A major development in the banking world.The FDIC just reported the Californiaregulators shut down Silicon Valley Bank,a big lender out in California,after reportinga loss of over $1 billion.There were fears of a run on this bank.People wonderingif there should have PTSD to 2008.What's going on here?Yeah,this really is an earthquake,especially for the tech community.Silicon Valley Bankdropped by 60% yesterday alone.We just learned todaythat California regulators have shut thislender down.This is the biggest failure since 2008.It's actually the second biggest failureever since Washington Mutualin September. Of 2008.This is a major lender tech startups.The FDIC says that insured depositorsthey will have full accessto insured depositsby Monday morning insured depositsthat means up to $250,000.Of coursewe know that some small businesses,some startups, some individualsthey have more than that $250,000.It's not clearif they're goingto get all of their money back.This, of course, is not sittingwell in the marketplace.We see the Dow is downby more than 250 points.Banks are leading the way lower.The good news hereis that experts that I'm talking to,they are hopeful thatthis is an isolated incident,that this is not partof a broader systemic issue.Mark Zandi, he told mehe's the chief economistover at Moody's Analytics.He just told me thathe doesn't thinkthat this failureis symptomatic of a broader problemin the banking industry.Let's hope not,because that's the last thingwe need right now.You know,the major banks are sayingthat they are well-capitalized.Matt Egan, thank you.Robert Reich, former U.S.labor secretary under PresidentClinton, is with usnow, also the author of The SystemWho Rigged It and How We Fix It.Secretary Rice, always good to have you.Let's start where Matt ended with this.Silicon Valley Bank,the FDIC now in control.We saw thatthere was some stumbles from Wells Fargo,JPMorgan Chase, Bank of America.Other bankstrading their halted yesterday.What does this meanfor peopleoutside of the Silicon Valley bankuniverse?What does it meanfor the average borrower, if anything?So far, it doesn't mean anything.But the big question is one of contagion.That is what we saw in 2008was when one big bankand a couple of others started to fail.Or could not paytheir depositors,could not actually pay up what they owed.They were closedand regulators had to move in very,very quickly.But we ended up with a financial crisisbecause, you know, one big banking cardeasily starts tipping over other cards.It's a house of cards.Now, we don't know yet about contagion.What we do knowis thatthis bank was obviously overextendedand this is related to the Fedbecause as interest rates went upand as and this bank was lendingto a lot of startups,this bank simply could not handle it.I think thatthis is the biggest economic news today.It is not.This jobs report report was good.And it's kind of signals to mea soft landing.But I think that in termsof what the Fed is going to doand this bank implosionwas potential contagion, may reverse.Jerome Powell has a directionit may lead to instead of a halfa point increase at the March meeting.It may lead to no increase.In fact, it's even conceivablethat interest ratesstart droppingout, but fearthat we're going to be in deep trouble.You have advocated for the Fedto stop increasing the interest rate.Why before this issue withSilicon Valley Banknow?Simply because I don't see any wage priceinflation, wages,according to JeromePowell, are pushing up prices.Well, that's simply not the case.Look at today's report, for example,we we are seeingthe smallest wageincrease in over a year.Prices continue to rise.That is absolutely true.But wages are not pushing them up.It's notthat workers are doingso wonderfully well.And what's pushing upmany pricesdomestically in big companiesthat want to increasetheir profit margins.And so they have monopoliesor near monopolies, oligopolies.They are using the opportunity,using inflation as an excuseto put up their prices.So this is at its at its bottom here.It really is an anti-trustmonopolization issue.It is not a Fed interest rate problem.So you suggest that the Fedshould stopincreasing the interest rate,but if that is the only tool they have.I imagineyou're going to correct that assumption.But if that is the only toolthey have to try to bring it backdown, to the 2% rate, that goal, thenwhat else can they do to to totry to tame inflation,if not increase the interest rate?Well, first of all,let me just say,it's not clearthat they have to do anything else.Inflation is starting to come down.Now, we'll find out more Tuesdaywhen the inflationreport the consumerprice in Greece, increased report,inflation report will be coming out.But as of what we know now,inflation is slowing slightly.As the key here is the direction.You know,if inflation were increasing,that would be one thingbut if inflation is starting toslow down,if we'reseeing it going in the right direction,then it's not clearthat the Fed has gotto keep raising interest ratesand risking a recessionthat is going to hurt everybody.
