RUSH TRANSCRIPT Signs on ░░░░░░░░ horizon In America Janet ░░░░░░░░ the Treasury secretary say ░░░░░░░░ we re getting a ░░░░░░░░ that debt ceiling on ░░░░░░░░ one real large we ░░░░░░░░ got bags failing and ░░░░░░░░ one taken over over ░░░░░░░░ weekend and of course ░░░░░░░░ interest rates rising inflation ░░░░░░░░ food prices lots of ░░░░░░░░ signs even in the ░░░░░░░░ indicators Some of the ░░░░░░░░ don t want to ░░░░░░░░ it but we re ░░░░░░░░ to do it We ░░░░░░░░ a perfect guest to ░░░░░░░░ us through What s ░░░░░░░░ going on in the ░░░░░░░░ he s one of ░░░░░░░░ country s premier economic ░░░░░░░░ in formerly served as ░░░░░░░░ assistant Treasury secretary for ░░░░░░░░ policy joining us right ░░░░░░░░ my clock on they ░░░░░░░░ going to have you ░░░░░░░░ on Mike Turn to ░░░░░░░░ with you John I ░░░░░░░░ the media keeps trying ░░░░░░░░ sell us a half ░░░░░░░░ half full story and ░░░░░░░░ three quarters empty The ░░░░░░░░ Thrilling right now tell ░░░░░░░░ what you see in ░░░░░░░░ most recent signs where ░░░░░░░░ s the bank failure ░░░░░░░░ the weekend or the ░░░░░░░░ indicators last we are ░░░░░░░░ in some into some ░░░░░░░░ We are so that ░░░░░░░░ significant report that came ░░░░░░░░ last week as GDP ░░░░░░░░ measure of national output ░░░░░░░░ it showed that for ░░░░░░░░ first quarter we only ░░░░░░░░ a little over one ░░░░░░░░ on an annualized basis ░░░░░░░░ yet prices over that ░░░░░░░░ frame grew at nearly ░░░░░░░░ percent again on an ░░░░░░░░ basis So we really ░░░░░░░░ in the midst of ░░░░░░░░ and unfortunately this is ░░░░░░░░ the best report for ░░░░░░░░ we re going to ░░░░░░░░ for this year because ░░░░░░░░ s factors that are ░░░░░░░░ hitting consumers and households ░░░░░░░░ their number one They ░░░░░░░░ largely exhausted the savings ░░░░░░░░ they built up during ░░░░░░░░ pandemic The second thing ░░░░░░░░ that their wages are ░░░░░░░░ keeping up with inflation ░░░░░░░░ the third thing is ░░░░░░░░ re sitting credit card ░░░░░░░░ hit record levels So ░░░░░░░░ you think about the ░░░░░░░░ ways that people pay ░░░░░░░░ things it s their ░░░░░░░░ it s their paycheck ░░░░░░░░ it s their credit ░░░░░░░░ and all three of ░░░░░░░░ are starting to hit ░░░░░░░░ with That means that ░░░░░░░░ are going to be ░░░░░░░░ back That s why ░░░░░░░░ latter half of the ░░░░░░░░ quarter We saw that ░░░░░░░░ sales fell in both ░░░░░░░░ and in March and ░░░░░░░░ s likely that that ░░░░░░░░ going to continue So ░░░░░░░░ we ve already got ░░░░░░░░ is pulling back on ░░░░░░░░ If consumers which are ░░░░░░░░ sixty five percent of ░░░░░░░░ economy likewise continue the ░░░░░░░░ they did in February ░░░░░░░░ March we re looking ░░░░░░░░ a recession then as ░░░░░░░░ said couple that with ░░░░░░░░ bank failure over the ░░░░░░░░ we ve now got ░░░░░░░░ second largest third largest ░░░░░░░░ fourth largest bank failures ░░░░░░░░ the United States history ░░░░░░░░ the last couple of ░░░░░░░░ That s tightening credit ░░░░░░░░ even further and if ░░░░░░░░ causes even greater concern ░░░░░░░░ households and they feel ░░░░░░░░ they ve even further ░░░░░░░░ pull back then we ░░░░░░░░ looking at a recession ░░░░░░░░ or probably on the ░░░░░░░░ end of it but ░░░░░░░░ by the second half ░░░░░░░░ this year Scary outlets ░░░░░░░░ China and I get ░░░░░░░░ question here And I ░░░░░░░░ this question pretty often ░░░░░░░░ we have our townhouse ░░░░░░░░ Friday people asking us ░░░░░░░░ they should do about ░░░░░░░░ finances that their banks ░░░░░░░░ obviously we had silicone ░░░░░░░░ bank saying interbank I ░░░░░░░░ silver gate holdings the ░░░░░░░░ time in between then ░░░░░░░░ then this one now ░░░░░░░░ first for bank and ░░░░░░░░ get that question all ░░░░░░░░ time to I need ░░░░░░░░ all my assets and ░░░░░░░░ say we know that ░░░░░░░░ s that two hundred ░░░░░░░░ thousand dollar empire but ░░░░░░░░ the government tells us ░░░░░░░░ to panic I think ░░░░░░░░ a lot of Americans ░░░░░░░░ like baby tend to ░░░░░░░░ Yeah unfortunately that s ░░░░░░░░ s often The case ░░░░░░░░ that when the government ░░░░░░░░ like it s gotta ░░░░░░░░ in and say don ░░░░░░░░ panic there s a ░░░░░░░░ Why there s some ░░░░░░░░ out there but you ░░░░░░░░ right that two hundred ░░░░░░░░ thousand dollar insured deposit ░░░░░░░░ means that most households ░░░░░░░░ t need to worry ░░░░░░░░ the money they ve ░░░░░░░░ saved up I have ░░░░░░░░ bigger concern sometimes about ░░░░░░░░ employers because you always ░░░░░░░░ to make sure that ░░░░░░░░ checking account on which ░░░░░░░░ checks are drawn Has ░░░░░░░░ money in it or ░░░░░░░░ insured account So that ░░░░░░░░ one of the areas ░░░░░░░░ I think we could ░░░░░░░░ update deposit insurance is ░░░░░░░░ think about payroll accounts ░░░░░░░░ a little differently yeah ░░░░░░░░ I think most households ░░░░░░░░ t need to worry ░░░░░░░░ about their bank about ░░░░░░░░ deposits being uninsured they ░░░░░░░░ going to be fine ░░░░░░░░ there are concerns about ░░░░░░░░ many more banks that ░░░░░░░░ potentially out there because ░░░░░░░░ notion that these three ░░░░░░░░ the only ones that ░░░░░░░░ on interest rate risk ░░░░░░░░ the pandemic It s ░░░░░░░░ is not the case ░░░░░░░░ they were a lot ░░░░░░░░ loans extended in two ░░░░░░░░ and 20 in two ░░░░░░░░ and 20 one at ░░░░░░░░ interest rates Securities that ░░░░░░░░ purchased earning a low ░░░░░░░░ rate environment and if ░░░░░░░░ have interest rates all ░░░░░░░░ a sudden rising those ░░░░░░░░ low interest rate loans ░░░░░░░░ going to start to ░░░░░░░░ because if banks have ░░░░░░░░ pay for percent to ░░░░░░░░ but they re only ░░░░░░░░ one to two percent ░░░░░░░░ the loans that they ░░░░░░░░ issued or on the ░░░░░░░░ that they purchased their ░░░░░░░░ at losses And that ░░░░░░░░ essentially what happened at ░░░░░░░░ ask be and at ░░░░░░░░ republic is that they ░░░░░░░░ too many low interest ░░░░░░░░ assets too many high ░░░░░░░░ rate deposits and so ░░░░░░░░ re looking at losses ░░░░░░░░ will say why I ░░░░░░░░ for the last two ░░░░░░░░ we were talking about ░░░░░░░░ interest rates of has ░░░░░░░░ doing it for 14 ░░░░░░░░ seconds 16 consecutive times ░░░░░░░░ shouldn t these banks ░░░░░░░░ saw this coming and ░░░░░░░░ t have regulators seen ░░░░░░░░ coming It kind of ░░░░░░░░ like a different version ░░░░░░░░ two thousand eight where ░░░░░░░░ writing was on the ░░░░░░░░ but no one was ░░░░░░░░ at the wall who ░░░░░░░░ to blame for not ░░░░░░░░ this crisis on the ░░░░░░░░ So you re absolutely ░░░░░░░░ on the the bank ░░░░░░░░ management itself is absolutely ░░░░░░░░ for this It s ░░░░░░░░ have known for decades ░░░░░░░░ not centuries that it ░░░░░░░░ this imbalance between you ░░░░░░░░ got loans that are ░░░░░░░░ term loans that are ░░░░░░░░ by short term deposits ░░░░░░░░ that means that if ░░░░░░░░ get ill rising interest ░░░░░░░░ environment you re potentially ░░░░░░░░ on losses and you ░░░░░░░░ to engage in interest ░░░░░░░░ risk management to do ░░░░░░░░ so by far the ░░░░░░░░ failure at sb be ░░░░░░░░ Silicon Valley bank They ░░░░░░░░ t have a risk ░░░░░░░░ for eight months and ░░░░░░░░ the second blame lies ░░░░░░░░ the bank supervisors Why ░░░░░░░░ t they doing more ░░░░░░░░ ensure that these banks ░░░░░░░░ more than enough capital ░░░░░░░░ then Finally I really ░░░░░░░░ place a lot of ░░░░░░░░ blame with the Federal ░░░░░░░░ both in the supervisory ░░░░░░░░ but also in the ░░░░░░░░ policy capacity the Fed ░░░░░░░░ way too late coming ░░░░░░░░ raise rates that allowed ░░░░░░░░ inflation rate to get ░░░░░░░░ of control and we ░░░░░░░░ probably seeing higher interest ░░░░░░░░ than we needed to ░░░░░░░░ seen if the Fed ░░░░░░░░ intervened earlier and if ░░░░░░░░ Fed had done so ░░░░░░░░ would not have gone ░░░░░░░░ as much as they ░░░░░░░░ You would not have ░░░░░░░░ the losses at the ░░░░░░░░ that you are seeing ░░░░░░░░ so not only did ░░░░░░░░ Fed delay the appropriate ░░░░░░░░ in interest rates but ░░░░░░░░ also then failed to ░░░░░░░░ these banks over which ░░░░░░░░ have supervisory responsibility to ░░░░░░░░ The interest rate risk ░░░░░░░░ was sitting right in ░░░░░░░░ of them a best ░░░░░░░░ I ve heard to ░░░░░░░░ my that was really ░░░░░░░░ to get about 20 ░░░░░░░░ left How important or ░░░░░░░░ problematic was it That ░░░░░░░░ like Janet Yellen were ░░░░░░░░ this information Transitory don ░░░░░░░░ worry about it low ░░░░░░░░ into a false sense ░░░░░░░░ security absolutely a did ░░░░░░░░ if people knew that ░░░░░░░░ interest rate rises work ░░░░░░░░ they would have moved ░░░░░░░░ of the low interest ░░░░░░░░ stuff earlier Yeah About ░░░░░░░░ we know the prescription ░░░░░░░░ inflation It was coming ░░░░░░░░ want a great honor ░░░░░░░░ have your you always ░░░░░░░░ autograph straight talk in ░░░░░░░░ economy that has had ░░░░░░░░ lot of it Lately ░░░░░░░░ for joining a great ░░░░░░░░ great to be with ░░░░░░░░ aren t folks don ░░░░░░░░ go anywhere Steve third ░░░░░░░░ precincts