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WSJ: DOJ, SEC Conducting Separate Probes Into SVB Collapse; Inflation Cools For Eighth Straight Month; Inflation Report: Eggs & Fuel Down, Shelter Costs Up; Moody's Downgrades Outlook For Entire U.S. Banking Sector; Poll: DeSantis Leads Trump Among GOP With College Degree; Trump Rails Against GOP Rivals In Fiery Campaign Swing; Poll: 63 Percent Of GOP Says Biden Not Legitimately Elected In 2020; Trump Fires Back At Pence: "You Can Blame Him For Jan 6". Aired 12-12:30p ET

Aired March 14, 2023 - 12:00   ET

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

[12:00:00]

JOHN KING, CNN HOST, INSIDE POLITICS: Hello, and welcome to Inside Politics. I'm John King in Washington. Thank you for sharing another very busy news day with us. On notice, six more lenders get put on a watch list, following the big Biden administration bank intervention.

New inflation numbers today make the government's challenge even more complicated. The Fed's inflation playbook says raise rates again, but the banking stress bring calls to wait.

Plus, the party of Reagan no more, GOP presidential hopeful Ron DeSantis says, Russia's assault on Ukraine and its democracy is not, not a vital U.S. interest. It's a flip flop. The Florida governor that puts him in sync with today's GOP.

And blame Mike Pence. Donald Trump says January 6 would not have happened if his vice president had only ignored the constitution and helped them steal the 2020 election.

Up first for us though, brand new reporting. This from the Wall Street Journal, both the Justice Department and the Securities and Exchange Commission now conducting separate investigations into the collapse of Silicon Valley Bank.

That news following a startling warning for Moody's, that six other mid-sized banks are at risk. Moody's says of credit downgrades, it's all part of a huge balancing act for the American economy.

This morning, a new measure of inflation and how it impacts your life and how it might impact the current stress on the banking system. Yes,' the top line number does show inflation overall is coming down. But if you dig deep into the data, core prices remain stubbornly high. We're now one week out from a Fed meeting to consider another interest rate hike.

We start our coverage with our chief business correspondent Christine Romans in New York. Christine, what's most important today? What's the latest? CHRISTINE ROMANS, CNN CHIEF BUSINESS CORRESPONDENT: You know, on a tightrope here, there's so much going on. You talked about those investigations, not really surprised when you have a bank of this magnitude go down so fast.

I mean, in 24 hours, they tried to withdraw $42 billion from this bank. I mean, it was a social contagion run on the bank that had real implications for the rest of Silicon Valley, the U.S. government stepped in and trying to just stabilize the banking system here.

We know the Fed, by the way, already announced that it would be looking into the regulatory lapses that may or may not have led up to this moment as well. So, you've got three, three big federal probes here into exactly what happened to SVB.

But remember, there were three banks that failed over the course of the last week. So that shows you where there has been strain and stress in the banking system because of those, you know, Herculean Fed interest rate hikes to try to cool inflation. We have those regional banks bouncing back today, John. I think that's really important to make this point.

You know, sources saying that it looks like the deposit - depositors that have been fleeing some of those regional banks, that has slowed. There is some stability there, the fire may be out. These are all of them well off their highs of the year, of course, but they are off their lows from yesterday. And so, I think that stability is an important thing to point out, John?

KING: And yet, Christine, as you're speaking new word for Moody's that it is now changing its outlook, cutting its outlook for the entire U.S. banking sector. It's put the six banks on its watchlist, but it says the ratings firm now expects the entire sector to struggle. What does that tell us?

ROMANS: It tells us that those interest rate increases that the Fed has orchestrated to try to slow the economy will slow the banking sector, right? It is maybe not exactly by design what the Fed was trying to do, but it is a cooling off of lending potentially, it's a cooling off of activity in the banking sector, which could help slow what has been underlying very strong economy.

The question is, are there weaknesses in banking? Banking is a very funny part of the - it is the oxygen for business, right? It is the oxygen for the American economy. So, you don't want to have fear or any kind of contagion in there, if there are any bankruptcies.

But what I'm hearing mostly from banking officials and people in the industry is that the Feds and the treasury's move over the weekend has stopped - has put out the fire for now. And the question is serving the rest of the field and seeing how isolated some of these problems are.

Remember, SVB that was a bank for startups. Signature Bank that had gotten into the crypto lending world. And a third bank that failed earlier last week, that was also a crypto lender. So, these are kind of very niche, niche lending institutions, John?

[12:05:00]

KING: And lastly, Christine, before I let you go. If we were having this conversation a week ago before the collapse of these two banks. And we saw the inflation bore today, we would be certain the Fed was going to what it meets next raise rates again because of that core inflation. There are some saying, no more volatility, take a break, take a month off essentially. What's going to happen?

ROMANS: I mean, there are people who say that the Fed shouldn't do anything. They need to take one week off, or maybe one month off rather, or maybe just a 25-basis point, virtually no one is saying the Fed should raise interest rates 50 basis points, again, because raising interest rates again, that's a big rate move, right?

Raising interest rates so much, so fast, has put the balance sheets of these banks under pressure. Many of them are sitting on mortgage- backed securities or treasury securities, very safe long-term securities, plain vanilla assets that have a bit of lost value, because they've been eroded by the higher interest rates.

So, now they've got this mismatch on their balance sheets. And that's what we're trying to work through. The Federal Reserve Board, of course, has started a new lending facility that will allow banks to tap in to the Fed for one year loans. That is an important taxpayer backstop that should provide some stability for those banks who are really underwater on their investments.

KING: Chief business correspondent, Christine Romans, appreciate you're kicking us off. Let's continue the conversation. With me in studio to help us understand the choices, difficult choices and the delicate moment for the American economy, Peggy Collins of Bloomberg, Jim Tankersley of The New York Times.

Do you agree with Christine? Let's just start there, that if you look at the markets today, the small and the regional, the mid-sized banks, the regional banks, we're watching the turmoil yesterday, they seem a little better today. The question is, does that tell you is it just day-to-day? Or does that tell you, OK, yesterday was everybody was waiting and seeing now?

PEGGY COLLINS, WASHINGTON BUREAU CHIEF, BLOOMBERG: I think the word is stabilizing, that's what we're seeing today in the markets, particularly around those regional bank stocks that got crushed yesterday, John.

But I think what people are now starting to look at is where do we go from here. Is there another hidden risk that we don't know about? Or can the Fed be in a position by next week to turn up that dial on interest rates again without spooking the public?

KING: And so, the SEC and the DOJ, if they have these investigations, the Fed is also looking into this, or those things can take months and months and months. The question, I guess is, are their big questions. That is, what happened in Silicon Valley Bank? Is it just unique to that bank? Or is it a problem throughout the industry? Is that the biggest question?

JIM TANKERSLEY, WHITE HOUSE CORRESPONDENT, THE NEW YORK TIMES: Well, I think the biggest question, that's a big question, and I think that's a good subject for this investigation. It's going to tell us whether there were improprieties, whether there's actual mismanagement of the bank, or whether this was just bad exposure to interest rate risk that led to this run-on on Silicon Valley Bank.

I think the biggest question still is psychology of people with money in America's regional banks. It appears right now. And this is something that Biden administration officials were very sort of happy about yesterday.

When I talked to them, it appears that psychology has taken a step back and said, OK, it seems like our money is safe. What you don't want is for people to panic again. And for that to spread to a wider range of banks.

KING: Right. And so, then every move the government makes have different pieces of the government as well. There's a number of pieces involved here could cause panic, could reassure people or could cause that panic. This is Larry Summers, the former Treasury Secretary. Who says, yes, the Fed has to be careful here. But the Fed also has to prove it's going to be consistent in the inflation fight.

(BEGIN VIDEO CLIP)

LARRY SUMMERS, FORMER TREASURY SECRETARY: The Fed needs to stay focused on the inflation challenge. I'd be disappointed if the Fed, which very clearly was on a path to raising interest rates by a quarter of a percentage point and then probably doing it again. If the Fed wasn't able to raise rates by a quarter of a percentage point because of all this, I would be surprised.

(END VIDEO CLIP)

KING: So, Larry Summers says, go ahead with another, I'll call it modest. It matters, but not a half point but a quarter point rate hike. There's a lot of other people saying, there's just too much volatility right now, please just timeout.

COLLINS: Well, I think that's the issue, right? If you think about last week, this time, the Fed Chair Powell was on the Hill saying, essentially and signaling to people that he thought he was going to go maybe 50 basis points because the economy was showing resilience. And in days after that, we saw a bank fail that essentially created a fear of bank runs.

Now bank runs is a term that people in this country buying scary, right? So how do you a week later, going into next week as the Fed chair go out to the American public and say, everything's fine within a week's time, we're now ready to jack up interest rates again.

So, I think that's the dilemma that they're really dealing with right now. But also, the Fed chair really does not want to see inflation entrenched. And we saw the numbers come out this morning showing that its persistent, inflation is way higher than the Fed wants it to be right now.

KING: 15 years ago, we went through this conversation. How much of this is just mismanagement by banks? How much of it is cowboy behavior by banks just being reckless, not just mismanagement? Mismanagement could happen, but how much of it is reckless and how much of it is government regulation? One of the companies that had money in Silicon Valley Bank is UrbanStems, the floral company. The CEO today saying what he has now is a crisis of confidence.

[12:10:00]

(BEGIN VIDEO CLIP)

SETH GOLDMAN, CEO URBANSTEMS: Where are you supposed to put your money? I actually asked after this happened is, where does Apple have their money? I mean, I just don't know. Does it at JPMorgan? Is it in - I'm sure it's a more sophisticated ways, but where were we supposed to put our money? We could never again agree to only have one bank have all of our money.

(END VIDEO CLIP)

KING: It strikes me, and I don't pretend to be anywhere near smart about this stuff that why would you put all your money in one bank anyway. But what are the conversations now, especially among the startups that do - they're more risky loans? So, you have a bank that says, we will lend you money, but you have to bring us business? How do you deal through this right now?

TANKERSLEY: Well, the exposure of startups to Silicon Valley Bank was high. And it was just a very central player in that entire ecosystem of startups. And even if you didn't have your money there, I've been talking to people involved in startup world for the last several days. Even if you didn't have your money there, you were under a lot of pressure to move money to safer places for fear that it was against this contagion was going to spread.

And so, I think a lot of startups spent the weekend, trying to figure out where is a safe place to put our money? Is it the bigger banks, or is it, you know, some other place? And I think those are the conversations that sort of are continuing, and that the administration and the Fed have tried to shut down by basically saying, hey, your money is safe.

KING: And so, to that point, the big question for people not involved in these two banks or the banks, other banks. So, I'm curious, can I have long-term confidence in the system? Where do you look, you know, Sheila Bair, the former FDIC.

Christine says, it'll be OK. That'll be OK. A little turmoil. The system itself is strong. The president says that, what do you look for in terms of whether it's numbers, whether it's which agency of the government? If you're somebody out there saying, can I trust this. Where do you look?

COLLINS: Well, I think two things, John. One, you look to the Fed, FDIC and Treasury on Sunday night that came out and basically said, we're starting a new facility, like we did in the pandemic to basically help the economy and help American households.

In case there is more instability in the banking sector, we're going to backstop deposits, even if they're underinsured, even if they're over that 250,000 level at FDIC, which is what scared people who are at small and medium regional banks.

And then, the other thing I think is like where we go from here in terms of the economy that will help ensure that people have confidence.

KING: Obviously, a story we're going to be with for weeks and months and more. Peggy Collins, Jim Tankersley, appreciate your coming in for us. We'll come back to the story a bit later in the program. But ahead for us, brand new CNN polling on what and who Republicans are looking for as they consider a 2024 presidential candidate. Plus, Donald Trump takes a sharper tax at a rally in Iowa, make crystal clear who the former president sees as his strongest rival right now.

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[12:15:00]

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KING: Donald Trump is getting more active on the campaign trail. You see him here back on the stump in Iowa last night. And it is crystal clear. Mr. Trump sees Florida Governor Ron DeSantis as his biggest threat at least at the moment. And so brand-new CNN poll numbers out today, tell us guess what, Trump is right about the current state of the GOP race.

Let's take a look at the field right now. And you have Trump and DeSantis, 40 percent for Trump 36 percent for the Florida Governor. That statistically is a tie with it right around the margin of error right there. And then you have the former Vice President Mike Pence, former U.N. Ambassador Governor Nikki Haley, well behind at 6 percent, 40 percent, 36 percent, and a big drop to 6 percent.

One of the most fascinating dynamics in American politics right now is how education splits the electorate. And you see that in the Republican race, among those who are college graduates, DeSantis leads with 41 percent. These are Republican primary - potential Republican primary voters. 41 percent among college graduates, Trump only a 23, but look at the difference.

Those who do not have a college education, Trump gets nearly half of those possible Republican voters at 48 percent, DeSantis drops down to 34 percent. So, what are Republicans looking for? Biden won in 2020.

You think maybe they want to beat Biden, that would be quality number one, but it is not. 60 percent, 59 percent of Republicans nearly six and 10 say what's more important to them is that the candidate they picked for president for their nominee agrees with them on the issues. 41 percent say, can be Biden for them. Now, the question is with Trump back out on the battlefield, a lot of Republicans are thinking about this. This is 2016, when he had a contested fight for the Republican nomination. Donald Trump began, people saying he's not a real Republican, he can't win. Well, there he was. He was the nominee. How did it happen?

Remember, Ted Cruz won Iowa, but just barely 28 percent to 24 percent. Then the race moved on to New Hampshire. Remember the numbers here, focus on the percentages. Republican rules in most states, winner take all or the possibility at least to get most of the delegates. Donald Trump comes in first in New Hampshire with 35 percent.

You have Kasich, you have Cruz, and you have other candidates down below. Jeb Bush was still in the race then, Marco Rubio and the like. After New Hampshire, come South Carolina. That's contest number three.

Donald Trump again, winning the state only about a third of the vote. And yet, he goes on to be the nominee. That's the conversation Republicans are having now. How many candidates can we afford to have in the race against Donald Trump, if he can still get 25, 28, 32 percent of the vote?

Here's one way to look at it. I'm going to stretch this out so you can see it. If you go back to 2016, and you take the other three candidates, leading candidates who stayed in the longest; Cruz, Kasich and Rubio, well, they got 50 percent of the vote. Trump got 45 percent of the vote by the end of the primary in those early primaries, he's getting 30 something or less, and yet he goes on to be the nominee.

So, this is the conversation among Republicans. How many candidates can we afford in a race against Trump or how quickly will they have to drop out, so that you have one candidate? If you look at that first threshold poll number, though, right now, it's a Trump, DeSantis race. The poll numbers show that, so does Donald Trump.

(BEGIN VIDEO CLIP)

DONALD TRUMP, 45TH U.S. PRESIDENT: Ron DeSantis today, we have the sanctimonious to say, he was very, very bad on ethanol and he fought it all the way. He fought against social security. He wanted to decimate it and voted against it three times. He voted against social security. That's a bad one. But you have to remember, Ron was a disciple of Paul Ryan, who is a rhino loser. To be honest with you, Ron reminds me a lot of Mitt Romney.

(END VIDEO CLIP)

[12:20:00]

KING: With us to share their reporting and their insights, CNN's Dana Bash, Alex Burns of Politico, and Francesca Chambers of USA Today. You know, we're all watching that and reliving 2016 as you watch it, starting with the nicknames. But if you look at the poll numbers, it's early, nobody votes for 11 months. But history does tell us when you have two candidates at the top of the field with such a huge gap. History more often than not says, it's going to be one of those two candidates. Trump clearly thinks so.

DANA BASH, CNN CHIEF POLITICAL CORRESPONDENT: He does. And the history lesson that you just gave everybody is so critical about what happened in 2016. And you're exactly right. Talk to any Republican who is not in it, yes, only Trump camp. They will say that the determining factor will likely be how much there can be a coalescing around an alternative to Donald Trump or not. And so, that is one of the fascinating factors.

Another one of the fascinating factors in this poll is how many people say that they would rather vote for lack of a better way to say it with their heart than their head. Meaning, they would rather vote for Donald Trump or whomever they support because they think that they best represent Republican values rather than the person they best think will win the White House.

KING: But you remember the conversations in 2016. You know, team Rubio was saying to Cruz, you get out. Cruz was saying to Rubio, you get out. Kasich was saying, well, I'm doing well, plus, we're about to go to the Midwest. I'm staying and they couldn't. Eagles get involved here and staffs get involved here. There's no question.

Listen to these voters here who came to Donald Trump's event yesterday. Donald Trump is weaker now than he was when he was in the White House. And the Republicans no doubt about that. But to that idea, can you get 25 percent, 28 percent, 32 percent, 40 percent? Yes.

(BEGIN VIDEO CLIP)

GLORIA CHMIELEWSKI, REPUBLICAN VOTER: Mr. DeSantis should wait his turn. He's got to wait his turn. And let President Trump do this again.

JOHN WALKER, REPUBLICAN VOTER: I think he needs a state and governor. I don't think he needs to be running with Trump.

DENISE VASQUEZ, REPUBLICAN VOTER: I'm 100 percent on the Trump train.

(END VIDEO CLIP)

KING: Trump has his voters. So, the question is, if you do have six or seven Republican candidates, do they have the discipline after one or two or three contests to say, OK, the rest of us are getting out, this one is yours?

ALEX BURNS, CNN POLITICAL ANALYST: Right. And the answer is probably no, right? If past performance is any indication of future results. Look, I think the good news for Republicans who don't want to nominate Donald Trump is that DeSantis is really on his heels there in Iowa, right. That once he became the clear front runner in 2015, nobody really got that close to him as close as to DeSantis appears to be today.

So, if somebody - there clearly is a path to coalescing, opposition to Trump. I think that if you want to see Trump nominated, or if you're just a Republican, who's generally more anxious about how this might unfold. I think there's a real question as to whether that 36 percent is really solidly for Ron DeSantis, or whether they're in favor of, you know, this guy, I've heard a lot about who's not Donald Trump, right? And does that stay together as a bloc?

You know, you mentioned at the top that those are disproportionately college educated voters, those tend to be people who follow this process very, very closely, I think very carefully about who they're supporting, and in some ways, overthink who they might be supporting, right? So, do they just pick a guy and stick with him or not? Because we know what the Trump voters are going to do.

FRANCESCA CHAMBERS, WHITE HOUSE CORRESPONDENT, USA TODAY: But the same theory in the case, I was going to say goes for Donald Trump. You saw in that poll that 76 percent of people who say that they are supporting him, see that that is firm and solid support for Donald Trump.

And so, if you're one of these other Republicans, and you're looking at this polling, it's showing already that you might not be able to peel off votes from Donald Trump. How firm is the support for Ron DeSantis? And as they're having to make a decision about whether to get in or not, even before the first debate, we're already starting to see some of these lanes close off for these candidates.

KING: And one of the giant differences in 2016, Donald Trump launched and succeeded in a hostile takeover of the Republican Party. It was not his party, when he came down that escalator and declared, it is his party now. When you look at the views of so many of the voters. Number one, you do have that education divide.

But look at this number, did Biden legitimately win in 2020. 63 percent of possible Republican voters, GOP voters and GOP leaning independents? Six out of 10, more than six out of 10 say no, no, it is just a fact. It is just a fact, sorry, lawsuits, recounts, audits, et cetera. But this is in the bloodstream now.

BASH: It is in the bloodstream. And it's - I mean, nevermind, just the conversation that we're having about the observations, about what it means for the Republican Party. I mean, the other question is, what does it mean for the American Republic? I mean, that's really scary to be honest with you.

KING: It is scary in this context. It doesn't allow Donald Trump at least in the Republican primary electorate to get away with this, what he said yesterday. Mike Pence has strong comments over the weekend about Donald Trump saying, what he his behavior was reckless. He put Mike Pence's life at risk, the country at risk. That's what Mike Pence says about January 6.

Here's what Donald Trump said yesterday. Had Pence sent the votes back to the legislators, they wouldn't have had a problem with January 6. So, in many ways, you can blame him for January 6. And then, he says, I guess he figured out being nice is not working the tough part. But it's the idea that Donald Trump just yesterday said, if Mike Pence had violated the constitution and joined me in a coup, they wouldn't have attacked the Capitol. [12:25:00]

BURNS: With one neat trick, right, you could have prevented January 6. Now look, it's his great sort of gift as a politician in the context of Republican primaries is why he's so dangerous to American political culture. Is that he has persuaded so many voters who live in really this alternative reality. And it's very, very hard for other Republicans to compete with those voters who are just living in a totally different factual universe.

And Ron DeSantis can try as hard as he wants. But for a lot of those people the rule is accept no substitutes.

KING: And do they stand up to it?

CHAMBERS: It's falling flat. Some of these other Republicans messaging is what the polling shows whether it's - whether they can beat Joe Biden, whether it's January 6, these messages aren't just falling flat.

KING: It's early, it's early. So, I'll call that poll a baseline, but it's a baseline that tells you at the moment is Trump, DeSantis we'll see if somebody else could break through. More politics a bit later. But next for us, major government intervention, absolutely yes. But is it a bailout the 2008 financial chaos is shaping the choices, and yes, the vocabulary of today's banking crisis.

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