In just 24 hours, markets
will reopen and rattled.
Investors are going to start
to assess the fallout
of the second largest bank
collapse in U.S. history.
Silicon Valley Bank
is now under the control
of the FDIC
after panic
among its customers set off a ba
And this morning, Treasury Secre
Janet Yellen is suggesting
that the government
won't bail that bank out.
Joining me now is the former top
economic adviser
to then-President Trump,
now the vice chairman of IBM, Ga
Good morning, Gary.
And thanks for being here.
I just want to start with where
things went wrong here for S&P
Well, good morning
and thank you for having me.
You know, in many respects,
what we're living through
today is a very traditional bank
And by that,
I mean we're going through a sit
where depositors are trying to
withdraw their savings
from the bank,
their banks account at SBP,
and the bank does not have the a
adequate liquidity to allow bank
to allow customers to take
their money out of the bank
all at once.
You know, this is the way
banks are designed.
You know, banks take in a lot of
and they invest them
and they reinvest them in the ec
which we have to
understand is very important
as banks take in deposits,
they reinvest them
into people's
mortgages and the credit cards
into automobile loans.
So, you know,
this is the traditional way
that banks work.
They hold some money aside
for daily liquidity.
But traditionally, very, very fe
small percentage of the deposits
actually go out of the bank each
But when it
when a bank is perceived
to have lost confidence
with its customers,
customers want to get their mone
out of a bank,
out of a financial institution,
and they they
they withdraw
sort of compounded upon each oth
And I think that's exactly
what we've seen in Silicon Valle
And is the the need to withdraw
or to want to withdraw has compo
The bank just does not have the
to allow those customers
to take their money out of the b
So what's the right response her
If you were still in the White H
would you advocate for a bailout
So, remember, depositors
are protected
on the first $250,000 of their d
We have something
called the FDIC here
in the United States,
which is the Depository Insuranc
Corporation.
So those deposits are protected.
You know, I would advocate that
all of the depositors
get their money out of the bank.
Something has to be done
to allow depositors
to get out of their bank.
And the history of the United St
There have been very few banks
that have not been able
to deliver depositors back
100% of their money.
And in those cases,
it has been very, very unique si
You know,
something much more catastrophic
than a bank run
in something fraudulent or somet
that's been done very harmful to
to to the shareholders
or to the depositors,
where, you know, it was well bey
what should happen.
This is a normal bank
running under normal conditions
that was highly capitalized,
where depositors
should not become
the victim
of this of this run on the bank.
Well, given that, you know,
there's a lot of them
that had over $250,000,
I think that's the concern.
We heard from
Nikki Haley, your former colleag
She said it's not the responsibi
of the American payer,
the American taxpayer, to step i
Well,
I think we have
to understand
how important banking
is to the US economy.
We want to encourage citizens
to keep their moneys in banks
because we do run a circular eco
As I said,
when money goes in the bank,
it gets released
into the economy to consumers
Yes, this was a bank where the v
majority of the deposits
were not insured.
But if you look what this bank a
did, this bank ran massive payro
for for many companies.
So companies
would put their money in the ban
you know,
and then during the course of th
or the course of the month,
that money would be paid out
to hardworking Americans
as payroll money.
If the bank goes under
and that money is not there,
those companies
don't have money for payroll.
I don't think that's the situati
that we want to put
hardworking Americans in,
that they can't get their payrol
because their company
put the money into a bank.
They just happen to have a run o
in that window
while their payroll dollars
we're sitting there.
So I do think we as a country
have some obligation
to make sure our banking system
Remember,
we do regulate banks at the fede
and these banks do
come under massive scrutiny.
So to run away
from these financial institution
when they go through a difficult
time is not the right answer.
Okay, so you do favor
helping them out on the question
of what happens tomorrow
if the markets open
and they have not been acquired.
How bad do you think that could
Well,
the regulators are hard at work
now, as they should be.
You know,
it appears to me
that the FDIC got involved
probably Thursday night.
They shut the bank down Friday,
which is exactly
what they should be doing.
They've had all weekend
to be involved with
with the bank right now.
They are going through
their normal activity
I mean, we have seen this play o
many times
in the past where the regulators
take the weekend.
They evaluate what's going on.
And today,
what's different
than what we've seen in the past
The last time we really went
through a situation like this
was 2008 and 2008.
The regulators did not have near
as a robust toolbox as they have
Today, the regulators have enorm
at their disposal.
They have enormous discretion
to go through
and really do whatever they want
in this situation.
So I'm cautiously optimistic
that they will use their tools.
They will
they will they will use their di
and we will hear something later
in the day what they have done
with with the Silicon Valley Ban
Well, on that front,
can I get you to respond to a st
that we heard from Senator Eliza
Warren yesterday
who said President Trump
and congressional Republicans de
to roll back
Dodd-Frank is too big to fail
rules for banks like SVP.
Reducing both oversight
and capital requirements
contributed to this costly colla
Obviously, you were in the admin
when those those rules were roll
back issue.
Is she right?
Was it a mistake to roll them ba
or do you disagree with her?
Well, let's
start to what what happened here
and what roles got rolled back?
Rolled back.
You know what we're talking abou
with some legislation, legislati
that worked its way through the
that when it went through
the Senate needed 60 votes.
And in fact,
this piece of legislation
got two thirds of the votes
in the United States Senate.
So it was a very bipartisan piec
of legislation.
And what the legislation was,
it was
a piece of legislation that says
we want we as a U.S.
government,
we want many banks in this count
Therefore, we are not going to p
every bank
under the highest, most stringen
and regulations that we have
in this country.
We will have a lower level of ru
and regulations
for smaller banks around the cou
because we want to encourage mor
to be in business.
And I think that has been a good
of legislation.
And, in fact,
I don't think there's anything i
in this piece of legislation
that would have changed
the outcome had it not existed
in what would happen in Silicon
Valley Bank.
Banks
still have very high capital lev
And you can't tell me
that anything would have changed
had had this piece of legislatio
not going through.
Okay.
Good to get your response.
Do you disagree with her on that
We want to do to respond to that
Also, Gary,
before we let you go,
obviously you used to work
for the Trump administration las
There was this dinner here in Wa
The Gridiron Dinner
that Vice President Pence,
who you also served with, spoke
And he delivered his strongest r
of your former
boss, former President Trump,
saying that
I know that history will hold
Donald Trump accountable for tha
referring to January six.
Do you agree with him?
Yes, I agree with him.
Look, that
that was a shocking day
in the history of this country.
We continue to be reminded about
January six,
and I think we will all live wit
And I'll live with the memories
of what happened on January six.
I agree. I agree with him.
Are you going to support Trump?
You know, he's
running for president again.
You know,
these days
all I'm thinking about
is banks and banks.
Bank regulation, to be honest wi
But in the bigger picture,
we are just
starting down
the path of a election cycle.
You know,
we are just starting to see
what candidates
and who wants to be involved
on both sides.
And I think like
most Americans in this country,
we want to understand
who our alternatives are,
who the candidates are.
We want to
understand what they stand for.
And what they're advocating.
And like all Americans, I'm
going to look and evaluate the c
and make a decision based on tha
All right, Gary Cohn.
Great perspective on the SUV col
thank you so much for joining
us this morning.
Thank you for having me.