Return to Transcripts main page
Russian Fighter Jet Damages & Forces Down U.S. Drone Over Black Sea; Source: Justice Department Investigating Silicon Valley Bank Failure; Northeast, Interior New England Brace For Heavy Snow, High Winds. Aired 2-2:30p ET
Aired March 14, 2023 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
BIANNA GOLODRYGA, CNN ANCHOR: Hi, everyone, I'm Bianna Golodryga. Welcome to CNN NEWSROOM.
JOHN BERMAN, CNN ANCHOR: I'm John Berman.
And we do begin with breaking news. A Russian fighter jet has forced down a U.S. drone over the Black Sea. The U.S. Air Force says that jet damaged the propeller of an MQ-nine Reaper drone. It's like the one you can see right there on your screen.
GOLODRYGA: The aircrafts are operating over international waters when one of the jets intentionally flew in front of the drone and began dumping fuel. The White House says President Biden has been briefed on the situation.
CNN's Oren Liebermann is at the Pentagon. CNN's Phil Mattingly is at the White House for us. We also have retired US Army Brigadier General Mark Kimmitt. Let's start with you though, Oren. What are you learning?
OREN LIEBERMANN, CNN PENTAGON CORRESPONDENT: John and Bianna, this whole played out early this morning over the international waters of the Black Sea according to U.S. Air Force Europe, where a U.S. Air Force surveillance drone, an MQ-Nine Reaper drone, like you just saw was operating again over international waters when the Air Force says to Russian fighter jets conducted an intercept in an unsafe and unprofessional manner according to the Air Force. But it goes beyond that.
After the intercept, the Russian fighter jets, Sukhoi Su-27s flew in front of the U.S. Reaper drone, dumped fuel in an apparent attempt to disturb or disrupt its flights, and then got behind the drone and damaged its propeller. On this particular drone, the propellers mounted on the rear. That forced the U.S. to bring down the drone in international waters of the Black Sea.
U.S. Air Force Europe issuing an incredibly harsh statement about this incident. Let me read you a part of the statement. It says several times before the collision, the Su-27s dumped fuel on and flew in front of the MQ-Nine in a reckless environmentally unsound, and unprofessional manner. This incident demonstrates a lack of competence in addition to being unsafe and unprofessional.
Now, the National Security Council has said there have been a number of intercepts like this but not even close to this severe or this dangerous where you see an actual collision between a Russian aircraft and a U.S. aircraft even if that U.S. aircraft is in this case, unmanned. The U.S. says it will continue to fly MQ-Nine Reapers and other surveillance platforms as we've seen it to since the beginning of the war.
And let me give our viewers a sense of an MQ-Nine Reaper drone. This is not a small little commercial drone. This is a large platform, a 66-foot wingspan, 36 feet long, and when it's fully loaded, it can weigh more than 10,000 pounds in the air. So, a collision between that and a Russian fighter jet is extremely dangerous and potentially very escalatory, John and Bianna.
BERMAN: This is a big piece of equipment. Let's go to Phil Mattingly at the White House. Phil, how is the White House responding and what are they asking of the Russians at this point?
PHIL MATTINGLY, CNN CHIEF WHITE HOUSE CORRESPONDENT: Yes, John and Bianna. The president was briefed by his National Security Adviser this morning about what transpired over the Black Sea. And White House officials making very clear this will not change how they operate. They will continue to operate aircraft and drones over the Black Sea, over international waters, and international airspace.
And as Oren mentioned, it's important to note that the idea that intercepts happen is not a new phenomenon. That has certainly happened several times over the course of the last several weeks. But as National Security Council Spokesman John Kirby put it unsafe, unprofessional, and reckless, and made very clear that U.S. officials from the State Department will be reaching out to Russian counterparts to register their objections about what transpired here.
What officials are making very clear is they're not changing any way that they operate. And that while this was certainly -- the scale of this action was beyond what they've seen up to this point, it won't change the dynamics of what the U.S. military does over the Black Sea. It won't change the strategy in terms of what the U.S. personnel do in that area. They are going to register their issues though. The president has been briefed. We'll see what more they have to say going forward.
But for the most part, it is very strong language, as Oren was saying from the Pentagon, also coming from the National Security Council. They're making very clear it's not changing anything the U.S. does, despite the fact that this was very out of the ordinary, and as said by John Kirby, reckless in every way, guys.
GOLODRYGA: The administration demanding an answer here, but obviously not wanting to escalate the situation any further. General, what do you make of this situation? In your view, was it something that was intentional, or perhaps just reckless by one Russian pilot? BRIG. GEN. MARK KIMMITT (RET), U.S. ARMY: Well, I really think it was a combination of both. When you're starting to dump fuel from your aircraft, you've got a serious effort here to try to bring that thing down.
But even though the language sounds somewhat harsh, the fact that we had to remind everybody that this was environmentally unsound, tells me that we're not going to war for this anytime soon. This is not escalatory unless we want to make that escalatory. So, I just hope that everybody takes a deep breath and just understands this is how things are done up in the air in an air combat situation.
BERMAN: It's how things are done. There is this aerial choreography, General, for lack of a better term there, but actually forcing down a drone, equipment that's worth what? You know, tens of millions of dollars in and of itself. That isn't terribly common. Is it? And do you think that the U.S. should send some message to Russia here?
KIMMITT: Well, I think it's not uncommon when you're using drones over territorial waters and territorial land. What's uncommon about this is that this was happening in international waters. So, there's freedom of merit movement in international water, nobody has claimed to that.
So, this is an issue, but I certainly hope we don't spin this thing out of control. Some harsh words to the Russians, which I'm sure they will receive and note with deep interest. But again, I don't think this is going anywhere.
GOLODRYGA: General, do you know how many of these drones we have operating around the Black Sea?
KIMMITT: I don't. And if I did, I probably couldn't tell you.
BERMAN: But the purpose of them, General, broadly speaking, I mean, this wasn't just on a joyride over the Black Sea. One would imagine that this reaper or this type of equipment is being used to I would imagine helping the Ukrainians or at least assess the quality and emplacement of Russian forces.
KIMMITT: Yes. I think these -- I don't know if these were shooters or just intelligence, surveillance and reconnaissance, what we call ISR. If it was ISR, I probably think it's probably keeping an eye on the Black Sea fleet of the Russians more than it is ground -- the ground forces inside of Ukraine.
GOLODRYGA: Yes, it's coming at a very sensitive time too because negotiations have begun again for grain exports. That initial deal is expiring. So, this is really a precarious moment too.
BERMAN: For years. And the exact kind of thing that is not supposed to happen between the United States and Russia. Oren Liebermann, Phil Mattingly, thank you both for your reporting. General Mark Kimmitt, always a pleasure to see you.
GOLODRYGA: Thank you all.
Well, the financial fallout from the failure of Silicon Valley Bank is deepening. A source says the Justice Department is now investigating its sudden and swift collapse. The Wall Street Journal reports that the Securities and Exchange Commission is conducting a separate probe. Last week, Silicon Valley customers withdrew a whopping $42 billion from their accounts in one single day, crippling the bank's finances.
BERMAN: Analysts are now calling it the first Twitter-fueled bank run as top investors tweeted their alarm about SVB driving startups to pull their money out. It was made more intense by the prevalence of online banking right now. Moody's is downgrading its outlook for the entire U.S. banking sector. As a result, however, the credit ratings firm does believe that the U.S. banking system is generally healthy.
CNN's Matt Egan tracking the latest on all of this. What's the latest on these investigations, Matt? What does that mean?
MATT EGAN, CNN REPORTER: Well, John, and Bianna, this was a historic banking collapse, the second biggest in American history. So, you got to believe that regulators and authorities are looking into potential wrongdoing here. CNN's Paul Reid did confirm that the Justice Department is indeed investigating the collapse of Silicon Valley Bank. The Wall Street Journal reporting that the SEC is also investigating.
Now, we don't know at this point whether these investigations are going to come up with any sort of wrongdoing. But the Journal reports that both the DOJ and the SEC are looking into both the collapse here and security sales done by bank management.
Now, the SEC declined to comment but just yesterday, Chairman Gary Gensler put out a statement saying, in times of increased volatility and uncertainty, we the SEC are particularly focused on monitoring for market stability and identifying and prosecuting any form of misconduct that might threaten investors capital formation, or the markets more broadly. And he vowed to bring enforcement actions if they find anything wrong.
Of course, this is on top of the Fed, launching just yesterday, a review of the regulation of this bank. So, there's a lot of questions here about what both management and regulators could have done differently to prevent this debacle.
GOLODRYGA: How should we be interpreting Moody's decision now to downgrade the entire banking sector?
EGAN: Well, it's certainly a sign of continued concern about these banks. Moody's says that they expect the banks are going to continue to remain under pressure for as long as the Federal Reserve hikes interest rates. They're warning they could downgrade six U.S. banks, including First Republic Bank, Western Alliance, and Comerica.
[14:10:02] Of course, I think there are some investors and some customers who are probably hearing these warnings from Moody's and wondering where were you, guys, last week right before the banks collapsed.
EGAN: I think the good news is that the regional bank sector is roaring back today. You know, we saw them get clobbered yesterday, but First Republic Bank up by 31 percent as we speak, Western Alliance up by 16 percent. So, it's nice to see these banks rebounding. And more importantly, there's reporting from our colleague Phil Mattingly, who talked to a Treasury official who said that deposit outflows from small and mid-sized banks, those appear to be easing. And that is, of course, exactly what U.S. officials want to see.
BERMAN: That is exactly what they were hoping to see by the measures that they took. If it's true that that's happening, they will be relieved there. The markets also finding something to like about the inflation reports today, which was, you know, mixed -- a little bit mixed.
EGAN: Yes. Well, listen. I think that the bad news is inflation is not gone. It's still here. It's still hot, but it is cooling off, right? Consumer prices up by 6 percent year over year. That is not healthy, right? That is actually three times hotter than what is considered healthy.
But if it's -- as you can see on that chart, the trend is moving in the right direction. We had nine percent inflation back in June. So, this is welcome.
I think if you dig into the numbers, did you see there are still some price spikes, right? We're still seeing big price increases for groceries, for pet food, for natural gas, and so that is something we need to keep an eye on. Now, the question is, what does the Fed do next?
EGAN: Because on the one hand, they don't want to raise interest rates at a time of stress in the banking system because they could actually make it worse. On the other hand, they can't just accept six percent inflation. So, there's a lot of debate. Moody's chief economist, Mark Zandi, he was on CNN earlier today and he predicted that he thinks that the Fed is just going to hold steady and do nothing, look around, survey the damage, and we'll see.
GOLODRYGA: And that is quite surprising, right, given that just a few days ago --
GOLODRYGA: -- we're talking about 50 basis points factored in all of it. EGAN: It's a huge swing from just a few days ago.
GOLODRYGA: Yes. A lot has changed.
BERMAN: We'll see. All right.
GOLODRYGA: Matt Egan, thank you.
GOLODRYGA: Well, joining me now is Sheila Bair. She served as chair of the FDIC during the 2008 financial crisis. That, of course, is the regulating agency that took over the two recently failed banks, SVB and Signature Bank. There's also the author of the children's book series Money Tails, which provides financial literacy lessons. An important book and series to read, no doubt.
Sheila, great to see you. So, my first question to you is do you support the actions taken by the administration and the Federal Reserve in response to this particular crisis? And if not, what else would you have done?
SHEILA BAIR, FORMER FDIC CHAIR: Yes. Well, I do question this systemic risk designation that they made on a few on a couple of banks, you know, 300 billion total assets between the two of them in a $23 trillion banking industry. So, I do think the FDIC's normal procedures could have handled those failures. I think the uninsured depositors would have had substantial recoveries. They might have taken a small haircut.
But to say that just by imposing some marginal losses on uninsured depositors of two mid-size banks is somehow puts the entire system at risk. And that's basically what you're saying, if it's a systemic risk determination, I do think that was ill-advised, and sets a dangerous precedent. Those designations are supposed to be done in really extraordinary circumstances, not this kind of situation.
So, if the concern -- if the concern was that there were going to be broad-based uninsured deposit runs, then probably -- a better approach would be to try to have a complete backstop for the banks. Fortunately, it doesn't look like that's going to happen. I'm holding my breath because I think there were some otherwise healthy regional banks that have been experiencing some stress over this -- all of this drama.
The Fed -- the new lending facility that the Fed has established, which is backstopped by the U.S. Treasury. I do think given the circumstances -- I don't really like bailouts of any kind, but -- or assistance, if you want to call it but I think given current circumstances, it's probably good that these banks if they have a lot of long-term -- longer-term debt that's lost a lot of market value because interest rates have been going up.
Now, they have a place to put at the Fed as collateral and be able to borrow against the full-face value of that debt. They don't have to recognize losses. So, in an ideal world, they wouldn't be better managing the risk on those securities. But at least with SVB, we know that risk wasn't being managed very well.
GOLODRYGA: So, what is it that you specifically take issue with, with regards to what the administration did?
BAIR: Yes. Well, I think --
GOLODRYGA: Is this what the FDIC going on and guaranteeing all of the deposits including those that were uninsured?
BAIR: I think using a system -- so by law, the FDIC can only insure deposits up to 250,000.
BAIR: By law, they are required to minimize losses Deposit Insurance Fund which is a fund that is capitalized by banks and is there for $250,000 deposits, household Mainstreet deposits. So, yes, making a systemic risk designation to give the FDIC the authority to pay in full all these uninsured depositors at -- you know these were very, very wealthy people. And while there are a few startups that need it for payroll, they could have gotten a dividend under the normal procedures to help with their cash needs. So, yes, I do take issue with that.
GOLODRYGA: So --
BAIR: I think on the -- so, there were two different actions.
BAIR: One was the systemic risk designation and bailing out the uninsured depositors. The other was this new Fed lending facility, which I think of the existing options, that was the least bad of the options available. But I think -- I think that actually more than anything is what's coming to markets right now. (INAUDIBLE)
GOLODRYGA: The emergency lending -- the emergency lending facility.
GOLODRYGA: So, given your concerns then, what are you worried about in terms of regional banks as a whole and their future as far as holding uninsured deposits?
BAIR: Right. So, regional banks -- listen. Regional -- I think you have to differentiate. So, Silicon Valley Bank was not a traditional regional bank.
BAIR: It was a rapid-growth bank. It had poor risk management. It didn't really load up on dodgy loans are speculative investments and bought a lot of long-dated government securities. But because they had low-interest rates, with interest rates rising, they lost a lot of market value. There are easy ways to manage that risk, which they just didn't do.
So -- but it was rapid growth. It was poorly managed. It had -- its very close-knit group of depositors that all talk to each other and ran at the same time. That is unique. That is not what most traditional regional banks are.
They're very healthy. They're diversified. They have core deposits, households, businesses with loyalty to them. They're not all perfect. I'm not saying there won't be failures down the road, could be -- could not be there. But for the most part, regional banks have had been a very good backbone of our banking system during the financial crisis.
When I was chair of the FDIC, they performed very well certainly, as compared to the large -- the very largest bank. So, yes, don't give up on r-- (INAUDIBLE).
BAIR: Regional banks are fine. They're an important part of the banking economy.
GOLODRYGA: Wait, you would --
BAIR: And let's not worry about them too much. Go ahead.
GOLODRYGA: We don't want to be -- we don't want to be in a situation where we rely on four major banks. And that's it. These regional are very --
BAIR: Yes, that's exactly right.
GOLODRYGA: Yes, these regional banks are very important. But look, the good news is it does seem like the worst of this crisis has been averted thus far, and there remains competence thus far --
GOLODRYGA: -- at least two days in following the Fed's decision in these regional banks as a whole. Sheila Bair, thank you so much for joining us.
BAIR: Happy to be here. Thank you.
BERMAN: So, in yet another side of turmoil in the tech industry, Facebook's parent company Meta says it is laying off another 10,000 employees. The company says it will also eliminate about 5000 open positions. This latest announcement comes just four months after the tech giant laid off 13 percent of its workforce. GOLODRYGA: In a -- in a memo, Meta CEO and founder Mark Zuckerberg wrote this will be tough and there's no way around it. A leaner organization will execute its highest priorities faster. People will be more productive and their work will be more fun and fulfilling. Quite a memo there from the CEO --
BERMAN: Well, not so fulfilling for the people being laid off.
BERMAN: All right, happening now. Wild weather from coast to coast. In the Northeast, hundreds of thousands are without power as heavy snow blankets the region. Some have already seen two feet of snow.
GOLODRYGA: And in California, 30 million people are under flood watches as the state braces once again for heavy rain. We'll have a live update. Next.
GOLODRYGA: A powerful nor'easter is bearing down on much of the region including interior New England. At least two feet of snow has already dropped across Western Massachusetts and Southern Vermont.
BERMAN: The city of Worcester, the heart of the Commonwealth is really getting slammed. Officials there warned that heavy winds could lead to huge power outages. More than 250,000 people across the Northeast have already lost electricity with many schools and city offices now shut down. In New Jersey, the governor had this message for residents.
(BEGIN VIDEO CLIP)
GOV. PHIL MURPHY, (D-NJ): This can be a foot of snow. So, this is a meaningful storm. Of course, it's coming in March, which -- that's -- the good news is we have -- we have a short runway until we know the weather's going to get better and that's good but that doesn't mean tonight and tomorrow won't be tough events for a lot of folks out there. So, please, please, please be careful. I reiterate. If you don't have to go out, don't go out.
(END VIDEO CLIP)
BERMAN: All right, that's New Jersey. Let's go back to Massachusetts. CNN's Chris Nguyen is in the thick of it in Worcester. Chris, what are you seeing there?
CHRIS NGUYEN, NATIONAL CORRESPONDENT: Yes. John and Bianna, good afternoon to you. Here in Worcester, what started out as mixed precipitation has now turned into this heavy wet snow that's been accumulating across the region. In fact, according to the National Weather Service, some parts of Worcester County could see up to a foot of snow. So, this heavy wet snow, good for building a snowman but certainly bad for drivers. And now, we've seen plenty of plows out this Afternoon. But what makes this weather so challenging is that you know because it started out as rain, MassDOT wasn't able to treat the roads. So, that's going to be a concern tonight, especially as temperatures begin to drop.
Now, a statewide MassDOT expects to deploy around 3000 pieces of equipment. They're urging the public to get home early tonight so that -- they want to keep those roads clear as much as possible so that the plows are able to do their job, John and Bianna.
GOLODRYGA: Chris Nguyen, thank you.
BERMAN: Yes, Chris. I went just down the street from my father who says the snow is really, really heavy there.
All right. In Central California, crews are frantically trying to shore up the catastrophic levee breach in Monterey County. They want to do it before the next atmospheric storm moves in later today. A second smaller breach happened just last night but that break is lowering river levels by forcing water into the ocean. Today's storm is expected to inundate cities already flooded by recent rain. About 30 million people across both northern and southern California are under flood alerts.
GOLODRYGA: Let's go to CNN meteorologist Jennifer Gray. So, Jennifer, before we talk about California, let's start on this nor'easter. What are you seeing and what are you looking out for?
JENNIFER GRAY, CNN METEOROLOGIST: Guys, yes, it's really wild to have such significant systems on both coasts at the same time. We have the west coast, the east coast. Of course, we'll start in the east where you can see the snow falling -- heavy snow across portions of the Northeast and interior sections of New England. In some areas across Western Massachusetts and Southern Vermont, we've received nearly two feet of snow.
Now, the consistency of the snow is super important with the storm because it is heavy, it's wet so it's going to bring down tree limbs. We've seen a lot of power outages. It could even compromise structures. It's a very heavy snow.
But this will continue throughout the overnight hours tonight and into tomorrow before it starts to wind down. This is by the time we get to nine o'clock tonight, pretty much ending for New York City. Boston is still in it throughout the overnight tonight. Tomorrow should be improving throughout the day. And then by midday tomorrow, we should be in the clear.
But the additional snowfall forecast we're looking at anywhere from say four to six inches, some areas could see 12 to 18 and additional two feet of snow across portions of the higher elevations as we go through tomorrow. Wind gusts are also a problem, 40 to 65-mile-per- hour wind gusts. So, aside from the snowfall -- or on top of the snowfall, you're going
to have very gusty winds. That's only going to make the power outages more likely. And so, a lot of people will be spending tonight in the dark across the Northeast, guys.
BERMAN: All right, Jennifer. Let's go back out west. Let's talk about the rain and flooding in California. What are you expecting there?
GRAY: Yes, huge flash flood threat. And this one is definitely interesting because we're seeing the rainfall where snow has previously fallen from these atmospheric rivers over the last couple of weeks because the rainfall is falling at a higher elevation. So, the flash flood threat is very real with this system.
We have rain that's falling and then we have rapid snow melt. So, that flood watches in effect. We have a very heavy rain that's going to be expected across much of the state.
You can see all across northern to Southern California, snow for the very high elevations across the Sierra Nevada. But we are going to see mainly rain for the lower elevations. As that pushes forward, we're going to see that all the way through this evening. Should be wrapping up, guys, by the time we get into tomorrow.
GOLODRYGA: It's relief to see clear coverage over California at some point soon.
GOLODRYGA: They desperately needed.
GOLODRYGA: Jennifer Gray, thank you.
BERMAN: All right, brand new CNN polling out just today that shows important differences between Trump and DeSantis voters.
GOLODRYGA: Plus, former President Trump is coming out swinging against anyone he sees as a roadblock to the White House. We'll tell you what he said. Up next.