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First Move with Julia Chatterley
France Enters 10th Day of Protests against Pension Reform; Jack Ma seen in Mainland China for the First Time in a Year; El-Erian: We're seeing Deposit Flight from Small to Large Banks; FinTech Unicorn Papaya takes a Stand against Judicial Reform; Police: Former Student Kills 3 Children, 3 Adults; U.S. Senate Holding Hearings on Recent Bank Failures. Aired 9-10a ET
Aired March 28, 2023 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:00]
(COMMERCIAL BREAK)
JULIA CHATTERLEY, CNN HOST, FIRST MOVE: A warm welcome to "First Move", as always fantastic to have you with us for a busy hour ahead, get my teeth
in. A cautious calm across Israel is Prime Minister Netanyahu presses pause on his judicial reform overhaul, saying a one-month delay will allow real
debate on the way forward.
Protesters responding with a pause of their own but critics say Netanyahu is merely buying time at the expense of democracy. We'll discuss how the
country's widening political divide over these reforms and other social issues has impacted business sentiment in particular, the CEO of Israeli
payroll management firm Papaya Global has called on other CEOs to withdraw some cash from banks in protest.
She'll join us later to discuss. And no protest polls in France meanwhile, where a 10th day of anti-pension reform demonstrations are just getting
underway. President Macron still refusing to budge on the issue further inflaming French anger we're going to be live in Paris in just a few
moments time for the latest there.
And in Washington the U.S. Senate beginning a first round of hearings into the causes of the two recent Regional bank collapses and what should have
been done to prevent them the U.S. brokered and backstops deal to sell SVB assets to the First Citizens Bank announced on Sunday, helping to further
improve bank investor sentiment.
Along with word that the U.S. may extend its emergency bank lending facility to help stabilize other troubled lenders. Stable is one thing but
at what price if banks ultimately lend less. Small businesses could suffer and that could cost jobs. We'll discuss with Allianz and Gramercy Adviser
Mohamed El Erian later in the show.
He's warning about potential rolling credit contractions that could increase the chance of recession. For now, global investors are banking on
banking calm. U.S. futures consolidating after a mostly higher close on Monday as you can see Europe relatively flat after a positive Asian
handover, where news from tech giant Ali Baba really stole the show shares set to rally some 9 percent in U.S. trade.
And weird words that the behemoth is splitting into six individual parts with five potential IPOs or fund raisers. In focus this news coinciding
with Jack Ma's first public appearance in a year. There are no coincidences more on all of that in just a few moments time too.
But first, the French government warning of a high risk to public order, as protests by French unions entered their 10th day. They are continuing to
reject a reform law which rises the pension age from 62 years old to 64. And Sam Kiley joins us now. And is there Sam, who's out there protesting?
And what are they telling you about the why?
SAM KILEY, CNN SENIOR INTERNATIONAL CORRESPONDENT: Well, Julia, just you said in your intro, this is day 10 of the protests. That is the official
protests, if you like organized by the trade unions that have been going on since mid-January, that's not counting the spontaneous street protests that
erupted Thursday, a week ago last Thursday following the adoption by the government of the legislation.
That will change the pensionable age from 62 to 64, without a vote in the National Assembly, that arguably is galvanized a lot of the street
protests. But these both sides, both the government and the Union are begging the demonstrators here to remain nonviolent and that is because
particularly over the weekend in an unconnected environmental dispute.
There was a lot of violence between demonstrators and the police. There are concerns that things could get a lot more violent later on today. But the
main problem for the unions and they sort of acknowledged this is that in terms of legislation, this move from 62 to 64 in terms of the pensionable
age in France.
Effectively a done deal, they can hope for now is a U turn from the government. They have implored the Macron administration to sit down to
talk to avoid an escalation here to avoid this sort of escalation. Even the government ombudsman is saying has got to be avoided condemning both sides
for violence over the weekend by the police and the demonstrators that is.
The unions want Macron to sit down to talk, but Macron is simply saying no, it's a done deal. It's got to come through it's got to be done for
budgetary reasons, he's regrets these reforms, but he says they're a done deal. So their question for the unions is what did they do next?
Can they continue to maintain the pressure and does damage ultimately to the French economy with these widespread strikes have been so affecting
France for nearly two months now?
[09:05:00]
CHATTERLEY: Yes and unsure whether anything will cause the President to change tack here. Standing firm for now Sam, great to have you with us,
thank you! Sam Kiley there! Now on to a devastating fire in Mexico nearly 40 lives lost at a migrant Detention Center near the U.S. border. Rafael
Romo joins us now with the latest. Rafael, has everyone been accounted for and what do we know about how this fire may have started?
RAFAEL ROMO, CNN CORRESPONDENT: Yes, hi Julia. They're in the process of still trying to do that and the death toll as a result of this very tragic
blaze now stands at 39 and officials fear it may go even higher. It happened late Monday at a detention center into that what is across the
border from El Paso, Texas.
The fires swept through the migrant Detention Center according to a statement from Mexico's National Migration Institute. We have heard from
Andrea Chavez she is Ciudad Juarez federal deputy, a member of the Mexican Congress who said in a tweet early on today that Mexico's Attorney General
had launched an investigation into the blaze.
Let me read to do what she said. She says it is with deep sadness and grief that we learned though the fire that occurred inside the INM - we will wait
for the official information. And from this moment on we send our condolences to the families of the migrants FGR meaning the attorney's
office initiated the investigation as she said.
She is - Julia, as you know is located in the Mexican border state of Chihuahua. And now there's word from the State Governor's office. In his
statement, it said that the fire happened after more than 70 migrants who were loitering in the streets of what is where detained.
Officials also say there are dozens of people who were injured. So that's why this is a border city where many immigrants from different parts of the
world arrive, hoping to get across the border to seek asylum in the United States as it has been the case with other border towns.
There have been multiple riots and tense situations in the last few years due to the fact that there's not enough shelters that can accommodate all
of these migrants. And Julia in a later release from Mexico's National Migration Institute Officials said among the injured there were 68 men from
Central American countries that also said an additional 29 people were transported to local hospitals. Now back to you.
CHATTERLEY: Thanks Rafael, an awful tragedy in many respects. Rafael Romo there! OK pressing pause in Israel, but for how long Prime Minister
Benjamin Netanyahu putting a temporary hold on judicial reform plans, which have resulted in widespread unrest and division across the country. He says
he owes a responsibility to the nation.
(BEGIN VIDEO CLIP)
BENJAMIN NETANYAHU, ISRAELI PRIME MINISTER: When there's a possibility to prevent civil war through dialogue, I as Prime Minister, taking time out
for dialogue. I give a real opportunity for a proper dialogue.
(END VIDEO CLIP)
CHATTERLEY: Prime Minister not stopped protesters who say they will continue taking to the streets, the country's largest labor union has
called off a general strike that says there'll be another if the legislation is revived. Hadas Gold is in Jerusalem for us. Hadas, and
that's the big question now is whether this will be revived after Passover or whether it's a permanent pause. And I guess what does compromise look
like if that is a possibility?
HADAS GOLD, CNN JERUSALEM CORRESPONDENT: Well, Julia, the Prime Minister actually vowed that this would be temporary. That this would be picked up
again in the next parliamentary session in some form or fashion. That session begins at the end of April and runs until the end of July.
And tomorrow, Ben-Gvir, the Far-right wing Minister of National Security said that Netanyahu promised him that if the reforms are not brought
forward with negotiations that they will be pushed forward as they stand right now, which will give the Israeli parliament unprecedented power over
the Supreme Court, including the ability to overturn Supreme Court decisions.
Of course, as I'm sure you have been reporting, this has caused a lot of alarm across Israeli society especially in the business sector, that
typically a political high tech sector. We've been hearing from companies' startups who say they are not putting any of their new funding into Israel
out of fears about what these reforms could do to the economy.
Even the Governor of the Bank of Israel speaking out against the hasty way that these reforms have been pushed through now the opposition has for
months been calling for a passes legislation saying that they want to come to talk but they're not going to come to talks unless the legislative
process is put on hold.
So now, it has been put on hold. The question will be what will these negotiations look like? We're getting reports from Israeli media, the
negotiating teams are being formed amongst the coalition members amongst the opposition leaders, and that they will are supposed to be meeting at
the Israeli President's residence.
Isaac Herzog, who has said that he wants to host negotiations and of course, now comes the hard part, the compromise reforms, what will they
look like? Will they satisfy the opposition? Will they satisfy the protest?
[09:10:00]
Will they satisfy perhaps most importantly for Netanyahu though Right Wing flank of his government that helps keep him in power because if they're not
satisfied with whatever this compromise looks like? They could potentially pull their support and then Benjamin Netanyahu is no longer Prime Minister.
So as of right now, it seems like things have calmed down just a bit. As you noted, the general strike has been called off, but the protesters are
vowing to continue, essentially, they don't believe Benjamin Netanyahu, and they say that they will not stop until this legislative reform is
completely off the table, Julia.
CHATTERLEY: Yes, clearly described stuck between the protests and the people and the politics. Hadas Gold, thank you so much for that. And later
in the show, we'll hear from an Israeli FinTech unicorn taking a stand against the current situation that's in around 25 minutes' time.
In the meantime, we'll open our door wider to the world. That was the message from new Chinese Premier Li Qiang as he welcomed business leaders,
including a small group of foreign executives to the China development forum. The leaders included Apple's Tim Cook, Samsung's Lee Jae-Yong and
Bridgewater's Ray Dalio.
Marc Stewart joins us on this. Marc, I think we have to make clear that for many of these business leaders, this is the first time that they've been in
China since 2019. And it comes amid a serious geopolitical deterioration between the U.S. and China too. So how was the message delivered? And how
was it taken?
MARC STEWART, CNN CORRESPONDENT: Yes, well said, Julia. I also want to point out it's not just the names of the CEOs, that's attention getting.
It's the industries they represent finance, pharmaceuticals and tech. And this is all happening at a time when, as you said, China is facing some
really strong and difficult economic challenges, including just basically waking up out of the COVID locked out.
We're talking about an ageing population. We are talking about a government that has been very strong with regulation. So when we have Chinese Premier,
Li Qiang make a very public declaration by saying that it's open for business in front of all of these noticeable business people.
It has a lot of weight, and Li Qiang made some very important points. One, he said that China will respect international laws and international trade
rules. In addition, he stressed the point that China will create perhaps an equitable platform for all of these businesses, all of this foreign
investment to take place.
But China's economic difficulties, its challenges aren't just coming from within. China is also facing a lot of challenge from outside its own
borders, from places such as India from Vietnam, which have all been courting American companies as well as companies from around the globe.
In addition, a recent survey by the American Chamber of Commerce found that American interest in investment in China has declined. It's waning compared
to years in the past when it typically was a go to place especially for manufacturing. So Julia, the economic story for China host COVID is still
very much to be written.
CHATTERLEY: Absolutely, Marc Stewart great to have you with us, thank you. Now China's extended hand to global corporate leaders comes amid a surprise
announcement from one of its mightiest tech firms Alibaba, the firm getting set to split into six separate units its biggest corporate overhaul ever.
The hope is clearly to unlock value Alibaba's share price has fallen more than 20 percent over the past year. Clare Sebastian joins us now. It's
interesting to see what the hope is? I have so many questions on this. Is this and does this signify a further regulatory easing as has been promised
by officials? There are six smaller companies easier to control than one behemoth.
CLARE SEBASTIAN, CNN CORRESPONDENT: Yes, Julia, I think it could be both really.
CHATTERLEY: Oh, really both?
SEBASTIAN: Clearly, yes, they're prioritizing growth and this should in the words of Alibaba unlock shareholder value and better positions. They say
Alibaba's business to become more agile. Certainly, if you look at the futures of Alibaba, New York, investors seemed to like the idea.
So there is that we know that China has, in some ways been softening its stance on tech after quite a long period of cracking down on it ever since
that infamous now speech that Jack Ma the Founder of Alibaba gave in October 2020, criticizing the Chinese authorities for stifling innovation.
Interesting timing, because he also made an appearance this week back in Mainland China visiting a school after more than year long absence so
perhaps the two are connected. Perhaps this was somehow a signal to Alibaba to roll out this plan. But on the other hand, this does break Alibaba down
potentially into these six business groups.
Five of them will have the right to IPO separately the company says if they want to fundraise separately, which could amount to essentially a spin off
that then creates a smaller company which is you say - as what we've seen from China over the last few years.
[09:15:00]
That discomfort that we know President Xi has towards what he called platform companies these big overarching companies. But either way you look
at it a huge change for Ali Baba Company, for Jack Ma had these overarching visions. He wanted the company to last for he said 102 years.
So it could span three centuries, you want it to be a place where customers would meet, work, and live, all of that seems to be in the rearview mirror.
And now that they're going to streamline it down into these six businesses.
CHATTERLEY: Yes, the hope, I guess is that it's a more agile workplace that they can streamline decisions; they can have a great response time of
speedier response time. Clare, but you mentioned the magic word there, Jack Ma fascinating that the day that this is announced is in the same week
where we see Jack Ma back in Mainland China for the first time in what more than a year?
SEBASTIAN: Yes, it was interesting. He sorts of appeared out of nowhere, Julia on Monday visiting a school talking there about development of
education in China and a lot of explanation went with that. But of course, he is intrinsically tied up with the fate of Alibaba, the Founder that he
doesn't play a day to day role in the company anymore.
And as I said, it was his infamous speech in October of 2020, criticizing the Chinese government that sort of set off this broader crackdown on tech
and he then disappeared from view for a long period of time. So look, we don't know if the two are linked, but the timing is certainly very
interesting.
CHATTERLEY: Yes, now we watch and financial to see what happens there. Clare Sebastian, thank you for that. Plenty more to come here on "First
Move", stay with us, we'll back after this.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to "First Move", in the next hour top U.S. banking regulators will appear on Capitol Hill to face tough questions on just how
and why two U.S. banks collapsed. Leading authorities to take emergency measures and protect depositors to ensure the broader stability of the
system.
Now it may have just been a handful of U.S. Regional Banks in question and we were discussing, but the implications for other lenders and their
lending could be much larger. Every small bank can expect more scrutiny on their loan terms and perhaps more regulation and red tape in the future.
Now this matters because small banks lend to small businesses, and they in turn employ nearly half of all private sector workers.
[09:20:00]
Not only that they're also responsible for two thirds of job creation, according to the Small Business Administration. Now Economists are
concerned that should loan dry up so good jobs. Joining us now is Mohamed El-Erian, Economist and President of Queens College at the University of
Cambridge.
Mohamed, always a pleasure to have you on the show, clearly much to discuss but I want to take a step back, because as you pointed out on Twitter, it
was a relief to come out of the weekend without any emergency measures or crisis being announced. Is it too early to say we've passed the worst and
we've got the all clear?
MOHAMED EL-ERIAN, ADVISER TO ALLIANZ AND GRAMERCY: Thanks for having me, Julia. I think it's a little bit too early for two reasons. One is because
of what's called economic contagion, what you just mentioned. We are yet to see the impact on the real economy on jobs. Two, is it's a question of
trust.
Banking is ultimately a question of trust. And trust has been shaken. So there's some calm, but trust is not fully restored as yet. So I think the
worst of the financial dislocation is behind us. But the worst of the economic effects are still ahead of us.
CHATTERLEY: Yes, I want to talk about the, what I call the macro and the micro. So we'll get to the implications for small bank lending or smaller
bank lending. But something else I've seen, and it's been widely discussed is what's going on in capital markets so where you go to raise money,
whether that's a good quality corporate?
For example, what we call investment grade, or if you're a little bit riskier, the high yield market, even IPOs in the United States? It's all
dried up, is that a temporary phenomenon in your mind, Mohamed? Or is that something else we should be watching very closely in an indication of a
broader concern?
EL-ERIAN: So it reflects basic volatility in interest rates. The two-year rate, which is supposed to be anchored by the Federal Reserve, has moved in
a way that I don't remember ever imagining, not just seeing, imagining in my career, it's been incredibly volatile. If the two years' volatile, you
can imagine what's happening elsewhere in the interest rate complex.
So people step back from volatile market. And that's why we have seen a drying up of bond issuance of drying up of IPOs. I think it's temporary, I
think calm is going to be restored to the interest rate complex. And with that, we're going to see capital markets functioning again. But we've been
reminded how fragile system is.
CHATTERLEY: Yes, because you just simply don't know how to price things. When there's this much volatility, you don't know what to charge for that
debt, or what you're willing to accept it to lend somebody money in reverse. Translate that now to my introduction, and what I was talking
about the sort of shot across the bows for all small lenders.
That perhaps there's going to be more red tape coming that there's going to be more scrutiny and how likely they are to perhaps hold on to the deposits
that they have? Or second guess where they borrow money from in order to lend it out to ordinary businesses or individuals? How big a concern now is
that?
EL-ERIAN: So they have two issues. Issue number one is on the deposit side. And just think a lot of people are saying, you know what, I trust my bank,
my small bank, but isn't it safer to take my deposit to one of the largest banks that are too big to fail? After all, what do I lose in doing this?
So what we've seen is a deposit flight from small banks to larger banks. And that makes sense for depositors who are just trying to sleep at night.
The problem with that is that it shrinks the balance sheet of the smaller banks, and the smaller banks are not able to lend as much as they have
before.
And the customers of the smaller banks tend not to be the customers of the big banks. So all the deposits move, the loans do not move. So that's
impact number one. Impact number two, the regulators wrongly assumed that these banks were not systemic. They didn't pose a threat to the system as a
whole.
But it turns out that in the case of Silicon Valley Bank, it did pose a risk to the system as a whole. So supervisors and regulators are going to
get much more interested in looking at the balance sheet of the banks and that will make the banks more cautious and will probably increase
regulation. So banks are getting hit from both sides.
CHATTERLEY: So there are the two Whammies, you've sort of quite rightly pointed out there and explained I think very clearly. What we have seen as
well is billions of dollars of money leaving those smaller banks, some of its gone into the bigger banks, some of its gone into what we call money
markets.
[09:25:00]
I just wonder whether you have any sense of the propensity to spend. Does that change when you take your money out of a smaller bank and you put it
into a money market, for example? I just wonder whether it's not just about lending, it's also about consumption, as well, and whether we see a slowing
effect there, too.
EL-ERIAN: So the big money that has moved has been above the 250,000 deposit guarantee and that is not normally spending money. That's more
precautionary money, a bit of savings. So I don't think it will change the spending pattern of the depositors, but it does change the lending pattern.
So for example, you rightly said, some money is going out of the banking system into money market funds. Some of its going into crypto, by the way,
could Bitcoin has done well, because there's been inflows into crypto, that money doesn't get lent to small and medium sized businesses.
Typically, the money market funds go into high quality corporates and government bonds, doesn't make it into loans and crypto stays in the crypto
space. So we are likely to see a change less than the spending of the depositors and more in the people who relied on those banks. And these are
communities, sectors, regions, it can be quite significant. And that's why some people already increasing the probability of a recession in the U.S.
CHATTERLEY: Yes, more so than even the Federal Reserve it is predicting because the gap between what at least investors think. The Federal Reserve
is going to do in terms of rate changes, let's call it that, because the markets obviously pricing in cuts to interest rates this year.
What's right, Mohamed, you're generally on the money when you predict these things? Do you think the Federal Reserve is done? And do you think, despite
what investors think we can rule out cuts this year, because that gap is big, between what the Fed saying and what markets are thinking?
EL-ERIAN: That gap is huge Julia, I mean, if you look by the end of the year, the difference is a full percentage points. Again, I've never seen
this before. It reflects a number of things. One is genuine uncertainty and you can think of certainly I can think of multiple scenarios for growth and
inflation and therefore interest rates.
But it also reflects a general loss of credibility in of the Federal Reserve. The Federal Reserve is engaged in what I think is the biggest
policy mistake we've seen for 40 years. People don't believe it anymore. So they are saying I don't care about the forward guidance that the Fed is
giving me.
I have my own views, even though the Fed controls those short term interest rates. So basically, the market is taking on the person who sets those
interest rates. It shows you what has happened to credibility of the Fed. And then they're also being tested today on Capitol Hill and elsewhere on
the supervision on the lapses in supervision.
So we have both genuine uncertainty, but it's compounded and amplified in a massive way, by a loss of confidence in the Federal Reserve.
CHATTERLEY: Yes, it's we've gone full circle to where we began the conversation about a total lack of trust. I could ask you how we got into a
world where there's an implicit assumption that any bank that gets into trouble is deemed systemic in order to shore up the whole system that the
Fed doesn't hike interest rates until the very last moment and creates a lot of the instability.
And now we're in a situation to your point where investors simply say to the Fed, we don't believe you, perhaps the better question Mohamed is, how
do we get out of this? And what are the implications for investors?
EL-ERIAN: So short term, there's no easy way out. And once you make a big policy mistake, you in the world of second and third best, you no longer
have a first best, which means that whatever you do is imperfect, whatever you do would have collateral damage and unintended consequences, and that's
the world we live in.
So I'm afraid that haven't dug a hole for itself, that's so deep, the Fed can't get out of it quickly. So it's going to having enormous difficulty
balancing, lowering inflation. Maintaining growth, and maintaining financial stability is the trilemma, not the dilemma, the trilemma.
How do we get out of this over the long term so economic growth? Economic growth can solve a lot of things for us, but that's a much longer
conversation, Julia.
CHATTERLEY: Yes I was about to say just getting warmed up and in the short term, keep calm carry on and by Bitcoin.
EL-ERIAN: No, I would say you know, carry on with a cautious approach to markets. Take advantage of overshoots because markets typically overshoot
in these circumstances and maintain resilience. Keep up asking yourself not the comfortable question of how much money am I going to make more if I
ended up making a mistake, not that I want to make a mistake?
[09:30:00]
But if I ended up making a mistake, because it was so uncertain is my mistake recoverable because most mistakes are recoverable over time if you
are not default, for example, if you have invested in a defaulting company that's not recoverable? So ask yourself the question if I end up making a
mistake, is it recoverable? That's a really important question when there was the so uncertain?
CHATTERLEY: Yes, capital preservation, not capital return at this moment, preservation. Mohamed, great to chat to you as always, Mohamed El-Erian
there, Economist and President of Queens College at the University of Cambridge. Sir, thank you! OK coming up after the break, judicial talks,
money walks, an Israeli FinTech finally had enough of the instability now moving cash out of Israel. The CEO tells us why next.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to "First Move"! With a return to Israel where Prime Minister Benjamin Netanyahu was paused controversial plans to
overhaul their justice, judicial system those reforms have divided the country and sparked weeks of protests and widespread strikes.
It's also prompted a backlash from Israel's vibrant tech sector. FinTech Unicorn Papaya Global is one of the country's most successful startups. Its
human resources and payroll platform is used in 160 different countries, and it has a valuation of $3.7 billion.
But in January, the CEO moved the company's funds out of Israel blaming the uncertain business climate and political instability. And she's now urging
other CEOs to do the same. Eynat Guez is the CEO of Papaya Global and she joins us now.
Eynat, fantastic to have you on the show, thank you for your time! Just start by describing your call to other CEOs why did you feel the need to
make this decision for your company but also encourage others to do so?
[09:35:00]
EYNAT GUEZ, THE CEO OF PAPAYA GLOBAL: Yes, hi. So first, I mean, exactly two months ago, a day after our Prime Minister went live, and told
everyone, although the public statement was already quite clear that this judicial reform will harm badly our economy, and said that no one
understand anything about that and eventually, we should trust the government to protect the economy.
Honestly, I felt very uncomfortable, because I think that eventually, you know, we our business leader, we tend to take decisions based on facts. And
I decided that I'm going to announce publicly that we decided, as the company at Papaya Global not to hold any investment funds in Israel.
So I think eventually, you know, as being part of the tech community, this is our responsibility to ensure that we are openly sharing things that we
are doing threats that we have with others and this is exactly what I decided to do
CHATTERLEY: Do other CEOs agree with you about the fears for the future?
GUEZ: So I think, you know, I mean, two months during this period of time, I mean, this is almost like a decade, in terms of the amount of events that
happens and the general kind of environment and the public opinion.
I think that if you ask people now two months later, a lot of them are in much bigger agreement that they were two months ago. I think at the time we
already saw and I think that the movement was already there. People feared to say it publicly.
And I think that in reality and we sold to the numbers at the time, I think, around February, the numbers that has been officially published me
as well, or talking to him on about $2 billion that went out of the country already.
So I think that this is a very, very, very complicated issue. Obviously, there are two sides here with very strict opinions about what they think is
right and wrong. But if you're looking on the recent kinds of events, I think that there is more and more agreement that we should protect our
economy, we should protect our nation actually, and we should protect our democracy. Because it seems that we are going into a place where the world
is looking in Israel and asking quite clearly what's going on and starting to lose faith in us.
CHATTERLEY: Yes, I think that's the key point about what the judicial reform means, not just in terms of the government's decision to do this,
and the changes that they make, but where it's leading the country, because I think that's your point. Where do you see this process leading beyond
even me think this judicial reform, as important as it is?
GUEZ: Yes, so first, I think and you said it correctly, right? I'm not a politician. I'm also not, you know, I'm not coming from the legal side of
things I just saying that eventually, if you have a quite a lot of people almost 50 percent of the country that are saying that this judicial reform
is not something that they want to put in place.
If you have hundreds of people from all around the world, people that were involved heavily in our - in designing our economy and other things in
Israel that are calling us to stop and eventually have conversation, assure that we are doing a judicial reform that everyone or you have a broader
consensus, we should do that.
And I'm very happy about the decision yesterday to hold the conversation. And eventually to ensure that yes, there are some conversations in place.
Honestly, I don't know if this is too little too late. And if we will be able to bridge currently, the huge kind of issues and kind of the huge gaps
that we already have in between the parties.
But I do think that eventually, even if you're doing changes, you cannot just ignore the noise around you because the cause of mistake can be fatal
to this country. And you know Israel is the only democracy in the Middle East. We need to keep it as democracy in the Middle East. I think this is
one of the key points, and a very, very important factor on our existence.
CHATTERLEY: Yes, as you said, you want to keep the politics out of it. But do you trust Prime Minister Netanyahu when he says, look, there will be a
debate about this, or do you fear that a month will go by and the same issue will be back on the table and there will be those hardliners that
that are continuing to push for this that say, we won't back down in the face of a protest, however potent that protest is?
GUEZ: So first, I don't know. I mean, I'm - you know - I'm coming to - or I'm hearing everything that happens around and I do hope that those are
real efforts. And those are really kind of pure efforts to solve this.
From the other hand, less than 48 hours ago, our Prime Minister decided all of a sudden to fire our Ministry of Finance - I'm sorry our Ministry of
Defense just because he will say things clearly and loud that the judiciary reform and the current state this judicial reform and the impact that we
have on the military in Israel is becoming very, very critical for our defense.
[09:40:00]
So I think until now, you know, I mean, we heard yesterday that the judicial reform is being put in hold in order to create conversation. But
from the other hand, we still don't have Ministry of Defense. I mean, nobody said that it was a mistake to eventually to dismiss him.
And I think that eventually, currently, we need to assure that, you know, Israel, with I mean, military in Israel is a very, very important thing.
Obviously, our defense is a key factor to our economy, to our life, to everything that we are doing.
So I do hope that eventually, the efforts will come side by side. So we need to have clear leadership and very, very bold leadership these days
that assured that we protect the interests of the government - the country first before the interest of the government before this judicial reform.
And I do hope that those conversations will lead to something that is different from the current state. I don't know, honestly, I'm optimistic
because I should be as a founder. But I do hope that it will turn out differently than the recent conversation that we had in the last two
months.
CHATTERLEY: Yes. But as a founder of a business to your point, you also have to be prudent and you have to be cautious and you have to protect your
workers and protect your business and make changes to reflect that too.
One of the things that you were saying was to every startup, pull 20 percent of the money that you have in the bank out because that will also
send a message. And as you said, defense is important to the economy but so as financial stability is the United States has had a sharp lesson in I
think over the last two weeks.
If this comes back on the table, and these reforms are gainer up pushed, will you repeat that message and what more can you do to send a message I
think to the government that this is the wrong direction? Do you believe the protests will continue?
GUEZ: So first, yes, the protest hasn't stopped. The protest will continue because we want to send a clear message that we are here to protect
democracy. We are not here we are not representing any political side. Honestly, we're not here to eventually replace the government.
We are here to protect democracy. We are here to protect the tech nation. So protest will stop until we will see any real kind of efforts and real
change in real agreement because I mean, we want currently stand still, and just let it go by itself.
So we are - and definitely as to your point, I think that if this judicial reform will come to re-elections, if we will believe that this is going to
a place where they are continuing with their original intent. I strongly think that it will impact Israel economy.
We saw it already with the volatility of the shekel versus the U.S. dollars in the last few weeks. Volatility that we only saw in the past when we had
quite a lot of issues on the political side that impacted this - the volatility so I think that we need to assure that first as tech nation.
And obviously as someone that works for - on the tech sectors that we protect our investors' funds. Israel and the tech sector in Israel have
raised more than $50 billion in the last five years. And nobody eventually will reward us or nobody will continue to invest in Israel, if you want
protect those funds in the best efforts that we can do.
CHATTERLEY: Yes, eloquently said and this is not about the politics in your mind. This is not about demonstrating against one individual or the Prime
Minister in this case, this is about ensuring the business community and the startup community remains vibrant as it is.
Your business is also fascinating. So you're going to come on as the CEO for Papaya Global and talk to me about your business, please, sometime
soon. But we appreciate your insights. Thank you!
GUEZ: Thank you very much.
CHATTERLEY: Eynat Guez is CEO of Papaya Global we'll speak soon please thank you. We're back after this.
(COMMERCIAL BREAK)
[09:45:00]
CHATTERLEY: Welcome back to "First Move"! A tragedy in Tennessee, six more innocent lives lost in a school shooting in Nashville on Monday. The
surveillance video shows the shooter opening fire on glass doors to gain access to a private Christian Elementary School. Authorities say the
shooter was a former student who used AR style weapons and had detailed maps of the building. Amara Walker has the details.
(BEGIN VIDEOTAPE)
AVERY MYRICK, MOTHERS TEACHERS AT SCHOOL: I don't know how somebody could go through with doing something like that? And especially children like
just it are disgusting. And I yes - I just - I have no words.
AMARA WALKER, CNN AMERICAN CORRESPONDENT (voice over): This morning another community is in mourning after what police are calling a targeted attack by
28 year old Audrey Hale, a former student who showed up on campus to execute a pre written plan.
CHIEF JOHN DRAKE, NASHVILLE POLICE: It indicates that there was going to be shootings at multiple locations and the school was one of them. There was
actually a map of the school detail and surveillance entry points and how this was going to be carried out on this day.
WALKER (voice over): Metro Nashville Police releasing more than two minutes of surveillance video showing the moment Hale arrived on campus. In the
video Hale is seen driving through the parking lot of the Covenant school in a Silver Honda Fit.
The security camera footage then cuts to video of Hale opening fire on glass double doors at an entrance of the school before climbing in. As the
video continues you see Hale start roaming the hallways. Police say Hale had three weapons an AR style rifle, an AR style pistol and a handgun along
with significant ammunition.
Police say they believe two of those weapons may have been obtained legally. Officers say when they arrived on scene Hale fired on them from a
second storey window one patrol car taking a bullet to the windshield. Police say two officers confronted Hale on the second floor and Hale was
killed. During the shooting Avery Myrick was texting with her mother, a teacher at the school.
MYRICK: I texted her and I said just like what was going on. She said she was hiding in the closet and that there was shooting all over.
WALKER (voice over): She later spoke to her mother by phone and learned she was safe. This morning we're learning more about the victims.
DON AARON, METRO NASHVILLE POLICE SPOKENSMAN: The three nine year olds who were killed Evelyn Dieckhaus, William Kinney and Hallie Scruggs.
WALKER (voice over): Also killed 60-year-old Catherine Coons, who according to the school's website was the head of the school police also identifying
61-year-old Mike Hill, a custodian and 61-year-old Cynthia Peak a substitute teacher. Police continue to investigate a motive but say they
have a theory.
DRAKE: There's some belief that there was some resentment to having to go to that school. I don't have all the details to that just yet. And that's
why this incident occurred.
(END VIDEOTAPE)
CHATTERLEY: Amara Walker reporting there. We'll be right back.
(COMMERCIAL BREAK)
[09:50:00]
CHATTERLEY: Just in a new indictment against FTX Founder Sam Bankman Freed U.S. prosecutors adding bribery to the list of charges against the 31-year-
old. He had previously pleaded not guilty to eight criminal counts over the sudden collapse of FTX.
In the meantime U.S. stocks are up and running this Tuesday cautiousness I think is what we can say with the S&P set to break a three session winning
streak is down by around two tenths of 1 percent in early trade an uptick in bond yields pressuring stocks.
Market participants now seeing a more than 50 percent chance that the Fed will raise rates at its next meeting if the banking outlook continues to
stabilize that's up substantially from just last week. I think volatile is the best word to describe all of that.
In the meantime, a British Parliamentary Committee kicking off a day of Transatlantic hearings on the recent banking turmoil Bank of England
Governor Andrew Bailey telling MPs that the failure of Silicon Valley Bank was the fastest collapse of a lender since the bearings debacle some 30
years ago.
U.S. bank regulators said to face tough questioning in the Senate today too, over the bank failures taking place under their watch also. Rahel
Solomon joins me now. Rahel, my fear is that it's going to be a little TikTok asks, like we saw last week, it was more of a verdict rather than a
hearing. But what can we expect today?
RAHEL SOLOMON, CNN CORRESPONDENT: Well Julia, those hearings expected to begin in just about seven minutes from now. And so this and these hearings,
we will hear from banking regulators at future hearings, we'll hear from former executives of SVB.
But what we expect to hear from and we can show you who exactly we expect to hear from is regulators explain what went wrong, what happened from
their vantage point. But also, of course, the big question is why didn't regulators themselves catch this?
And to that point, on the one hand, based on prepared remarks, which I should say, by the way, we expect the bulk of comments to come from the
FDIC, based on prepared remarks. But in terms of why didn't regulators catch this?
You know, in the remarks we read most say, you know, the investigations are ongoing, essentially not really pointing to anything in particular, but
it's in the comments from the Federal Reserve, which actually do try to sort of shift some of the blame saying we actually did raise the alarm
about these concerns.
So this is page five and six of the Fed's comments, Michael Barr's comments and on page six, he starts to point two out of 10 pages, he starts to point
to the events that led up to this saying that as an early end of 2021 supervisors began to grow concerned and began to raise risk - raise alarms,
rather about some of the liquidity risks that these banks were sitting on.
And then pointing to five or six different events five or six different dates before ultimately saying that in mid February 2023 the staff
presented to the Federal Reserve's Board of Governors, they're concerned about rising interest rates in the impacts on the banks, but also
specifically SVB's liquidity risk.
Now that was in February, of course, we know that SVB failed on March 10th I believe it was. And so the question is, did they wait too long? Was it -
by this point was there enough time to actually do something?
[09:55:00]
As one economist told me when I asked about the store, he said, look, we're regulators asleep at the wheel. So even if they did raise these concerns,
the questions are, did they do it soon enough?
CHATTERLEY: Yes. But that's fascinating, isn't it? Because what that says to me is and I've seen plenty of people saying this is about lack of
supervision or incoherent supervision. You've got the supervisors pointing at the regulators and the regulators pointing at the supervisors more of
all, perhaps.
Rahel Solomon, thank you very much for that we shall see. And finally here on "First Move", there's a new theory about water on the moon. Chinese
scientists think the moon could be covered in water trapped inside tiny glass beads, which were formed when asteroids crashed into the surface.
They suggest the beads were infused with water after being hit by solar winds, creating a deep reservoir of this precious resource. If the science
checks out, this knowledge could help astronauts harvest water on the moon in future, how exciting? That's it for the show. "Connect the World" is up
next. I'll see you tomorrow.
(COMMERCIAL BREAK)
[10:00:00]
END
