600-1000 More Bank Failures?

" To craft a bipartisan deal on overhauling financial market rules have stalled amid disputes. Over a proposed consumer protection agency is raising another hurdle in the White House's efforts to try to revamp banking regulations. Republicans led by Alabama senator Richard Shelby. Have intensified their opposition to the administration's consumer measure. So what's going to happen. Joining us now from Washington DC is the founder and managing partner of the cypress group pat -- pat -- good to chat with the again. Good morning Brian are just slip when it looks like they're working and inching toward some kind of a deal. Now you've got this concern about the consumer financial protection agency that is sort of raised the ire of the GOP. Are they back to square one or will -- deal eventually be cut especially in the Senate."

" Well I think it deal eventually will be cut and the question is now what new rules. Or imposed by congress to protect consumers. The administration now has proposed a new agency to -- that task I think many Republicans take in the Senate believe that. The current regulators. Ought to police that function."

" What about the idea failed banks a lot of talk about FDIC asking for a three year prepayment we had nine more banks -- it lost the headlines -- for everything else is nine more banks failed on Friday. What's the DC insider take on how many more banks. That may be members key members of congress expect will fail and more importantly pat. Who the heck is going to pay for all this is the FBI got a lot of money right."

" Well they are not yet -- a money but headed that direction they do have tools at their disposal to. To stave off. Are rather not pay for these failures but I've seen numbers between 600000 banks and that should anyone knows. We do see that there's a lot of interest in capital markets work investments in banks and distressed assets. But this is a multi year story. And and in congress it's a broader debate about who pays for the next AIG or systemic failure of which is not a okay well let's go back on what you said -- I think you said -- very distinct things are number one there's chatter among key legislators on the hill. That another 600 to a thousand banks may fail. I don't know that policy makers would give specific numbers to that I think I hear it mostly for my client base and other participants in the market. At a very real concern that. Where in the second third inning a multi year effort to resolving. Many many failed banks. And I think members of congress anticipate that and look to the FTSE for leadership."

" Yeah 100 million dollar bank failing you know is one thing. But do you think there are more systemic concerns of what are you hearing on the hill what about Fannie and Freddie -- these companies aren't concerned readership they they are huge. They're getting bigger and their taxpayer controlled we have an exit strategy for Fannie Freddie. I think that's the broader question."

" Now on and it it is -- how -- we as a federal government dismount from the ownership interest we have a large banks and other institutions. Edgy Fannie and Freddie. I would say on smaller banks -- the best policy the federal government can pursue is to encourage private capital to come in and to consolidate bank's purchase banks' purchase distressed assets and help. By the FDIC clean this up. Fannie and Freddie larger numbers bigger issues. I think -- you do see in the Senate where Republicans would like to address TSE reform. I think the administration has said we -- to get to that I just a question of timing and a lot of lot of issues in congress right."

" Now listen -- you -- want to bash your former colleagues there aren't they used to work the treasury pat did you think that we have a handle on the idea of systemic risk. And may be what is too big to fail at that even exists."

" Well at at I think we do in this aspect. I think the current administration is saying. Let us. It's strengthened market discipline for larger institutions let's force upon creditors and owners of these institutions to police risk. And let -- ask the Federal Reserve to step in and be the cop on the beat if you will. Let's also ask the FDIC to be prepared to help resolve at lower cost than next god forbid larger institution failure. And let's also ask larger institutions to pay for those failures. But I can't see going forward out taxpayers. Are are left at of that equation. All right Patrick -- the cypress group had always a pleasure to get your insight thanks very much."