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Two U.S. Banks Collapse in 48 Hours; Democratic Leaders Tell Allies to Stop Piling on the Vice President if They Want the Party to Win Next Year; Actress Michelle Yeoh Wins Oscar for Best Actress. Aired 5-5:30a ET

Aired March 13, 2023 - 05:00   ET

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

[05:00:00]

CHRISTINE ROMANS, ANCHOR: Right now on EARLY START, a tale of two banks collapsing in 48 hours. The president set to speak this morning, vowing to hold those responsible. Will taxpayers be on the hook for a bailout?

And new CNN reporting a message from Democratic leaders to allies, stop piling on the vice president if they want the party to win next year. Plus --

(BEGIN VIDEO CLIP)

MICHELLE YEOH, ACTRESS: Thank you to the academy. This is history in the making. Thank you.

(END VIDEO CLIP)

ROMANS: Actress Michelle Yeoh capping a night of triumph for "Everything Everywhere All at Once". Big wins there. See who else won the biggest awards the night, ahead. All right, welcome to our viewers in the United States and around the world, I'm Christine Romans.

Just hours from now, President Biden will speak to the nation about his administration's plan to deal with the failure of two, two banks, Silicon Valley Bank and Signature Bank. Two big commercial banks with more than $200 billion in total deposits. SVB, a major funder of tech startups. Federal officials are desperate to prevent contagion leading to runs on other banks.

So far, they have promised everyone with deposits in those two banks insured and uninsured will be able to get the money out, and with the word, bailout, now a political third rail in the wake of the 2008 financial crisis, officials are also promising taxpayers will be on the hook for none of it, although investors and bondholders will be wiped out. CNN's Jasmine Wright live for us in Washington.

What a weekend, clearly, a very busy weekend at the White House, at the Treasury, at the Fed. What's the plan and what's been the reaction, Jasmine?

JASMINE WRIGHT, CNN WHITE HOUSE REPORTER: Yes, Christine. Well, the White House has been watching this very closely, acknowledging the concerns people have that this could lead to a financial crisis like 2008. So, at the president's direction, his economic team has worked really hand-in-hand with financial regulators, behind-the-scenes efforts, furious behind-the-scene efforts to lead to these dramatic measures that you just described.

Now, when you talk to the White House officials, they say two things, first, they say this is not 2008, that the economy is in a much better place, and that guardrails have been put in place to avoid, to help or to respond to issues like this. And, two, they say that this is not a bailout, but instead a way that they can protect those who have deposits and those who need to make payroll.

And so, the president, I think that's one of the reasons why we'll hear him speak this morning, really trying to take his message directly to the American people, but also to those abroad, and really clean up any misconceptions that people may have about the administration's efforts. He also is promising accountability. I want to read you a part of his very strong statement that he released last night.

The president said the American people and American businesses can have confidence that their bank deposits will be there when they need them. "I am firmly committed to holding those responsible for this mess, fully accountable and to continuing our efforts to strengthen oversight and regulation of larger banks so that we are not in this position again." Now, that last part strengthening regulations is important because President Biden thinks that divided Congress here.

So, the likelihood that he can get some type of regulations passed is pretty low. But he and his administration have kept Congress really abreast over their actions, of course, this weekend, doing multiple briefings with divided members of Congress, trying to keep them hand- in-hand, as this administration looks to respond to this very serious issue. Christine?

ROMANS: All right, Jasmine, thank you so much for that, we'll stay on top of that and wait for the president later today. We have more news to discuss later in the hour with you, let's now bring in Ken Rogoff; a Professor of economics and Public Policy at Harvard University, and the former IMF chief economist. Can you say the White House didn't have it, there was no other choice they had to do this?

KEN ROGOFF, PROFESSOR OF ECONOMICS & PUBLIC POLICY, HARVARD UNIVERSITY: No, there was panic, I mean, not just in Silicon Valley, but even here in New York, there's just panic all over. Everybody talking about taking their deposits out of the smaller and midsize banks, and they had to do something dramatic.

ROMANS: Let's talk about how we got here. Explain how the quick rise in interest rates from the Federal Reserve can cause something like this to happen?

ROGOFF: Well, when interest rates rise this fast, somebody is going to get caught out, somebody is going to lose money. In this case, the Silicon Valley Bank was making some kind of plain vanilla bets. They were holding long-dated treasury bills, but when they're paying 1 percent or 1.5 percent interest, and the rate goes up to 4 percent, they lost a bunch of money on those.

[05:05:00]

And they haven't protected themselves. But there are lots of things like that can go on around the economy when interest rates go up this fast.

ROMANS: Yes, and interest rates have gone up so fast, something is going to break, and that's what we saw break there. Janet Yellen, the Treasury Secretary spoke to "CBS" on Sunday. Listen.

(BEGIN VIDEO CLIP)

JANET YELLEN, SECRETARY OF TREASURY, UNITED STATES: Let me be clear that during the financial crisis, there were investors and owners of systemic large banks that were bailed out, and we're certainly not looking and the reforms that have been put in place means that we're not going to do that again. But we are concerned about depositors and are focused on trying to meet their needs.

(END VIDEO CLIP)

ROMANS: So they're going to make depositors whole, right? So somebody who has more than $250,000 in his bank will be able to withdraw their money today if they need to, to pay payrolls or one of these startup companies. But the Treasury Secretary is saying this is a backstab, not a bailout. Is she right?

ROGOFF: There's some semantics going on here. I mean, obviously, the government and ergo, the taxpayers just blanketing banks. They're basically saying these treasury bills with which we just talked about, which are -- if you bought them a while ago have gone down in value.

ROMANS: Right.

ROGOFF: Not the face value, but the interest rate. They're just going to buy them as if they were new. And they'll give you a year to think about it, and in a year, they'll decide what to do. And so, certainly by any interpretation, that's a bailout. And they're bailing out the uninsured depositors over $250,000. After the financial crisis, they said, never or not, you know, bailing everyone out again, then people take too many risks. But I think the lesson they took away is, when in doubt, bail it out.

ROMANS: When in doubt, bail it out. So you're really concerned that if they had not done this, there would have been contagion in the financial system?

ROGOFF: Yes -- no, absolutely. The -- you know, the first thing to do is to get the bank bought by somebody. Wipe out the shareholders, but let it be a continuing business. They do a lot of other things beside depositors, banks keep the economy --

ROMANS: Sure -- ROGOFF: Going in a lot of ways. So, that's the first one that finally

happened. But they were so worried about all these rumors of other banks, where they were -- obviously, I mean, it really looked like come this morning, we were going to see a wrath of banks in trouble, and not just one. And there are -- you know, there's some big problems, some with little problems. There are pockets of areas, but they didn't want it happening all at once.

ROMANS: Well, so we talk about -- you're talking about the -- you know, all these treasuries of some of these banks, they take in deposits, times were really good, they're taking in deposits, they park them in treasuries. Those treasuries are worth less money today. So on paper, there are a lot of banks who are sitting on unrealized losses. Is that a problem?

ROGOFF: Well, I think it was particularly bad at this one because they bought long treasuries. If you just bought three month or one month, you wouldn't lose that much money. But when you're locked in for a long time at the low interest rate you do, but it's not just that, it's for example, commercial real estate, people haven't completely gone back to offices, I think the occupancy is only 50 percent.

They're going to lose money, the banks that lend to them are going to lose money, all part of interest rates going up, but also the pandemic.

ROMANS: This particular bank, the Silicon Valley Bank, it's kind of got an interesting profile. It is the bank for start-ups, for VCs. It was really -- it's really the center of the tech ecosystem. So, it has a unique profile. It's not like most other banks, really.

ROGOFF: No, it's a little unusual about it, is all its depositors were in the same business.

ROMANS: Right.

ROGOFF: And they all came to need money at the same time, because although the economy as a whole is actually doing OK, tech has been hurting more, it's interest rates --

ROMANS: Right --

ROGOFF: Have been going up. But you know, there is this tendency in a financial crisis as it unfolds today -- oh, it was just that bank. Don't worry --

ROMANS: Right --

ROGOFF: They're special -- oh, there was another one, well, they were special too. And I think they just decided not to go through that song and dance for too long and cut right to the chase, and do this huge program as we're doing.

ROMANS: It's not 2008. We had all of these regulations and things that happened after the financial -- the great financial crisis which you know very well. Are we in a better position today, the banks in a better position today, than they were a decade ago?

ROGOFF: Well, I think the core of the system is unquestionably in a better shape. But the problem is, because of those regulations, a lot of the business they were doing has migrated to the less regulated parts of the financial sector, which are now pretty big. And midsize banks were regulated less and there's something called the shadow financial system or just things that do bank-like activities which are regulated much less. So there's still a lot of problems out there.

[05:10:00]

ROMANS: Ken, does the Fed change its trajectory because of this? I mean, is Jay Powell looking at this and Fed -- you know, the policymakers saying, oh, maybe we need to slow it down?

ROGOFF: Well, I think the optics of bailing out Wall Street and then raising interests rates on main street are not going to be good. It probably will cause them to go slower. On the other hand, what's also different about 2008 is we have inflation, and a lot of pressure on interest rates. This isn't going to relieve that. And it makes the -- when you're bailing people out and the interest rate is falling, it turns out to be cheap money --

ROMANS: Right --

ROGOFF: That you're using. But if the interest rate is high, the losses are bigger, and it's not such cheap money.

ROMANS: All right, well, it's interesting. We had a strong jobs report Friday and a big bank failure. It was like what's going on --

ROGOFF: Yes, it's amazing. Incredible --

ROMANS: It really is. Ken Rogoff. Nice to see, thank you so much for dropping by.

ROGOFF: Right, North Korea launching two missiles just hours before historic U.S. and South Korea joint military drills. The latest on the rising tensions on the Korean Peninsula. Plus --

(BEGIN VIDEO CLIP)

JIMMY KIMMEL, COMEDIAN, TELEVISION HOST & HOST OF 2023 OSCARS: If anyone in this theater commits an act of violence at any point during the show, you will be awarded the Oscar for best actor.

(LAUGHTER)

(END VIDEO CLIP)

ROMANS: Hollywood's biggest night is back. A look at who took home the top prizes at the Oscars, ahead.

(COMMERCIAL BREAK)

[05:15:00] ROMANS: All right. This morning, new saber-rattling by Beijing.

President Xi Jinping vowing to build China's army into what he called a great wall of steel. The big applause line in his speech, a pledge to, quote, "reunite Taiwan with the motherland." CNN's Steven Jiang live this morning in Beijing for us. Steven, Xi is opening his unprecedented third term, very aggressively pushing his one China theme. This has to be making Taiwan and the West nervous.

STEVEN JIANG, CNN BEIJING BUREAU CHIEF: Yes, Christine, very strong words from Xi Jinping indeed. But to be fair, it was all part of their usual script, especially for the annual political theater that was the gathering of the country's rubber-stamp. And now, that event is more choreographed than the Oscars. But this year, there have been some interesting developments including the appointment of General Li Shangfu as the new defense minister.

Li actually has been sanctioned by the U.S. government, by the Trump administration since 2018 for his role in the Chinese procurement of Russian weaponry. So installing him in this position would make it very challenging for the two sides to resume military-to-military dialogue. That was suspended last year after the Nancy Pelosi visit to Taiwan.

So, this is worrisome because many have said this kind of mail-to-mail communication is increasingly critical at a time when trust was so low, any little incident could balloon into a major crisis as we have seen recently. But perhaps, most extraordinarily we have seen during this year's session was from Xi Jinping himself. Last week, he said the U.S.-led West has been out to contain and suppress China in a comprehensive way, and of course, vowing to fight back.

And that kind of language, naming the U.S. in this kind of direct attacks, we had not heard from a top Chinese leader in years. So it really doesn't bode well for the stabilization, let alone improvement of bilateral ties any time soon, Christine.

ROMANS: All right, Steven Jiang for us this Monday morning. Thank you, Steven. North Korea issuing its strongest warning to the U.S. and South Korea, launching two strategic cruise missiles from a submarine in the sea of Japan on Sunday. Pyongyang saying the drill, quote, "confirmed the reliability of the weapons system". The moves came just before Seoul and Washington kicked off their annual Spring time joint military exercise today.

The 11-day Freedom Shield drills are the largest in the past five years. North Korea issued several warnings against the scheduled drill last month. Right, in the bloody battle for Bakhmut, the head of Russia's private military from Wagner admits the Ukrainians are fiercely fighting for every meter. Meantime, Ukrainian President Zelenskyy in his evening address touting his military accomplishments in the region.

(BEGIN VIDEO CLIP)

VOLODYMYR ZELENSKYY, PRESIDENT, UKRAINE (through translator): In less than a week, starting from March 6th, we managed to kill more than 1,100 enemy soldiers in the Bakhmut sector alone, which is Russia's irreversible loss, the loss right there near Bakhmut.

(END VIDEO CLIP)

ROMANS: CNN's Clare Sebastian live in London for us this morning. Clare, is Bakhmut still, I guess, on the verge of collapse here?

CLARE SEBASTIAN, CNN CORRESPONDENT: Yes, Christine, you know, it's interesting we don't get the same sense that we did in the last couple of weeks really that Ukraine may be on the verge of surrender. Fighting is still very intense. But, for example, the Institute for the Study of War, a think-tank which tracks these movements says that the Russian advance may have slowed.

Western officials believe Wagner, which is the private military company which is, of course, spearhead the Russian advance there has -- is starting to run short on manpower. Meanwhile, Ukraine says as you saw there from Zelenskyy and also commanders on the ground say they're inflicting heavy losses, and the fighting is still very intense. Take a look at this video that we are showing you, tanks, this was released by Ukrainian, the great tanks-fighting at very close quarters in the streets.

You can see the intensity of the battle, street by street, meter by meter as the head of Wagner Yevgeny Prigozhin put it. It seems, Christine, that the Ukrainian resolve, despite the fact that we saw debate around the merits of hanging on, given the losses that, that resolve has now strengthened, one, because as President Zelenskyy put it in an interview with CNN last week, if Russia does capture Bakhmut, that will give them an open road to other cities in the east.

And, two, because if they can hang on, they tie up those Russian forces in that town, crimp their ability to mount a more meaningful Spring offensive, and can meanwhile regroup for their own Spring counteroffensive. Christine?

ROMANS: All right, Clare, thank you so much for that. Clare Sebastian in London for us. Right, three women are missing for weeks in Mexico after crossing the border to go to a flea market. The latest in that investigation ahead.

[05:20:00]

Plus, the stars coming out in Los Angeles hoping for a gold statue. This year's Oscar winners, next.

(COMMERCIAL BREAK)

ROMANS: All right. The 95th Annual Academy Awards full of excitement even without last year's slap drama. Host Jimmy Kimmel kicked off by the show by parachuting on to the stage out of a CGI "Top Gun: Maverick" clip in an actual jet flyover of Hollywood. In his opening monologue, he not so subtly joked about last year's unforgettable moment.

(BEGIN VIDEO CLIP) KIMMEL: We know this is a special night for you. We want you to have

fun, we want you to feel safe, and most importantly, we want me to feel safe.

(LAUGHTER)

[05:25:00]

So, we have strict policies in place. If anyone in this theater commits an act of violence at any point during the show, you will be awarded the Oscar for best actor --

(LAUGHTER)

And permitted to give a 19-minute long speech.

(END VIDEO CLIP)

ROMANS: And as most predicted, "Everything Everywhere All at Once" dominated the awards. Seven Oscars, seven, including best picture, best director and best original screenplay. It also clinched three out of the four acting categories. Actress Michelle Yeoh making history as the first woman of Asian descent to win the Academy Award for best actress.

(BEGIN VIDEO CLIP)

YEOH: For all the little boys and girls who look like me watching tonight, this is the beacon of hope and possibilities. This is proof that dreams -- dream big, and dreams do come true. And ladies --

(END VIDEO CLIP)

ROMANS: Amazing. Ke Huy Quan and Jamie Lee Curtis also won best supporting actor and actress for their performances in that film. Other memorable moments include Brendan Fraser winning best actor for "The Whale", major performances from Rihanna and Lady Gaga, of course, and during the memorial, John Travolta delivered this emotional tribute to his "Grease" co-star Olivia Newton-John.

(BEGIN VIDEO CLIP)

JOHN TRAVOLTA, ACTOR: They've touched our hearts, they've made us smile and became dear friends who we will always remain hopelessly devoted to.

(END VIDEO CLIP)

ROMANS: One special award to note, CNN Films winning its first Oscar "Navalny" as best documentary. A terrific film. All right, break out the brackets because March Madness is officially here. Coy Wire has this morning's "BLEACHER REPORT", hey, Coy.

COY WIRE, CNN SPORTS CORRESPONDENT: Are you ready, Christine?

ROMANS: Yes! WIRE: And let the madness begin. The tournament where anything can

happen, and usually does. And there may be more madness this year than ever, especially on the men's side because there's no clear-cut favorite to win it. Alabama, Houston, Kansas and Purdue are your number one seeds with Alabama earning the top overall seed for the first time in school history.

They've had controversy, Christine, swelling as police say the star- freshman Brandon Miller delivered a gun to a teammate who was then involved in a deadly shooting, though Miller is not considered a suspect. Houston lost in their conference championship game and they may be without their star, senior Marcus Sasser who was injured on Saturday.

The defending champs Kansas lost their conference title game. The Jayhawks led by star, Jalen Wilson and their coach Bill Self is expected to be back coaching after an emergency medical procedure last week. Meanwhile, Purdue led by 7'4' behemoth Zach Edey won the Big Ten Championship, but not before nearly blowing a 17-point lead in the final six minutes against Penn State, but they found a way to get it done.

It all starts with the first four. The Madness tips off tomorrow in Dayton, Ohio, and you can watch all four games on our sister channel "TruTV". One big main team missing the cut, North Carolina becoming the first pre-season number one to ever miss a tournament it expanded in 1985, and they're choosing not to even play in the NIT.

The first four for the women's tourney tips off on Wednesday. The defending champions South Carolina Gamecocks earning the top overall seed, they haven't lost in over a year under coach Dawn Staley, having won 38 straight. Indiana, Stanford and Virginia Tech are your other number one seeds. Now, I spoke with the winningest women's coach of all time, Stanford's Tara vanDerveer looking to make a third straight final four.

She actually coached coach Dawn Staley on the '96 Olympic team, and now, Staley has built South Carolina into an absolute powerhouse.

(BEGIN VIDEO CLIP)

TARA VANDERVEER, HEAD COACH, WOMEN'S BASKETBALL TEAM, STANFORD UNIVERSITY: Number one thing with Dawn, she's a competitor. She hates to lose. She -- like I used to play Dawn in chess, you know, on the -- when we were on trips. She will -- she'll say she won. She never beat me once. But she is a competitor. She understands the game, and she was a great teammate. She was a leader on the floor. She just wanted -- she was all about one thing, and that was winning.

(END VIDEO CLIP)

WIRE: I love how she said, and she never beat me. Christine, the respect between these two, I've coached -- talked to Coach Staley as well, and you can feel the respect they have for each other. But this Madness is about to begin. I hope you have your bracket ready or at least you're starting to etch out a few things because this is big time within our company, as --

ROMANS: I know --

WIRE: You know --

ROMANS: I know, I am -- look, I need your advice. So how far should I take my cyclones?

WIRE: Well, I think you should take them all the way --

ROMANS: I know --

WIRE: Into the second round at least.

(LAUGHTER)

ROMANS: All the way into the second round -- oh, my gosh. My loyalty --

WIRE: Yes --

ROMANS: Is sometimes -- overrides my good sense when I do my brackets, let's be honest --

WIRE: I know, just so you can either like spend hours a day until Thursday and Friday when you have to pick for the men's and women's brackets, or you can just pick your favorite mascot or your --

ROMANS: Yes.

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