, yes, they are trying to avoid further problems down the road because when you raise interest rates by a factor of at least 25 in less than a year the assets, it's not just those government bonds. there are other assets everyone knows that. that's so you see this uncertainty continue. there is a whole asset on the portfolio. those are going to be under pressure with this interest rate and the slowing of the economy.

yes, depositors say let's not make this thing worse. that's what you do in a crisis. lisa: i guess the concern people have is, ok, this is a crisis response but you are creating long-lasting policy without creating it. this goes to ensure all deposits , let's protect all the small businesses. is there a consequence to having a defective policy implied by the actions without it being codified or even paid for by some of these banks? >> well, yes. you have set the expectation. everyone is going to be protected. if you walk away from that now you are going to create a crisis. that is pretty clear what they're trying to do is they will say hey we will take your assets, especially the

government bond so there's liquidity coming into the system. if there are other problems, talking about commercial real estate earlier, at that point they're going to have to step up and protect these depositors. if you don't do it you're going to have a major problem on your hands. everyone i have heard on this program and others the capital is just well-capitalized. you wouldn't have this uncertainty in the system. your well-capitalized for good times but can you take the shots? liquidity, liquidity is a false capital. and people become uncertain about your solvency they run and then your liquidity problem versus the issue. we have to, you know, were going to have to get through this and the government is going to intervene. but if we don't learn on the other cited this to watch the

monetary policy, we need stronger capital, these we have to make sure they are actually liquid because bonds are risk-free, they're not. we need to do a better job on the others if are going to go ahead in the future. jonathan: got to get through the storm first. great to catch up. equity features done a third of 1%. credit suisse down and holding on to 1.82. just a couple of nights ago, big time and that stock is looking to close out the week. tom: the phrase is simple if you look at the asymmetry of the bid. the buyers are on strike, they walked away like three or four days ago. jonathan: what about first republic? it's not really a major move is

it. lisa: it changed. tom: i really can't get a good handle on premarket we had the advantage of active trading with volume with liquidity so you can do the fancy math. i can't do that right now on fancy -- first republic. lisa: it's so choppy. i think that's telling, especially after what's been announced. when can we come to some sort of conclusion? jonathan: chief economist and senior vice president coming up to the studio to join us very shortly. again forward to that, this is bloomberg. >> keeping you up-to-date with news from around the world with first word, i'm lisa mateo. tylan's prime minister has issued a decree to dissolve parliament. that decision paves the way for elections as a former leader

seeks to extend military backed rural. by law a national vote must be held within 60 days of the dissolution of parliament. parliament terry elections on sunday, the latest stage of a government reset. in response to last year's deadly riots. he brought forward the voting central asia's producer in order to dismantle the legacy of his long serving predecessor. north korea launched the most powerful ballistic missile just before a rare summit before japan and south korea with leader kim jong-un saying he wanted to strike fear into the enemies. he was on hand with his preteen daughter to watch the launch of the intercontinental ballistic missile. north korea has fired off a dozen missiles in a month. potential sale of a some occult system -- tomahawk system to

australia it would tighten security ties between the two nations. tomahawk's are subsonic cruise missiles. global news powered by more than 2700 journalists, i'm lisa matteo. this is bloomberg. it's easy to get lost in investment research. introducing j.p. morgan personal advisors. hey david! connect with an advisor to create your personalized plan. let's find the right investments for your goals. okay, great. j.p. morgan wealth management.

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that their deposits will be there when they need them. this week's actions demonstrate our resolute commitment to ensure that our financial system remains strong and that depositors savings remain safe. jonathan: this has happened so quickly. it was only a week ago that we set around this table talking about svb in may be for the first time to see about this story they had never heard of the bank before. for many people that was the case and here we are is just kind of domino, snowballed over the last week. tom: each bank as you said earlier has its own different character what we just heard from the former president of kansas city fed, i'm sorry, one percentage of america agrees with him. it's way larger than what you're getting from the east coast media. jonathan: she said americans can feel confident.

first republic down 8.12%. credit suisse on first republic, credit -- credit suisse down 10% this morning. holding onto 180 the low of the session. we are rolling over again. lisa: the american consumer, credit suisse is its own story. is it just building on the negative that we've seen because of a concern not among the average consumer but among businesses? and where they plant their many? that is becoming a concern whether it's depositors, small business departed -- depositors in the u.s. or wealthy individuals over in europe? tom: with all that's going on and john i'm watching the u.s. two-year it really is sort of the tipping point i would say it's not near a crisis level right now. jonathan: i would say five basis points on a two-year. that's what we've seen over the

last week. tom: the markets are open. we will continue here. right now, the star of balance of power. it's great to get a show started annemarie. that helps things out. you mentioned there was a meeting of a balance of power in washington what can you report on the delicacies of new york meeting with washington? >> the timing. if you have the treasury secretary on the hell testifying, talking about everything from the svb to the health of the banking system. at that same time, jamie dimon must have been in route because when she got back to her office yesterday, that's the man she was speaking to and they were finalizing this agreement that started on tuesday. this idea to get these big banks to lead this deposit in first republic to try to shore up some

of this risk and chaos in this bank came from a call and this was yellen's idea. she spoke with regulators and pitched it to diamond and they started hitting the phones. it culminated to them finalizing it yesterday afternoon. 48 hours, they were able to get these 11 banks together. jonathan: some of these institutions have been vilified for much of the last decade. does that introduce limits on how much they're willing to do and by willing to do we are talking about acquisitions even if they were able to make acquisitions, with the want to? >> i think they would want to look at all of the banks and whether or not it makes sense to make acquisitions. not all these acquisitions made sense. they at times regret them. what they were able to do here,

these big banks have also benefited from the last week. a lot of people were pulling their money from small regional banks and putting it into the bank of america's and jp morgan's because they felt this is the safe place to go. another trying to help shore up the regional banks. the politics of this, it definitely looks like anchors bailing out bankers. instead of government -- it was government orchestrated. this administration wants to avoid any taxpayer money having any thread into this. what you're going to see over the course of the next few weeks is a ton of questions. the big one is going to be on regulation and the other is going to be about the fed and whether not the fed should be investigating themselves. lisa: that's exactly where i wanted to go. the story talking about the federal reserve blocking any

mention of any flaws in the statement they put out. thinking -- banking regulation for preventing any sort of true systemic distress. what do you make of that given that biden the -- the biden administration wanted to put that in? >> i think in the end the biden administration probably when the debate because on monday the fed came out with their own statement saying they will have a thorough review of svb and what happened with the supervisors. i think the big question lawmakers are facing is the fed in washington that potentially there is an issue. and now you are hearing a growing chorus and joe and i on balance of power spoke to a number of lawmakers about this exactly. you have the likes of elizabeth warren who wants powell to recuse himself from this and then you have the likes of senate chair of the finance, banking finance committee saying

i think we could let the fed do this themselves and he has some optimism. there is a growing course that does think this is potentially the third scandal within the fed starting off with the trading scandal and then they had their own inspector general look into it. there is a number of lawmakers who say outside investigator needs to come in and needs to look at this. they should not be in the hands of the fed which of the ones that were supposed to be supervising the bank. jonathan: great reporting in the last 24 hours. thank you. balance and on radio. can it regulate banks and regulate itself? lisa: that's a great question. they would argue, yes, of course. there has been a shift in the culture under vice chair of supervision before michael farr came in and there are questions

about what the conversations were like. we will have to see what was revealed in these discussions but how do you assure credibility without more transparency? jonathan: a share of confidence credit suisse let's get the name on screen if we can, down 11%. tom, the lower the session so far, 1.79. tom: off the enthusiasm and the good news of what seemed ages ago, we are down 24% from those first prints of let's get on board. that is not a germane number down 24% but the trend is the issue here. the word elegant is just an integrity trend. this is a very elegant move. jonathan: talk about what we've had so far, tom. we had the swiss regulator put out a public statement of

support you have seen credit suisse come out. they are talking about repurchasing debt the ceo has been on this network early this week saying we are working through these issues. what else can they do? lisa: beyond an acquisition, hard to see what it would be, especially given what jp morgan put out there which is how do they really remedy a problem that is not fixable right now without being acquired. tom: silicon valley, credit suisse they are all in the same boat. that's usually the way it works. going under. the jewel, we have a mystery. we don't know the flows of the wealth management or asset management. you mentioned earlier they don't want to tell us, do they? but information with speculation saying about what about the flows? lisa: why buy visuals when you

can just take them. tom: to your point, just compete for them. why do a transaction? just them up. jonathan: what competition will be left in switzerland? that's the challenge, right? 1.80 on credit suisse. first republic, if you're following that one, first republic negative in the premarket as well. ♪

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>> there is a tightening in financial conditions and a rise in the cost of capital banks. it is causing some friction. >> we expect a lot more

volatility in sideways moves in markets. >> we have taken a large amount of chips off the table. >> buying treasuries is a reasonable knee-jerk response. >> we are now seeing that traction. >> this is bloomberg surveillance with just tom keene, jonathan ferro and lisa abramowicz. tom: good morning, everyone. you thought you would get a big rake on friday, no, you do not. financial crisis continues. we will give you coverage on that here through this hour and through the morning. i look at the screen and i guess i got to go to zürich to discuss american banking. credit suisse with the brutal morning. i'm not sure what it means for u.s. banking but it is a vote of nonconfidence. jonathan: we are down about 11%

at the moment. what else can they do? we have the big public display of support the bank has tapped the s&p they repurchased debt, what's next from them? tom: was really interesting, mr. hammer is needs to go and talk to the canton authorities in's with portland or this was national bank. where is the meeting like what we had in america? jonathan: you have to go to the other side of the atlantic. the stock is down in the premarket. 11 u.s. banks, $30 billion of deposits going into that institution. is it enough to shore up confidence? tom: the story moves on. we have headlines which we must discuss. svb financial files for chapter

11 bankruptcy in new york. it has a modest liquidity of $2.2 billion. this really speaks to the things we don't talk about. we are not inflammatory, lisa, until there is a headline that there is a moment but this does within this crisis. lisa: we were all expecting a resolution but we have all been talking about why we haven't gotten a buyer? why is it that they had to file for bankruptcy in the biggest failure since 2008. we are seeing this question around who is going to come up and swoop into do this. i wonder if we can call this crisis we keep saying this crisis in financial markets. federal authorities say this is not a crisis this is specific institutions. systemic risk kind of a program to fuel, to sort of tamed down the flames.

is this just a series of idiosyncratic stories? is this something that has, you know the markings of bigger distress that will curtail? tom: it's a script and i don't know which act we are in right now but there is a point where they lose control of the theater. jonathan: this is not my opinion, this is just to state a fact. they invoked the systemic risk inception. they are acknowledging this leads to a bigger issue. that's not my opinion that's just implied by the nature of what they did. this goes beyond svb and they quite clearly have the same fear. tom: it goes beyond svb and the stories for the narratives of the moment whether it's first republic thinker credit suisse are the ones we don't even know where do they go and are they systemic? there's got to be a number of inks that we don't know about. jonathan: it's change the game. certainly the follow-up for

weeks, months, years to come. the institution of this size needs to invoke inception do they need the same degree of scrutiny that a much larger banquet get and lisa that's going to be the talk in d.c. for much longer than just this week is going to go through the rest of the year. lisa: they have to have a much higher standard with respect to liquidity. but also they have to pay a higher premium for getting insurance on all their deposits not just those $250,000. there has to be some charge for that. tom: you made a joke about the acronyms but the fact is cassidy went 1, 2, 3. that's how these guys think under crisis. jonathan: they tried to come nurse but they haven't calmed to much. tom: our team has done a great job. we spoke with the former

president of the kansas city fed. i'm going to go to the two year yield it's in a little bit but it's not giving me the theater that we see in some of the premiums for the banks. jonathan: i can bring it to you if you like we are unchanged on a two-year this morning. yesterday up 27 basis points. tuesday up 27 monday down 61 when was the last time you saw a week like that in the bond market? lisa: 2008 it's like arrhythmia tom:. were going to jump to our guest a brilliant note out over the last 24 hours of where we are anastasia you take a much broader view. you've always done that with jp morgan and others. you are out searching for shadows globally this morning

what's the shadow you're most focused on? >> it's in the u.s. banking sector. i don't think they are idiosyncratic issues i think there is a broader problem. there are specific things that went wrong at those two banks but if you take a step back let's take stock of what's happening. first of all, depositors have other options and if you look at the online savings rate it is much higher than what you're getting on your checking account or savings accounts so depositors are looking for other options and as a result those deposits go out the banks are having to sell their sale securities or the fears that they're going to have to sell some of their maturity securities. that means a new wave of markdowns so this is, i mean this is systemic or broad-based and this is why i think the market is having a hard time saying yes, this is that, this is over because what we've seen is sort of a patchwork of

piecemeal approach of regulation the depositors of these two institutions don't have to worry about their deposits and resort have -- we sort of have -- jonathan: if they met today but what they do? >> the more i think it is a very different story versus the ecb. the ecb is committed to 50 basis points. they can look at the ratios of their banks and say our banking system is fine and our rates are not at 4.75%. credit suisse is truly unique and different. look at the u.s., the banking system is experiencing strain under these level of rates. a confident signal of 25 basis points i don't think it goes that far the biggest signal of confidence would be to say we are in tune to the issue. we want to take the time to make sure we have the right approach

in place. to me, that would be the best approach. lisa: the argument they could make is that you are seeing a rapid tightening in financial conditions that you're not saying the same kind of credit that is given over to small businesses given all your experience in the markets world do you see the starting to spread think that's the next shoe to drop? >> i think it will impact pockets of private markets so for example the svb, the reason this is such a big deal for the start of community deposits are safe but what about the lines of credit? what about the lens that some of these companies are able to get that they wouldn't have gotten from some of the bigger banks? who's going to step in and fill the void? i happen to think people will step in. guess what, it's not going to be deployed at the same valuations.

if you look at the early stage never went up to the levels that the late stage venture did. we had huge surge in 2021 i think the deals may still be getting done. but they're going to demand a pretty steep cut and a discount in the valuations. jonathan: as growth gets hit, with that in mind what do you play for in this equity market? >> maybe i'm a bit contrary i think this is a deflationary development in that banks will tighten and pull back on lending over time but if you look at the economy today we came into the year expecting 0% gdp growth. the last i checked the projection now for q1 is 3.2% gdp growth. this is an economy that these consumer confidence has been rising. the quarters are picking up and

the economy is fine so i think that explains the resilience why -- that we have seen in the market. that's why we hang around this level because the economy is fine and i think the market is betting that this thinking issue is going to make the fed at least pause. for now, you know, i can't say were going to see immediate new lows in the market but at the same time i think how this ultimately plays out is hopefully the banking issue is fixed and then the fed gets back to its inflation fighting. then we have the pricing that needs to happen back from whatever the terminal rate is from 4.6% back to 5.8. so that's a big thing coming for the market later this year. jonathan: what are wide range of outcomes. anastasia, thank you. think what anastasia said, three

handle, take the inflation straight out and talk about nominal gdp. tom: going to go back to the giant phil caray who says it's a great -- bright lights, it doesn't save all the zombies but there's all sorts of companies benefiting from moving by three or 4%. jonathan: density bullish argument. you have 8% nominal and a reason for the fed to back away. lisa: that's the bullish argument on that. the bearish argument is that the fed has to come in stronger later on an as anastasia was saying. that's a concern right? jonathan: i hear you. credit suisse down 11%. lisa: your humoring me. jonathan: to indulge.

i can swat it away. she did say, what did they say? lisa: it's fantastic it was basically they took a from a financial stability perspective they killed the fly with the sledgehammer. jonathan: the bearish argument. first republic 29.73. this is bloomberg. >> keeping you up-to-date with news from around the world with first word, i'm lisa mateo. the u.k. government and education unions agreed to begin talks about teacher pay strikes. no schools traits will be announced for two weeks while the discussions are happening. the move raises hope of an agreement and industrial action in schools across england one day after the government reached up a deal with nurses and england's workers. turkey is nearing ratification

of finland's ascension into nato the bring moves military alliance a step closer to welcoming the 31st member as the effects of russia's invasion of ukraine change the landscape. china's central bank cut the amount of cash banks must keep tiny reserve in an effort to stimulate the economy as it gradually recovers from pandemic restrictions. it reduced the reserve requirement for almost all banks by .25% points. the first humans of the year it rebounded although graph -- growth outlook. david! connect with an advisor to create your personalized plan. let's find the right investments for your goals. okay, great. j.p. morgan wealth management. at allspring, we break away with purpose.

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hey david! connect with an advisor to create your personalized plan. let's find the right investments for your goals. okay, great. j.p. morgan wealth management. >> the european banking sector remains strongly capitalized and remains very liquid and we have not seen the kind of deposits

causing problems in the u.s. we have seen some shift from deposits but typically within the making system. jonathan: howard davis on the situation with the banking industry. situation worldwide. tom: called him up and sent signals across the atlantic morse code and said howard, please, let's talk about this. he was the first chairman of the fsa in england, the financial services authority and with his deep experience you guys do it different and some would say better over in england and particularly how you guys come out of northern rock versus what we are witnessing now. jonathan: what we are witnessing now america proves there's only so much regulation can do. this is a confidence issue.

just by the nature of banking it has been somewhat entertaining over the last week. to hear people describe the situation with svb and then basically describe the banking and this is the problem because they've got this duration mismatched and i'm sitting there like hmm isn't that how banks work? it's like they finally found out for the first time this is how they operate. this is the model, this is what they do. tom: i think we need to parachute in someone like sir howard davis. when we get to kenneth lay on, director of equity research is experiencing including the 2008 crisis, what was that like, can? take us back to march, 15 years ago. you are at your desk, what was it like? >> moving so much faster than

how you can react. if you are in the readings committee you are trying to catch up with the market i agree with sir howard. european banks are in liquidity positions in u.s. banks. so when you go back to 2008 it was a little bit more transparent because it was the largest bank and it was really the markets. we think there's a story that's missing today and it's almost like the conversation is pioneering -- binary and the monetary policy but the third rail is really people. this is a people story of bank supervision. i have a report coming out later today and were taking a deep dive in terms of the people story because even if you do the walk back from legislation in 2018 to more significantly

regulate the top 100 banks there's a problem of banks with total assets with the story of 10 to 100 billion. there's $2.7 trillion in those banks and if you are a hedge fund you say there's a cockroach theory. the markets still don't believe the financial stability has been fully stable and we think there is a long tail going well into congress and the report from michael bar at the fed how do people supervise banks? tom: the people overnight by our reporting suggest a $30 billion will be what is essentially a three month cd. 120 days to salvage first republic bank. comment, please, on the efficacy of a three-month timeline of this plug-in. what happens in 120 days?

>> it's not a detailed term sheet but 25 of the $30 billion, it's a consonance factor and it's essentially trying everything they can to make sure that you arrest any panic and have financial stability. so i'm not sure the timeline is that critical, the banks want to make sure that we get past this problem and then we can ask the harder questions of what happened, how do we fix this, and prevents the problem? lisa: we look at one bank in particular, they filed for chapter 11 bankruptcy this morning even after entering receivership. this is the second largest bank ever to fall under receivership behind the only other washington mutual. i'm curious whether this is

significant for you or unexpected of this saga. >> it's an unexpected event but it's a story, it's bank examiners. sarah raskin, who i don't agree with a lot of her politics but she said this was really a supervision 101 to many of the issues that you had with this bank. if you can put $80 billion to the irs, you can put more funding to the fed so we have more people out in the fields. you're not going to have 5-10 fed examiners as you do have at the largest banks to get onto these levels. they need more resources or artificial intelligence. all of these are important because its human error that has missed this observation and unfortunately that's created the problem. lisa: this raises the larger question which is what's next. if this is human error of not being able to oversee some of

these smaller banks how many more are there? >> my point, again, is even if you walk back from the eight largest and you capture the banks that are over 100 billion to 200 billion and it comes out every six months, there's 99 banks that represent 2.7 trillion that probably need more supervision. we have the investor confidence that this kind of problem won't happen again. tom: if we can see flows now, to me the big mystery into the weekend is an accounting of the flows to -- money market funds to the big banks. what is your guesstimate of the magnitude of those flows? >> again, to your first question, i don't think this is 2008. i do believe that we have financially strong institutions. both annie the u.s. and europe and i do believe credit suisse

is a one-off at this point. it's been really resolved to the extent the swiss bank is there. i don't think we have that situation of hysteria as we did when all the wheels were coming off the tracks back in 2008. jonathan: can, this was great. let's talk again hopefully next week. can leon there. breaking down session lows. 1.7 eight on credit suisse, first republic that stock very much followed after the last week or so down 18%. just off session lows. $28 in the premarket rate now. tom: the correlations are going to need to be watched. i can't make a correlation on the real yields. i think those dynamics don't work right now. i would say the equity markets give a little angst in the vix it's not the 30 or the 29 level

of days ago but i'm sorry, pushing near 25 is sort of unacceptable right now. jonathan: futures are softer now. in the next hour of bloomberg tv coming up we will catch up with j.p. morgan investment management. that's your lineup, tom going into the next hour. tom: i would love to know what she thinks. her use of cash equities, real costs and with the pump we saw yesterday in the market is going to be fastening to see where she's at. jonathan: the down 50. does the fed follow-through and tight? lisa: especially what we heard yesterday if they raise 50 is there and assured 25 basis point

rate hike? jonathan: is that happening? tom: very sophisticated. has he left greenberg? tom: he's been involved in that. jonathan: he's the authority on the new york jets. tom: talk about retrievers it's like benny lyons. lisa: anyone tuning in -- jonathan: that's a good rumor. that's a really good rumor. [laughter] jonathan: i heard -- i didn't hear. futures negative, this is bloomberg. ♪ when they expect it. discover how ryder ecommerce makes your customer's experience ever better.

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tom: on radio and television amid a banking crisis lisa abramowicz and i'm tom keene. i thought we would get a little bit of a policy or on friday to the unfolding story. there is an announcement of a bankruptcy of svb financial. importantly, of the three items it's only the banking item svb capital, svb securities remain whole but nevertheless something to be expected to see that bankruptcy. lisa: and the sale of some of the assets. the question is the creative destruction, is there not

discretion -- that's going to be a question as we figure out who's next and if there is real distress. tom: it may be distress under a new technology or institution including mr. dion everyone is dealing with this it's not too thousand eight in terms of technology. credit suisse making lows moments ago. lisa: basically the reason for this chapter 11 bankruptcy is to basically open a path to sell business lines other than the banking unit. this is one reason for filing for bankruptcy, to create -- tom: i haven't even asked you of what your wheelhouse looks like what does high-yield, what does

distress, what does ig look like lisa:? you have been seeing it bounce around. right now just the trend generally potential risk of default isn't high enough and that's over at ubs put out a statement and said not really if you expect to see of recession we are not pricing in recessionary types of risks. tom: this is important, sitting at home you're going, ok, this is chaos and i don't care what's see fsb is doing. the two year yield and its role simple its giving way as we go into the 9:00 hour here to get markets open on a friday. 4.09% seven basis points. that will be front and center. as lisa mentioned it's about the knock on effects of the crisis tom honig was great from kansas

city. i think ken lyons was brilliant there. now let's look over to the american economy. chief economist nationwide, kathy your note says it all. it is a knock on effects of a knock on effects of the tighter banking environment, tighter lending maybe dare i say emotion as well what does it do to the american labor economy? >> tom, lisa, happy to be with you. it's the tightening of bank lending standards that's really concerning here particularly credit that's extended to small and medium-size firms, large banks are in good shape but we are seeing still ongoing stress and questions. these banks, even if they are in good shape are going to be looking at the balance sheet and trying to repair it or try to be careful about making new loans.

really this is doing the work for the fed. tom: the heart of the matter in research notes over the weekends is going to be simple. cautious banks, cautious financial system and how does it for over to united states real gdp? >> credit is really what greece is the wheel of the economy. if you start to see a pretty large restriction, a contraction in that it's going to affect economic activity. we are going to see its low. first quarter gdp running somewhere between two and 3%. we need to see -- one thing i think that's going to be interesting to watch next week of course the fed meeting and the updated gdp and inflation numbers. what's the reaction, what do they tell us? even beyond that the following monday we get the senior bone

officers from the fed reserve. the quarterly report up to this point, 40% of the banks were tightening credit standards. that's typically associated with the recession. we know that's going to continue to tighten. this most recent episode is probably not going to be reflected for april, on that monday following the fed meeting. but it's certainly predisposing as to a recession unfortunately. lisa: i want to pick up on something you said earlier. the market is doing the work for the federal reserve. does this mean don't think the fed needs to hike much more in fact they could be done if it for messaging and it could be just as restrictive if not more so than a week ago. >> i think there is there's also a risk and you were tightening into unsettled financial markets. and the financial system overall

but, yes, the problem is we just don't know the degree of the tightening of lending standards. we also don't know how disinflation reduces. it should be disinflationary if it restricts capital and credit and economic activity. it should do quite a bit of the work of the fed. it should be nearly done, but i guess you know the markets are pricing in below the 25 basis points as you pointed out the ecb went 50. we have evidence that central banks will tighten into this. i think it will be more prudent to pause and have a hawkish pause as opposed to a tightening. tom: hawkish pause. lisa: so they're going to raise rates further down the line. i wonder how dangerous that is though because at one point the fed expressed fear of having the stop start kind of mentality. this could create even stickier

inflation and create more of a problem. what's the potential risk of that given the momentum of the economy heading into this period? we have seen some stress at specific banks but it isn't some widespread kind of credit crisis. it's certainly not 2008. it's not to that degree very different conditions. point is well taken. it's a tough spot for the federal reserve. clearly they want to show that they are still fighting inflation and that they can and ideally they'd like to say we have contained this issue. we have other tools to deal with any instability and we can still keep raising rates. that's the ideal world but i think in reality it could be other rise -- otherwise. raising interest rates is what got us into this issue. raising rates yields only taking

people their money out of banks. as you write this weekend, you adjust to the end of a to mulch was quarter. how does it set for q4 of this year or dare i say the first quarter of next year. what is your tone there? >> we have been cautious on the economic outlook. these events reinforce our view that we are in for some type of recession. still, it's pretty painful that him claimant -- employment ra tes rise. we remain cautious and again these conditions always sort of reinforce that view for us. lisa: does that get us closer to

the inflation rate the fed has? >> unfortunately, we don't really see a big deceleration on inflation and it's because of the services number. we see, it's still going to take a few years to get back down to 2%. we think the fed could stop raising rates sometime, maybe by the middle of the year. it's very different from what the markets are saying. the markets are saying the fed is going to make a mistake, but too far and will have to cut rates. tom: kathy, thank you so much. lisa, the markets are moving here equities drift away the vix goes out almost 2.2466 i'm sorry the two-year speaks volumes. it was 4.09 and all of a sudden

4.05. solid not fear laden but friday angst he basis points. lisa: shrugging off what the ecb did basically saying the ecb can raise rates by 50 basis points but they are further behind the fed in terms of the hiking cycle and you're looking at a fed that's much more compromised by the issues with financial stability. tom: these are little tea leaves, i don't want to oversell it to you with the two year yield rolling over. i've also got american oil it was green and now red. $67 maybe the real push there, brent crude 73.86 is the global price. lisa: it's been so noisy for me it's hard to make a coherent story. take a look at gold. a lot of people pinpointing

gold. we see that with a real balance of 1.3% as well. tom: we would say it had a bid and then it didn't. lisa: here's the issue, $30 billion of deposits from the biggest banks trying to shore up some sense of stability in the deposit base. the share is down so perhaps not working to shore up some of that confidence. what's next in terms of is it going to be a silicon valley solution or is it going to be some sort of acquisition or just stability? tom: i would think in switzerland the goal is to get to a market close. they are getting there 5, 6 hours of daylight savings times away credit suisse is having it difficult.

we found stability of 180 and then give it away to 1.79. i guess i can be constructive but if i look at the technical some not constructive because the buyers have vapor. they just walked away in the last two hours. lisa: breaking through 1.80 you wonder what the solution could be. tom: the age old solution is on a friday get to the market close and maybe that's what were doing in europe and most decidedly perhaps that's the banking goal of the united states as well. we will continue with futures, -26. negative -- dow features -29. the fix -- the vix 26. these stick with us. this is bloomberg surveillance. >> keeping you up-to-date with news from around the world with first word, i'm lisa mateo. microsoft ceo says it's infusing open ai's technology in the

office apps. spoke exclusively with bloomberg's emily chang. >> today's generation of ai is on autopilot. it's a black box that we sort of use, it is dictating how our attention is focused. the biggest and most exciting of this generation is we move from autopilot to copilot. >> microsoft is testing it with 20 companies including eight in the fortune 500. just before where summit between japan and south korea kim jong-un wanted to strike fear in the hearts of enemies. he was on hand with his preteen daughter to watch the thursday launch of the intercontinental ballistic missile. north korea has fired off about a dozen missiles. xi jinping will travel to russia next week. his first trip to russia since it invaded ukraine.

he is expected to discuss the blueprint for ending the war on ukraine. a document dismissed by most western governments. slovakia says it will send 13 fighter jets to ukraine to boost the defense against russia. they are in different states of readiness. all have been grounded since august. the announcement comes a day after poland said it will send fighter global news 24 hours a day on air and on quicktake. powered by more than 2700 journalists and analysts in over 120 countries. jets to ukraine. global news 24 hours a day on air and on quicktake. powered by more than 2700 journalists and analysts in over 120 countries.i'm lisa mateo this is bloomberg. hey david! connect with an advisor to create your personalized plan. let's find the right investments for your goals. okay, great. j.p. morgan wealth management.

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there is a party that concentrates a large part of that. tom: of the european central bank came out on script yesterday as the ecp vice president here is the summary of what lagarde did yesterday. lisa: she stuck to script that everything is fine. we have financial stability tools. tom: we will continue this discussion. chief economist at oecd and we are supposed to have a boring discussion about what it looks like. amid bank crisis, we will not do that. we can do that because he is gold and is taught at the university of british columbia simon fraser which truly owns a high ground on this arcane world of econometrics.

we have a bank crisis going on, we have different shades of bank crisis going on will that diminish global gdp? do you just assume what financial agility do we see a dampening to economic recovery? >> well, tom first of all i think it's important to say that we see a fragile recovery going on we see some positive news in terms of activity and confidence it's going down in terms of headlines. service inflation is a bit sticky. we've been thinking about what is the impact the impact has been mostly on the risk side.

the risk over all there, more to the downside. at this stage we think it's very important to say that we are undertaking and undergoing attentive or fragile recovery. tom: i know it's appropriate for you and you as a chief economist to second-guess central banks as well but if we are in the interest rate structure we are in now can you state that oecd in a general statement we are restrictive in our global monetary policy? >> well, we can say that in spite of the turbulence of the past few days, our big problem still is inflation. we need to be more driven that central banks need to see what they need to do regarding price stability but also financial stability. you can see many countries have

followed different approaches. brazil had a big increase in inflation. their central bank was very forceful. they are taking it later now. bank of canada last two meetings said let's look at the data first. so i think central banks will have to decide what to do. this is not 2008. important to say that banks are in much better shape than they used to be. regulations in many countries are we more active than they used to be. even though, yes, there are risks and episodes that -- of financial volatility that could possibly continue we think we don't have systemic risk still on the cards. lisa: window something break from your vantage point? >> i think what matters, it will

be exactly if we have really bad news regarding inflation from them it would mean that rates would have to go higher than anticipated or an unexpected event. even though they are on the downside the economy is starting to have, it's on the united states it's often europe and china and a few other countries in which we start seeing some positive signs up there. i think it's important to keep the eye on the job -- ball. we still think that at this stage of the economy it is slowly getting back on its feet. lisa: the market disagrees and this is what i found notable over the past couple of days we have seen a huge repricing in fed policy going forward. we have seen a huge repricing

for inflation and for growth. one more hike then done still a rate cut what are you saying, what are you saying that is so different to that scenario that markets are currently pricing it? >> i'm looking at fundamentals. i understand the markets and of course sometimes markets get -- overreact sometimes. we think we need to look at fundamentals. for us, the fundamentals are how is the economy looking? how is it doing through the financial stability front and how is the economy doing in terms of activating indicators? what we see right now is yes, it's true, very likely because of the turbulence of the last few days it's very likely that the financial institution might become a bit more conservative for the lending procedures it is very possible that we might have

a few volatility and a few financial institutions but at this stage we don't see systemic rex on the table. tom: from the purview of the oecd, chief economist, lisa we have been waiting for this. you called for this to year yield in the united states all of a sudden markets on the move. lisa: i can't really come up with the narrative of a day except you're not seeing any confidence stick around in the banking system and i wonder what the correlation between small bank called first republic and the two year yield that benchmark to your rate, the irony between that. tom: do you think names diamond and janet yellen are having -- james diamond and janet yellen are having coffee this morning? lisa: saying what? what is the next step? i keep going back to a point that a number of people have raised. for a bank to raise capital right now is incredibly expensive based on the income

they are earning from pre-existing loans. this mismatch in profitability is an existential challenge to banks that don't necessarily have that deposit base. tom: premarket first republic has broken down and a moments ago breaks down decisively between -- below 27 handle. i don't have the chart to see what the q level is. that we saw in crisis. i believe it was yesterday or the day before but certainly if you are just joining us on radio and tv, a real deterioration there. snp features, -28. 264 points of vix. in other proxy here broader sense as we heard from oecd's oil. oil was up, it's not anymore. 64.72 down a dollar. what do you see on the bond market? lisa: i was looking at some of

the yield curves and re-inversions in a way across the board. i guess i'm struggling to know how to characterize this. i guess i'm struggling to understand this market in any way shape or form. that's the volatility we have seen, implied the bond market going back to 2008. tom: credit suisse if you want to look across the pond finally, some form of bid on credit suisse we go from well under 180 and launched out up to 1.83. that's a bit of good news. back to first republic bank and those for you -- for those of you turning in friday morning and thought it would be peaceful, it's not. 13 american banks, 12, 2 lisa: lisa:? 11 american banks. it was $30 billion. tom: $30 billion with a 120 day

window and the semantics of the word deposit. i think it's going to be great to discuss not only the idea of what is a deposit, the semantics of this word i feel like i'm in a bed book or something. lisa: by the end of today we have no idea the path that we've been seeing. going to have to see what the reaction function in central banks really is if inflation still is as christine lagarde said the pre-eminent concern. tom: first republic bank under 27 is where we are this morning. with a few seconds left on a friday, what in extraordinary week by team bloomberg surveillance. the character of the guests. i'm sure all three of us have a different favorite guest. lisa: a lot of wonderful voices on a difficult week. tom: bob diamond this afternoon

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jonathan: this feels like we have one more long trading session ahead of us. live from new york, good morning. equity futures down 0.8%. the countdown to the open starts now. announcer: everything you need to get started for the start of u.s. trading. this is "bloomberg the open" with jonathan ferro. jonathan: live from new york. wall street banks throw first republic a lifeline. credit suisse and ubs suck up