THOSE KEEPING SCORE, THAT IS UP
FROM 1.4% WHEN JOE BIDEN
SHUFFLED HIS WAY INTO THE OVAL
OFFICE.
DAGEN: BRING IN FORMER OFFICE OF
MANAGEMENT BUDGET DIRECTOR,
FORMER WHITE HOUSE CHIEF OF
STAFF, MICK MULVANEY.
GREAT TO SEE YOU, MICK.
WHAT JANET YELLEN SAID TODAY, IF
YOUR BANK GETS IN TROUBLE,
UNINSURED DEPOSITORS WILL ALSO
GET, BE MADE WHOLE, RESCUED BY
THE FEDERAL GOVERNMENT.
WHAT IS THE DANGER OF THAT, OF
HER STEPPING UP, PROMISING THAT?
>> YEAH.
ULTIMATELY, DAGEN THE RISK IS
THAT BANKS WILL TAKE MORE
AGGRESSIVE BEHAVIOR, MORE RISKY
BEHAVIOR, THEY KNOW THEY’RE
ESSENTIALLY TOO SMALL TO FAIL.
THAT WILL LEAD TO HIGHER LEVELS
OF REGULATION WHICH WILL THEN
LEAD TO HIGHER LEVELS OF
CONSOLIDATION.
REGULATION IS REALLY EXPENSIVE.
IT FALLS DISPROPORTIONATELY ON
SMALLER BANKS THAN IT DOES ON
LARGER BANKS.
WHAT HAPPENS THE SMALLER BANKS
START TO COMBINE, REGIONALS
START TO COMBINE.
YOU END UP WITH 10 OR 15 REALLY
LARGE BANKS IN THE COUNTRY WHICH
I THINK IS A REALLY BAD IDEA.
ONE OF THE UNINTENDED
CONSEQUENCES MIGHT BE END OF
COMMUNITY BANKS, END OF REGIONAL
BANKS, MAYBE OF CREDIT UNIONS
AND IS FORTH.
I DON’T KNOW WHY WE TRUST THE
TREASURY DEPARTMENT
UNJANET YELLEN.
I DON’T KNOW WHY WE TRUST THE
FED TO MAKE THESE DECISIONS.
EXTRAORDINARY DECISIONS THEY
HAVE BEEN MAKING GO UNCHALLENGED
IN WASHINGTON, D.C., AND
NEW YORK CITY BECAUSE IT CAN BE
VERY, VERY DANGEROUS WHEN NO ONE
IS ALLOWED TO FAIL.
SEAN: YOU AND I SERVED IN
CONGRESS, MICK, DAGEN AS WELL,
WE’RE ALL FROM SMALLER
COMMUNITIES.
THE LIFEBLOOD OF THE AMERICAN
SMALL COMMUNITIES IS THE COMMUNE
BANK.
THEY KNOW THE BUSINESSES, KNOW
THE INDIVIDUALS, MAKE REALLY
GOOD LOAN DECISIONS.
THEY MAKE THE DECISIONS IN YOUR
COMMUNITY.
THAT DECISION IS NOT OUTSOURCED
TO NEW YORK, CHICAGO OR DALLAS.
WHAT HAPPENS WHEN YOU HAVE THAT
CONSOLIDATION?
WHAT HAPPENS TO THE SMALL
COMMUNITIES THAT RELY ON THESE
SMALL BANKS?
>> THEY GET NO CREDIT.
KEEP IN MIND, WHAT HAPPENS IF
YOU’RE A SMALL RESTAURANT,
STARTING A SMALL LITTLE
FRANCHISE RESTAURANT IN
LANCASTER, COUNTY,
SOUTH CAROLINA, CITIBANK IS NOT
GOING TO BANK YOU.
NATIONS BANK IS NOT GOING TO
BANK YOU.
THAT IS NOT HOW IT WORKS.
THESE COMMUNE BANKS SERVE VERY,
VERY IMPORTANT ROLE.
WHEN YOU INCREASE REGULATION,
WHICH IS WHAT HAS TO INEVITABLY
COME FROM THIS, AGAIN THAT IS
SORT OF THE NEXT DOMINO TO FALL
AFTER THIS DECISION TO
ESSENTIALLY TAKE FDIC INSURANCE
TO EVERYBODY, WHEN THAT HAPPENS,
IT IS THE SMALLER COMMUNITY IN
RURAL SOUTH, IN THE MIDWEST, ALL
OVER THE COUNTRY, OUTSIDE OF BIG
CITIES THAT WILL BE STARVED OF
THE CAPITAL THEY NEED TO
PROSPER.
DAGEN: MICK, THE BIGGER PICTURE
IS, LOOKING AT WHAT THE FED HAS
DONE IN THE PAST WEEK, AND WE
WERE TALKING WITH TOM HOENIG
QUESTIONED ABOUT THE BLOWOUT IN
MONEY PRINTING WHERE THE FEDERAL
RESERVE TOOK ITS BALANCE SHEET
TO NINE TRILLION DOLLARS, JUST
IN THE LAST WEEK THERE HAS BEEN
A 300 BILLION-DOLLAR INCREASE
AGAIN, $300 BILLION PUMPED BACK
INTO FINANCIAL SYSTEM, WHICH IS
ABOUT HALF OF ALL THE TIGHTENING
OF THE MONEY SUPPLY SINCE LAST
YEAR.
IT IS JUST THIS PHENOMENON, SEAN
AND I WERE TALKING ABOUT IT,
THEY WON’T LET PEOPLE LOSE
MONEY, RICH PEOPLE.
THERE IS THIS --
>> RIGHT.
DAGEN: WHERE DOES THAT TAKE US?
>> WHERE IT TAKES US BACK TO
INFLATION.
I MEAN I CAN’T BELIEVE
JANET YELLEN ACTUALLY SAT THERE
AND TOLD ALL THE GREAT STORIES
HOW THINGS ARE SO FABULOUS IN
THE COUNTRY WITHOUT EVEN
REFERENCING INFLATION.
SOMETHING THAT WENT UNREPORTED,
MOST PEOPLE MISSED IT, THAT’S
FINE, I KNOW I’M A GEEK, I READ
THE BUDGET IN A WAY MOST PEOPLE
DON’T, I WROTE THREE OR FOUR OF
THEM, WHEN YOU GO LOOK IN THE
BIDEN BUDGET, IN THE VERY BACK
UNDER TABLES, LONG TERM
PROJECTIONS FOR THINGS LIKE
ECONOMIC GROWTH, UNEMPLOYMENT,
INFLATION.
KEEP IN MIND JANET YELLEN
PARTICIPATES IN THIS PROCESS.
THE TREASURY SECRETARY HELPS THE
OMB DIRECTOR WRITE THAT PART OF
THE BUDGET AND THAT INFLATION
NEVER GETS BACK TO 2%.
I THINK IT STOPS LOWEST IT IS
2.3%.
WHAT THEY’RE TELLING US IS,
JANET YELLEN’S TREASURY IS
TELLING YOU THEY HOPE WE HAVE
HIGHER INFLATION FOREVER.
THEY EXPECT THE FEDERAL RESERVE
TO GIVE UP PERMANENTLY ON THE 2%
TARGET THEY HAVE HAD FOR THE
LAST SEVERAL DECADES.
THIS IS MOVING INTO A PERIOD
WHERE WE THINK, WHERE I THINK
HIGH INFLATION WILL BE AROUND
FOR A LONG TIME, HAVING THE
FEDERAL RESERVE BAILOUT LARGE
COMPANIES IN SILICON VALLEY WILL
SIMPLY ADD TO INFLATIONARY PRESSURES.
SEAN: THIS IS DID DISASTEROUS FO
AMERICAN FAMILIES BUT COULD
THREATEN AMERICAN DOLLAR AS
GLOBAL RESERVE CURRENCY.
YOU START DOLLARS CASHED BACK IN
AND THE PROBLEM GETS MORE WORSE
ABOUT INFLATION?
>> SEAN, I’M NOT AS CONCERNED
ABOUT THE VALUE OF THE DOLLAR,
I’M NOT CONCERNED ABOUT THE
CREDITABILITY OF THE DOLLAR, I’M
NOT CONCERNED ABOUT THE RESERVE
STATUS THERE IS NO OTHER CHOICE.
OTHER THINGS FACTOR IN OUR
STATUS AS RESERVE CURRENCY,
POLITICAL STABILITY, LEGAL
SYSTEM.
EURO WILL NOT BE RESERVE
CURRENCY BECAUSE IT CAN FALL
APART ANY DAY.
YUAN IS NOT RESERVE CURRENCY
BECAUSE CHINA IS COMMUNIST
COUNTRY.
PEOPLE TALKED ABOUT RUBLE
REPLACING DOLLAR.
WORRIED ABOUT INFLATION, LOSING
RESERVE CURRENCY STATUS IN MY
LIFETIME OR KIDS LIFETIME I’M
NOT WORRIED ABOUT.
SEAN: I HOPE YOU’RE RIGHT.
DAGEN: PEOPLE SAME PEOPLE OUT
SCREAMING TO THE HIGH HEAVENS,
SILICON VALLEY BANK MUST BE
BAILED OUT.
FED HAS TO INTERVENE!
MAKE OUR DEPOSITS WHOLE!
THERE WILL BE NATIONWIDE
CALAMITY.
THEY GOT ON THEY WANTED BECAUSE
CALLING ON JAY POWELL AND
FEDERAL RESERVE CRONIES NOT TO
RACE INTEREST RATES BECAUSE THEY
DON’T WANT TO LOSE MONEY, RICH
FOLKS.
HOW DO YOU SEE THAT PLAYING OUT?
INFLATION, SEAN SAID WE DON’T
WANT TO ATTACK THE RICH, I WILL
BORROW WHAT SEAN SAYS THERE IS
TWO SETS OF RULES.
WILL JAY POWELL HAVE ENOUGH
TEMERITY AND STONES TO KEEP
FIGHTING INFLATION?
>> THAT IS A REALLY GOOD
QUESTION.
I THINK THE BIGGEST STORY IN
WASHINGTON, BIGGEST STORY IN THE
WORLD AFTER PRESIDENT XI GOING
TO RUSSIA.
IF FED RAISES IF THEY WERE
CONFIDENT THE BANKING SYSTEM IS
SOLID THEY MIGHT RACE BY 350
PAYING SIS POINTS.
I THINK THEY RAISE A QUARTER
POINT.
THAT IS SPLITTING THE BABY.
WE’RE WORRIED ABOUT INFLATION
BUT WORRIED ABOUT THE BANKING
SYSTEM.
WHAT CONCERNS ME DAGEN ON
WEDNESDAY, IF THEY DON’T RAISE
AT ALL.
WHAT CONCERNS ME DAGEN, I DON’T
UNDERSTAND BANKING BUT I
UNDERSTAND THIS TOWN MORE THAN
MOST.
IN THIS TOWN WHAT THE FEDERAL
RESERVE DOESN’T RAISE INTEREST
RATES, WHAT THAT IS TELLING
EVERYBODY THEY’RE SCARED TO
DEATH ABOUT THE BANKING SYSTEM.
WHAT THEY DID AT SILICON VALLEY
BANK BAILED OUT SOME RICH FOLKS
DIDN’T FIX THE SYSTEM.
THAT IS WHAT I WILL BE WATCHING
NEXT 24 HOURS.
SEAN:
SEAN: MICK, GO BACK TO THE START
OF CLIPS WE PLAYED FROM YELLEN.
LISTEN EVERYBODY, THE BANKING
SYSTEM IS SAFE AND SOUND.
THEN IN EIGHT LEAR CLIP, STILL
TODAY DON’T YOU WORRY THE
ECONOMY IS GREAT.
HOW DOES SHE HAVE ANY
CREDIBILITY?
MOST AMERICANS UNDERSTAND THE
ECONOMY IS NOT GREAT.
IF SHE LIES TO ME ABOUT THE
ECONOMY SHE MAY BE LYING ABOUT
THE BANKING.
>> I DON’T KNOW HOW SHE HAS ANY
CREDIBILITY LEFT.
WE RAN THE FINANCIAL SERVICES
COMMITTEE WHEN SHE WAS FED
CHAIR, BACK THEN WE KNEW SHE WAS
A LIBERAL OPERATIVE.
SHE WAS SUPPOSEDLY RUNNING A
INDEPENDENT CENTRAL BANK.
WE KNEW WHAT SHE WAS DOING WAS
TIED TO THE OBAMA
ADMINISTRATION.
SHE GETTING TREASURY SECRETARY,
PROVES YOU AND ME RIGHT.
SHE WAS A LIBERAL OPERATIVE AT
THE VERY BEGINNING.
THIS IS POLITICS YOU THAT FROM
THE TREASURY SECRETARY.
HOW SHE A HAS ANY CREDIBILITY ON
THIS AT ALL I DON’T KNOW.
HOW DOES THE FED HAVE ANY
CREDIBILITY?
THEY WERE WRONG ON INFLATION IN
THE FIRST PLACE.
THEY WERE WRONG ON IT BEING
TRANSITORY.
THEY WERE WRONG HOW IT WOULD
LAST.
THEY ARE WRONG, FED IS PARTIALLY
RESPONSIBLE FOR THE SVB.
THEY HAVE PARTIAL
RESPONSIBILITY, OCC, FDIC FED
REGULATE BANKS LIKE SVB THEY
MISSED BASIC ERRORS ON THE
BALANCE SHEET LIKE INFLATION
RISK.
I WILL BE STUNNED IN THE FED
GETS IT RIGHT THEY HAVE BEEN
WRONG SO OFTEN.
IN WASHINGTON D.C. WHEN YOU’RE
WRONG EVERY SINGLE TIME YOU
DON’T LOSE CREDIBILITY AS A
DEMOCRAT.
SEAN: WE TALKED ABOUT JUICING
MONEY AND WOULD CAUSE INFLATION
AND SADLY WE WERE RIGHT ON
INFLATION.
DAGEN: YEAH THE WORST BEAR
MARKET IN TREASURIES EVER!
YOU GOT BANKS SITTING ON
TREASURYS!
HOW DO YOU THINK THAT IS GOING
TO END?
>> SEAN, GOT TO CLOSE WITH THIS,
NO EVER SAY THIS, BARNEY FRANK
WAS RIGHT.
HE TOLD ME THE BIGGEST LIE IN
WASHINGTON SOMEBODY TELLING YOU
THEY HATE TO TELL YOU SO.
EVERYBODY LOVES IT.
I LOVE THE FACT THAT YOU AND I
WERE RIGHT ABOUT BERNIE SANDERS