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Regional Banks Facing Fallout After Back-to-Back Collapses; First Nor'easter of Season Set to Slam New England, New York With Heavy Snow; Trump Sharpens Attacks Against DeSantis During Campaign Stop in Iowa. Aired 7-7:30a ET

Aired March 14, 2023 - 07:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

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UNIDENTIFIED MALE: In the northeast, a significant nor'easter is taking shape.

UNIDENTIFIED MALE: Flooded communities in Northern California are bracing for yet another wave of heavy rainfall.

UNIDENTIFIED FEMALE: Our worst nightmare came true. We had failure at the levy.

UNIDENTIFIED MALE: The former president is making his first trip to Iowa of the 2024 campaign and perhaps just days before criminal indictment in the Stormy Daniel's hush money case.

DONALD TRUMP, FORMER U.S. PRESIDENT: Ron DeSanctus, did anybody ever hear of DeSanctis, DeSantimonious.

KAITLAN COLLINS, CNN ANCHOR: Some brand new CNN that was released moments ago paints a picture of a divided party heading into the race for a GOP presidential nominee.

UNIDENTIFIED FEMALE: For the first time since the invasion of Ukraine began, Russian officials could be facing war crimes charges.

UNIDENTIFIED MALE: Reuters and New York Times reporting the international criminal court is planning to open two cases and issue arrest warrants for a number of people.

UNIDENTIFIED FEMALE: And something that Ukraine has been asking for for some time.

POPPY HARLOW, CNN ANCHOR: In just moments, the Labor Department will release a key inflation report revealing just how much consumer prices rose last month.

CHRISTINE ROMANS, CNN CHIEF BUSINESS CORRESPONDENT: Biggest thing to watch for is what the Federal Reserve is going to do. Are they worried about the fragility of the banking system and being able to handle more rate hikes?

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DON LEMON, CNN ANCHOR: Good morning, everyone. Welcome in to CNN This Morning.

Banks across America struggling with the fallout from the largest bank failure since the 2008 financial crisis. Stocks of more than two dozen regional banks plummeted yesterday, even after President Biden took emergency action to ease panic. We're keeping a close eye on Wall Street this morning to see if they bounce back or keep sliding.

Credit ratings from Moody's has now put these six banks on watch for potential downgrades. We saw long lines at Silicon Valley Bank locations after President Biden guaranteed customers could get their money back following the bank collapse.

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JOE BIDEN, U.S. PRESIDENT: All customers who had deposits in these banks can rest assured, rest assured they'll be protected and they'll have access to their money as of today. That includes small businesses across the country that bank there and need to make payroll, pay their bills and stay open for business.

UNIDENTIFIED MALE: We have an obligation with payroll. We have electrical business. And we have to meet payroll this afternoon. So, that's why I'm here.

UNIDENTIFIED FEMALE: Everything is ensured. So, we're not worried.

UNIDENTIFIED MALE: Walking out with what I wanted. I'm going to go collect my chair and go home.

(END VIDEO CLIP)

LEMON: So, we need to tell you, in about an hour, new inflation numbers set to be released. Federal Reserve now facing a delicate balancing act of hiking interest rates to fight inflation while preventing the collapse of more banks.

Christine Romans knows all about this. She's our anchor and chief business correspondent. Hi, Christine.

ROMANS: Hi, good morning.

LEMON: Can we talk about these -- the regional banks. They seem to have been especially hit hard. What's the problem? What's going on here?

ROMANS: Real bruising there yesterday. You look at First Republic, for example, down some 66 percent. Here is the issue. Some of these banks, like First Republic, have a lot of deposits that are so big, they're uninsured. They're above that uninsured level and there's a worry that depositors will get nervous and go to a bank, another bank, move their assets someplace else.

You also have this issue with some banks, especially regional banks and smaller banks, that have put a lot of money into treasuries and mortgage-backed securities over the past few years, higher interest rates has made them less valuable. So, now they have got this disconnect on their books, unrealized losses on their books essentially.

LEMON: And we have all been report, especially you, the Fed seemed to -- last week, they were poised to raise interest rate. How does this affect -- does this affect their calculation?

ROMANS: What a balancing act. I mean, already it was really tricky here for the Fed. Now, they've got to look at recession fears. They've got to look at these bank failures and financial stability and make sure that anything they do doesn't cause more breakage in the financial system. You have got an inflation number coming out. Inflation is still too high.

And you got a very strong jobs market that's been also spinning off inflation. Look, after the collapse of these two -- three banks, really, in the last week, now you have a bigger chance of no rate hike at the next meeting. And look at this, most people think it will be about a quarter -- this is the fed futures market, but maybe only 25 bases points. So, the Fed probably -- going thought is now will not tighten as much as it would have a week ago.

LEMON: Yes. They did not foresee this. So, as I say, if it ain't one thing, it's another when it comes especially now to the markets.

ROMANS: Absolutely. It just gets more and more interesting by the day.

LEMON: Thank you, Christine Romans. I appreciate it. Poppy?

HARLOW: All right. Let's bring in former FDIC Chair Sheila Bair, she's also the author of a children's book Money Tales. It's all about financial literacy for children, also really related to this, Chair Bair, is the fact that you were at the helm during the 2008 financial crisis, Washington Mutual, et cetera. So, you have great experience in this. Thanks for your time this morning.

SHEILA BAIR, FORMER FDIC CHAIR: Sure.

HARLOW: Do you expect more bank failures in the coming days?

BAIR: Well, it's not clear. I hope not. I think at this point, you're managing more fear than bank insolvency. But if you have a deposit run and the bank can't raise cash fast enough to meet those deposit withdrawals, then the bank has to be closed.

[07:05:02]

So, hopefully, that doesn't happen. I do hope people keep their head.

I think most of these regional banks are probably just fine. It concerns me everybody is kind of getting tagged with the same problems that Silicon Valley Bank had. And that was an unusual situation, very poor interest rate risk management and very heavy reliance on sticky -- non-sticky volatile uninsured deposits.

HARLOW: Wouldn't the new federal lending facility prevent against not being able to have a capital raise that was successful?

BAIR: It should help certainly to the extent. The problem is that they have these hold to maturity securities that have lost market value, right? If they can keep to maturity there's no loss. But if they have to sell them for deposit run, they will have a loss. So, yes, they're able to post these securities at par with the Fed and get the full amount of their par value in advance for a year. So, that should help, yes.

HARLOW: Why wouldn't the regulators know or do the regulators know right now if all of these other banks that are under pressure, like First Republic, manage their interest rate risk the same way or mismanaged that SVB did? Wouldn't regulators know that?

BAIR: Well, I hope so, yes. Banks, especially these larger banks, regional banks have fairly intensive examination -- continual examinations by bank supervisors. So, one would hope that. I'm sure they're doubling down now and very closely looking at all these banks.

Any bank with a large percentage of HTM, hold to maturity, the securities we're talking about. And that includes -- it's a large bank that's got a lot too (ph). So, this is just not a problem unique to regional banks. But if they're hedging their interest rate risks, they should be fine. Or if they have uninsured deposits or sticky institutional deposits, I mean, those loyal institutional customers, they should be fine. I do think fear is the big problem now, not so much banks have solvency trouble. I think the problem is fear.

HARLOW: Unfounded fear?

BAIR: Well, you know, there's a lot of data out there about banks. No, I don't see anything from a solvency standpoint. I don't see any pervasive problems in our banking system. And I do think regulators need to be careful how they communicate this just by the fact that they made this very unusual and very extraordinary systemic determination. It's de-settling a little bit. Well, what's going on here? Is it really that bad?

But if they're worried, I would say, if they are worried about uninsured deposit runs and do something that protects them all, just singling out a couple of banks is not going to help the others. It might make it worse for the others.

HARLOW: You said this weekend to my colleague, Matt Egan, that the fed should pause raising interest rates, meaning they should not raise rates at all next week. What happens if the Fed does raise even 25 basis points next week?

BAIR: Right. Well, 25 bases points would probably be less bad. I do think they should hit pause. I said that last December.

Look, I'm an inflation hawk. I've been arguing for normalizing interest rates since 2010. I have not liked this extended period of loose money, of cheap money. But, you know, if you look at where they started, they've raised rates by 6,000 percent. They started at 0.08. They're now at about 4.5. They need to hit pause and see what the impact of this will be on the financial system and the overall economy.

So, yes, I do think that would be prudent. They can tighten later, but now they need to stop if they need to. But now they need to stop and assess.

HARLOW: There are many fingers being pointed at many directions, many of them at the 2018 rollback of part of Dodd-Frank, basically raising the bar for when a bank is considered systemically important. And a lot of these banks that are of concern fall below that $250 billion in asset threshold.

Elizabeth Warren said no question that rollback is to blame for these collapses. Are you so sure about that?

BAIR: Well, I don't agree with -- some of those reforms I supported, some I did not. I think the problem here is that the smaller banks for the securities they hold that they say are available for sale. Now, everybody in their, quote/unquote, hold to maturity, meaning you don't want to sell them until they mature, you don't have to mark them, you don't have to realize the market losses against your capital. But if they're available for sale, a different designation, the smaller banks can opt out of marking them. The larger banks have to mark them, deduct from capital. The small banks don't have to.

So, yes, that may have been a factor here. But, again, I tremendously respect Elizabeth Warren and I agree that needs to be fixed, but I don't think that implies there's some broad problem because of deregulation with regional banks. I just don't see that, no.

HARLOW: Okay. Final question, you're a Republican and we're hearing from a number of Republicans, including Ron DeSantis, Josh Hawley, who are pointing to the diversity equity and inclusion initiatives that Silicon Valley Bank or their ESG, I see you roll your eyes there, and they're saying they were focused on that and DeSantis says they were not focused on the, quote, core mission of the bank.

[07:10:04]

Any credence?

BAIR: Yes. So, I guess, you know, both sides -- let's not politicize this and have agendas on regulation or ESG or whatever. SVB, Silicon Valley Bank, did a really poor job of managing its interest rate risk. It was mismanaged and it had an unusual deposit base. So, those are things that make it a bit idiosyncratic in terms of the larger system. So, that's not to say other banks may have some issues. Again, I think fear and driving uninsured deposit withdrawals is the big problem we have now. But let's not politicize this. That's just really not helpful. Let's focus on what the real problems are.

HARLOW: Sounds like you don't think that's it at all, right?

BAIR: No, I don't think -- no. That's the first time I've heard of that. No.

HARLOW: Okay. Well, they're talking a lot about it. Sheila Bair, former FDIC chair, thank you very much.

BAIR: Sure, happy to be here.

HARLOW: Kaitlan?

COLLINS: Great perspective on such a key issue here.

Also this morning, we're tracking something else going on across the country, a huge nor'easter that is now packing heavy rain, snow, dangerously strong winds, as it is ramping up across New England and New York. In Massachusetts, winter storm watches are already in effect. Snow totals might reach two feet with wind gusts already up to 45 miles per hour. More than 94,000 people are without power already throughout the northeast this morning.

CNN's Derek Van Dam is live in Massachusetts tracking all of this. Derek, last time we checked in with you, it looked a lot more like rain. Now, clearly, the snow is coming down there this morning. What are you seeing on the ground?

DEREK VAN DAM, CNN METEOROLOGIST: Yes. This is what I signed up for, Kaitlan. Big, fat snowflakes, a true nor'easter starting to set in here in Worcester, Massachusetts. What you're looking at behind me is a salt barn. We have seen this dump truck filling literally trucks and trucks full of salt and brine, ready to treat the roads.

I have my camera pan around to our vehicle here, and you can see how the snow is starting to accumulate. And the reason I show that is because this is the hairline precision of forecasting these nor'easters. It is a matter of miles. You go further towards Boston and to the east, it is raining heavily. We'll take you to La Guardia, where they currently have a ground stop at the moment because of the rain now starting to transition to snow. But here in Worcester, it is all snow and I don't see it changing back to rain any time soon because we are on the cold side of this storm now, elevation here 500 feet.

The real concerns that I've got, bring up the radar, and you'll be able see that distinctive rain/snow line. Snow in New Bedford, snow in Boston, snow in Hartford, but Worcester northward into the Berkshires as well as the Catskills, this is where we're anticipating the one to two feet.

But this is a very heavy, wet snow. You can just see by the nature of the size of these snowflakes. And so when this piles up on power lines and the various trees around the area, you combine that with 50 mile- per-hour wind gusts and that is going to start bringing down the electricity.

We already have those numbers rapidly rising at 90,000 across New York State and other various states across New England and we expect that number to continue to grow as this nor'easter grips New England. We'll have reports all morning from this area. Kaitlan? COLLINS: And we will continue to check in with you. Derek Van Dam, stay warm. We'll see you soon.

VAN DAM: Yes.

LEMON: A notable shift from Florida Governor Ron DeSantis on a key foreign policy issue. We're talking about Ukraine here. Why this puts him closer to former President Trump.

HARLOW: Also, just releasing this morning brand new polling on what Republican voters want as we head to 2024. We'll tell you what those numbers say, ahead.

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HARLOW: Florida Governor Ron DeSantis is now providing the clearest indication yet of where he stands on a major foreign policy issue. DeSantis telling Fox News' Tucker Carlson that he disagrees where with most in his party are in Ukraine, putting it this way, saying, quote, while the U.S. has many vital national interests, securing our borders, addressing the crisis of readiness with our military, achieving energy security and independence and checking the economic, cultural and military power of the Chinese communist party, becoming further entangled in a territorial dispute with Ukraine and Russia is not one of them.

This thinking now aligns DeSantis with the stance of one of his strongest potential rivals, former President Trump. Of course, DeSantis has not actually announced he's running yet. But put that in context with what DeSantis said back in 2015. This was after Russia illegally annexed Crimea. DeSantis was then a Congressman and this is what he said at the time. We in the Congress have been urging the president, referring to President Obama, to provide arms to Ukraine. They want to fight their good fight. They're not asking us to fight it for them. And the president has steadfastly refused. I think that's a mistake.

LEMON: And Governor Ron DeSantis, former President Trump's most frequent target on the campaign trail in Iowa.

So, CNN's Kristen Holmes live now in Davenport this morning with more on this. Kristen, good morning to you. How did Trump's first Iowa stop go? Full of jokes, I'm sure.

KRISTEN HOLMES, CNN NATIONAL CORRESPONDENT: Good morning, Don. Well, this was really the first time we heard him go after DeSantis by name in a speech since he announced his candidacy for president. Usually, he saves that for his social media page or for these one-on-one interviews.

And I will say that while it was a very enthusiastic night, the response to those criticisms of the Florida governor was a little bit lukewarm. It was clear from people that we talked to that while they like Trump and maybe they like Trump better, they still like Florida Governor Ron DeSantis.

But one thing was very clear in the last two days we spent here. We talked to people. We saw the crowd last night. It was a packed house for Donald Trump. And, of course, those CNN poll numbers, Donald Trump is still a huge force in the Republican Party.

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HOLMES (voice over): Former President Donald Trump taking aim at Florida Governor Ron DeSantis in Iowa --

TRUMP: Ron DeSanctus, did anyone ever hear of DeSanctis, DeSanctimonius?

HOLMES: -- during his first trip to the crucial early state since announcing his third White House bid.

[07:20:00]

TRUMP: Ron was a disciple of Paul Ryan, who is a RINO loser who currently is destroying Fox and would constantly vote against entitlements.

HOLMES: At this early stage, DeSantis is widely seen as the former president's chief rival for the GOP nomination.

TRUMP: Ron DeSantis strongly opposed ethanol, do you know that? And we don't even know if he's running. But I might as well tell you, if he's not running, I will say, he was fine on ethanol, don't worry about it.

HOLMES: The Florida governor has yet to announce a presidential run. Earlier in the evening, Trump setting his sights on another potential 2024 hopeful, his former running mate, while seeking to deflect blame for the violent attack on the Capitol on January 6th, telling The Washington Post that Mike Pence was at least in part to blame for the events that day, saying, quote, had he sent the votes back to the legislatures, they wouldn't have had a problem with January 6th. So, in many ways, you can blame him for January 6th.

Trump's comments in response to the former vice president delivering his sharpest rebuke yet of his former boss in a private speech during an annual dinner in Washington, Pence telling attendees, quote, I know that history will hold Donald Trump accountable for January 6th.

Trump becoming the latest 2024 Republican hopeful to visit Iowa --

NIKKI HALEY, REPUBLICAN PRESIDENTIAL CANDIDATE: The agricultural industry should be treated just like the manufacturing industry.

GOV. RON DESANTIS (R-FL): We said we are going to go on offense. I'm going to find issues.

HOLMES: -- as the 2024 GOP field begins to take shape. A new CNN poll showing that the former president still remains a leading figure in the party. 40 percent of Republicans and Republican-leaning independents said they would most likely back Trump for the GOP nomination when given a list of nine potential candidates, compared to the 36 percent who chose Florida governor Ron DeSantis, the only two to reach double digits, with former Vice President Pence and former U.N. Ambassador Nikki Haley at 6 percent each.

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HOLMES (on camera): And, Don, of course it is important to note that this is still very early. Obviously, the former vice president as well as the Florida governor have not even announced that they are going to be running for president, even though, of course, that is anticipated. But this is expected to be a very crowded GOP field and it's expected to be a very busy next year-and-a-half. Don?

LEMON: Right on that, Kristen, and yet here we are covering them. Thank you so much.

I wonder if we should make -- unless they declare, should we not talk about them as if they are running? You know what I'm saying? Until you declare --

HARLOW: 36 percent of people in that poll want --

LEMON: I know. Well, we could do that -- we could have done that last year or the year before.

COLLINS: That kind of reminds me of what Trump said last night. He was saying that DeSantis is bad on ethanol. He said, but unless he doesn't run for president, I'll say he's good on ethanol.

LEMON: He's good on ethanol.

COLLINS: Okay. Anyway, Astead Herndon is here. We've got a fourth guest to the table.

LEMON: Hi, Astead. And he is CNN political analyst and national politics reporter for The New York Times as well. Good morning to you.

ASTEAD HERNDON, CNN POLITICAL ANALYST: Good morning. I also loved that Trump line on DeSantis, just showing how transactional his politics really is.

LEMON: So, Astead, what are you hot on?

HERDON: I mean, I think that this presidential race is really turning up to another level. Over the weekend, we had that back and forth between former President Trump and Mike Pence, which is not new, those lines of attack. President Trump has been blaming Mike Pence wrongly for the attacks on January 6th for years. He was doing that on that day publicly, he's been doing it privately. But we have now seen Vice President Pence ramp up his kind of positioning as he gets closer to the presidential race.

He took out a kind of pro-Ukraine position, which obviously cuts against some of the Republican electorate. And now at that gridiron dinner, a place in Washington, D.C. where there was going to be a lot of media folks there, he ramped up those attacks Donald Trump and democracy. I think this is someone on Vice President Pence side who may have been trying to pick that fight with Donald Trump, trying to draw him into the race in a way of growing his own lane, growing his own position as he heads into 2024. The race is definitely turning up.

COLLINS: It certainly is. And I think part of that with the Pence calculus of why he did that is now other Republicans are going to get asked about their view of January 6th and if Trump will be held accountable that day.

Trump's response, I want to go back to that for a moment because I don't think we focused on it enough here this morning, which is he is blaming Mike Pence, saying that the actions he did not take that day is why there was January 6th. That's what he told reporters on the plane to Iowa. That's the same argument John Eastman, the attorney who was in and out of the Oval Office, made to Pence's counsel while Pence was still under siege at the Capitol that day, as the riot was still underway, saying this is your boss' fault because he didn't do what we wanted him to do, that's why we're seeing this level of violence.

HERNDON: Exactly. From that day all until now, despite all of the evidence that's come out, despite the facts, Donald Trump and those around him, the kind of hardened Trump base, has not changed their position here.

[07:25:00]

They still blame Mike Pence for those actions and not sending the certification back to the state legislatures, something we know Pence did not have the authority to be able to pull off on that day.

And so, when I was just at CPAC, which is, again, a representation of the hardened, kind of collective Trump base, this is still the line of attack on Pence. They are defending the rioters at January 6th, actually saw folks in shirts that were really supporting those people, making sure they went up to people who talked on the stage, making sure they pulled Marjorie Taylor Greene over to the side, making sure that that issue stayed in the consciousness of some of those people.

And I think that there was an interesting split screen at CPAC actually which speaks to this point from the stage. You did not really hear election denial January 6th come up that much, but among the people there, it is still a driving topic and that's why you see Donald Trump still reflecting that language against Mike Pence.

LEMON: Is it hypocritical of Mike Pence to now make these statements made at gridiron and then refuse every single subpoena, refuse to talk to the January 6th committee, refuse to testify? So, it's hypocritical. But everyone is -- well, not everyone. A lot of people are lauding him, but they're saying, Mike Pence, not so fast.

They're also talking about what they call his homophobia, right, not so funny at the gridiron dinner. This is what he said about Pete Buttigieg, the infrastructure -- the secretary here, says, when Pete's two children were born, he took two months maternity leave whereupon thousands of travelers were stranded in airports, the air traffic system shut down, airplanes nearly collided in mid air. I mean, Pete Buttigieg is the only person in human history to have a child and all of the rest of us get postpartum depression. He said that on Saturday. Of course, the White House speaking out, you can put up the response, basically saying he should apologize and that he used -- he treated women suffering from postpartum depression as a punch line, not the mention the homophobia of that joke. What do you make of that?

HERNDON: Yes. I mean, this was something that also came out of that dinner. We know the gridiron is place where politicians try to make some jokes, barb on the other side. This one didn't land. We saw the White House and specifically Chasten Buttigieg really come out and say that they're looking for an apology from Mike Pence.

But I think that which speaks to a kind of overall tricky line that Mike Pence is walking. To your point, he is trying to speak more out against Donald Trump and his -- and January 6th. But at the same time, there is the block of those subpoenas. There is the endless cycle of questions that are now going to come. If Donald Trump is responsible for January 6th, that opens up a whole -- some responsibility. That opens up a whole set of questions now that Mike Pence should be open to answering.

And so this is actually the difficulty, I think, in running in a Republican primary and you kind of do this attacks against Donald Trump because Mike Pence does not want to turn himself into a Liz Cheney-like figure. He does not want to turn himself into someone who does not have credibility or standing among the Republican primary. He wants to stake out a middle of the road lane, and that's difficult to do because, to your point, the race -- the criticism of Donald Trump is often a race to the bottom because there are so many things you can ask them about.

LEMON: All right. Astead, thank you very much.

HERNDON: Thank you.

HARLOW: Thanks, Astead.

This morning, China is responding to a new deal between the U.S. and the U.K. and Australia. Why they say it could cause an arms race.

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