The Megyn Kelly Show - Silicon Valley Bank Collapse, and Mayhem at Stanford Law, with David Sacks, Vivek Ramaswamy, and Tim Rosenberger | Ep. 510

Episode Date: March 13, 2023

Megyn Kelly is joined by David Sacks, founder of Craft Ventures and co-host of the All-In Podcast, and Vivek Ramaswamy, GOP candidate for president and founder of Strive Capital, to discuss and debate the Silicon Valley Bank collapse, what it means for America, whether this is a bailout of the bank or a bailout of tech startups and entrepreneurs, who should be responsible for helping the tech startups, whether there will be a run on more banks in America and a cascading effect, evaluating risk management and due diligence in the wake of the collapse, how to fix the problem short-term and long-term, how the Biden administration may have played a role in this, and more. Then Tim Rosenberger, president of The Federalist Society at Stanford University, joins to discuss the mayhem at Stanford Law School after students protested a federal judge in extreme ways, faculty joining in on the protesting, the corruption and boneheaded training of our young people, the partial apology coming now, and more. Finally, Megyn Kelly breaks down what happened at the Oscars last night, including a pro-America speech and a winner slamming Don Lemon.David - http://www.craftventures.com Vivek - https://www.vivek2024.comTim - https://twitter.com/TimJRJR Follow The Megyn Kelly Show on all social platforms: YouTube: https://www.youtube.com/MegynKellyTwitter: http://Twitter.com/MegynKellyShowInstagram: http://Instagram.com/MegynKellyShowFacebook: http://Facebook.com/MegynKellyShow Find out more information at: https://www.devilmaycaremedia.com/megynkellyshow

Welcome to The Megyn Kelly Show, your home for open, honest, and provocative conversations. Hey everyone, I'm Megyn Kelly. Welcome to The Megyn Kelly Show, live from Montana. Happy Monday. We have an extraordinary show for you today. This is a must listen. As the Wall Street Journal put it this morning, the U.S. banking system is under siege, and we have two of the top voices in Silicon Valley with opposing views, and how, on what to do about it. David Sachs and Vivek Ramaswamy are both here to have a discussion and debate regarding the fallout from the collapse of the nation's 16th largest bank, Silicon Valley Bank. David argues it's right for the federal government to step in and protect depositors.

Vivek says the bank does not deserve it, and we are looking at a moral hazard here. The pair have been going back and forth in heated Twitter exchanges, I would say, that are atypical for both men. And they have agreed to come on this show today to hash out their arguments. This is a discussion you will not hear anywhere else. And you cannot miss on a day like this. You will emerge smarter than everyone else, you know, on this particular topic. Here are just some of the latest headlines on this story. Treasury Secretary Janet Yellen announcing last night that Silicon Valley banks in uninsured depositors would gain access to their deposits this morning.

And President Biden saying, quote, Americans can have confidence that the banking system is safe. But now, hours into the trading day, several regional bank stocks have been halted. The trading of those stocks has been halted amid fallout from the collapse. So clearly there is something closing in on panic with respect to some of these smaller banks. First, Republic Bank was down over 70% at one point. Meanwhile, on the larger bank side, Charles Schwab is seeking to reassure its investors and customers that it is well positioned during what has been a volatile trading day already. Charles Schwab is the eighth largest bank in the country. It saw its stock price drop as much as 20% in early Monday trades.

We're going to cover it all, the good, the bad, how it affects you and your money in your bank and your paycheck, because this could affect people in various different streams, depending on how it goes. David Sachs, founder and general partner of venture capital firm Kraft Ventures and co-host of the All In podcast. And Vivek Ramaswamy is a Republican presidential candidate, declared, and founder of Strive Asset Management. Vivek, after he went to Yale Law School, made all of his money in biotech, and is now turning to politics,

as I mentioned. So this is a great panel. You guys have been snarking at each other and fighting online. But I understand this whole thing brings up strong feelings, and not just for you guys, right? For the average consumer and taxpayer out there who worries about their balance sheet and their bank and so on, too. So thank you for the spirit of debate and for agreeing to come on and hash it out here. All right. So, David, let me start with you. Most people going about their lives, they have no idea what Silicon Valley Bank is, 16th largest bank. And this is the second largest bank failure in U.S. history. So it's a big deal. But this is like sort of a weird bank. It's like a tech bank that all of you and your people

out there used a lot. Probably, you, probably people in my industry less so. So explain how it sort of found itself in this position. Yeah, well, I think this story really actually started about a week before you saw SVB go into receivership on Friday with the testimony of the FDIC chair who acknowledged or admitted that US banks had something like $620 billion of unrealized losses, not on exotic instruments like derivatives, but on simple mundane T-bills and mortgage bonds. This was a result of the spike in interest rates that we've seen. I'm jumping in. I'm jumping in. Hold on. I'm jumping in because I want to keep it 101. You can talk 501, but I'll just be the annoying 101er just to keep everybody up to speed because

not everybody knows everything that you know about banking and trading. So you're basically saying unrealized losses. Basically, a lot of these banks invested in things like treasury bonds when interest rates were really low. And as the Fed kept hiking up interest rates, those investments were basically becoming devalued. And you didn't actually lose any value unless you're forced to sell the treasury bonds. And these banks, so it's unrealized. You have a loss on paper, but you don't have it in real life

until you actually have to sell it. So you're saying a lot of these banks had unrealized losses, which are scary, but only actually impact you if you have to sell the bonds. Go ahead. Right. I think that's very well said. But the thing to understand is, even though the losses may be unrealized, the value of those bonds has gone down because the value of bonds moves in the opposite direction of interest rates. And as we know, interest rates have spiked over the last year in a way that we haven't seen in decades because we're dealing with the worst inflation in 40 years. This leads us to SVB. They had about $80 billion of mortgage bonds. Even though they're a startup bank, they serve Silicon Valley, I think it's important to

understand that they got in trouble not because of some sort of risky startup behavior. They got in trouble because they basically bought a bunch of mundane, boring mortgage bonds. And the value of those bonds got decimated over the last year. And their capital basically got to the point where they basically needed to raise emergency capital. And when they announced that they were going to have to do a stock issuance, the hedge funds got a hold of this, their share price basically tanked. And then a run on the bank started on Thursday. People basically began to worry that it was insolvent. And then on Friday, the Fed stepped in and took it into receivership. And that was the start of this crisis. But if you look at what's going on now in the stock market today, on Monday,

this is a much bigger problem than Silicon Valley Bank. You're seeing now trading was halted this morning in roughly half a dozen major, major regional banks. The interest, the bond market now has rallied significantly. It is betting that the Fed will now have to cut interest rates because banks are in trouble. And so, you know, I wish this was just a story about SVB and Silicon Valley Bank, but it's a much bigger story than that. And this is where I took issue with Vivek's take on this, is that he basically said this was a Silicon Valley problem. We shouldn't bail them out. We shouldn't worry about it. This is no systemic risk. And two hours after he wrote that piece in the Wall Street Journal, Signature Bank in New York was seized by regulators. There was a run on the bank that started on Friday. And now we see this huge problem in all these other banks on Monday. So this is where I fundamentally disagree with Vivek. I think that we probably share a lot of

views in common about a lot of things, including where SVB mismanaged its finances, because certainly they did a bad job. But this is a much larger issue because of the fact that the Fed has slammed on the brakes after basically running the American economy at 150 miles an hour. So that is the wreckage we are starting to see right now. And we can talk about SVB, but we should also talk about the larger problem in this economy. We're definitely going to get to all of that. And Vivek, before you respond, just to add some more meat on the bones of the background, because I didn't know anything about this prior to this story breaking on Friday. It's kind of an interesting thing. So tech kind of has its own bank, and it's this bank.

And yes, they invested in all these so-called safe government bonds, like these treasuries and these mortgage-backed securities with the low interest rates. But I know you've been pointing out those interest rates going back up was foreseeable. And other banks foresaw it and hedged their investment portfolios accordingly. You know, SBB did not, which is one of the questions you've been raising about whether they deserve help. So they were living large for a long period during the tech bubble, 2021, post-pandemic, during pandemic, all these tech companies did so well. They hired a bunch of people. They were in the bubble. And then post the bubble, like it's been popping in tech before

it popped anyplace else. Not only have those companies been doing less well and their deposits into Silicon Valley Bank have been going down and they need to withdraw more to cover payroll and things like that. So SVB's coffers are less full. But then the Fed steps in, starts hiking up the interest rates. So the value of their portfolio, the SVB's overall, is going down. So it's a bad combo. The money is being pulled out and the money they're taking in is going down. And so it leads to sort of a crisis. And then, as David just made reference to, this is kind of an interesting thing about it. So the investor money is drying up. The depositors begin withdrawing money to make payroll. SVB needed to raise money to meet the withdrawals.

The dispatch news service had a great write-up on this. I'm quoting from them in part. Then they had to sell a $21 billion portfolio. Well, no, no, sorry. Let me revise that. Then to shore up the resulting hole that they had in their balance sheet, they announced a capital raise of $2.25 billion. That's what they had to do. And that's when the panic ensued. They announced that they were shoring up their suffering balance sheet and that they needed a capital raise of $2.25 billion. That's all. But then panic ensued, panic ensued. And on Thursday, customers withdrew $ 42 billion. So their position, Vivek, has been we could have covered the 2.2 billion. If we had had somebody come in and help us, we could have gotten that. No bank could cover 42

billion. Well, one of the issues that probably David and I agree with, I mean, this was mismanaged at the level of the CEO who actually, I think, in a bad act, sold stock just several days before the calamity, but also botched the communication, right? They only in securities filings cryptically said they were raising equity capital. That didn't instill confidence. And then he committed the telltale cardinal sin during a bank run of admonishing his own customers to stay calm and calm down. So no better way to actually drive a bank run crisis than that. But I want to actually put my finger on a really important point here. What we saw on the last day, because I think David and I agree on a lot, let's focus on

where we disagree for the sake of the discussion. This was effectively a bailout of Silicon Valley tech startups. That is who the customers of Silicon Valley Bank were. And it's important to see exactly what this was. It's not a bailout of Silicon Valley Bank. Everyone agrees on that. The equity holders in Silicon Valley Bank are crushed, as they should be. But this was a bailout of tech startups in Silicon Valley who chose to bank with SVB.

And what does this do? It incentivizes some really bad behavior. I think a lot of folks in Silicon Valley have somehow gotten addicted to this mentality that financial discipline is not their job. There are CFOs I've talked to in the last 48, 72 hours who didn't even know, CFOs of multi-billion dollar tech startups who didn't even know what the deposit insurance limit was from an FDIC perspective. Roku, inexplicably, I just want to just give you another example of Roku, inexplicably, it's like an $8 billion,

some odd public company, something like that, had close to half a billion dollar balance on balance with Silicon Valley Bank itself without diversifying. And I just think one of the things that we're doing here is rewarding that bad behavior by saying that even though you didn't do your diligence, even though you weren't exercising basic financial discipline, we're still going to reward that anyway. And then the dirty little secret here, Megan, is that Silicon Valley Bank and also all the people around it, but Silicon Valley Bank included, lobbied for years for lower capital requirements and lower risk requirements on the express thesis that they were not systemically important. What does that mean? It means they're saying we're never going to be important enough for the federal government to step in and save us and treat us any

differently anyway. That's why we get to take greater risk. That's why perhaps they didn't even want to engage in interest rate hedging, though any other professional bank would have done it. And yet in their hour of need, what does everyone in and around Silicon Valley argue? They argue the bank run thesis that it is indeed systemically important. And I just think that's hypocritical and it's a problem. And I think we got to separate this question of how we would have handled Silicon Valley Bank, which is the bigger of the two, significantly bigger in scale than Signature Bank, and also it came first, and also it's worth talking about. Silicon Valley Bank versus how we want to handle a bank run on the rest of the banks across the country. So I think that there's a way

to separate this. In my Wall Street Journal op-ed running in print today, I separate the two. If you want to raise the FDIC deposit insurance maximum above $250,000 for everybody, that's a reasonable conversation to have. The Federal Reserve is the lender of last resort to all banks in this country. Great. There are other mechanisms. But I think it really sows well-founded mistrust when you change the rules on a whim, on the fly, after the fact, for whichever darlings might be the greatest favorites. And the arguments I heard over the weekend were really, I think, discouraging to me all the way from one end of the spectrum saying that, no, no, no, these are America's entrepreneurs, the chosen class, the special ones driving the American economy. I mean, the number of calls I

got, I mean, people throwing spaghetti against the wall, that's one argument to compete against China. I think that actually captures the essential intuition here is that these are the people who deserve to be saved, even if they're playing by a different set of rules than everybody else, to then saying there's going to be a bank run across the rest of America. When in fact, if that's really the case, you could handle that in a lot of different ways than just bailing out a bunch of tech startups who are banking with Silicon Valley Bank. And I think this is just going to incentivize more of that. Let me explain what, let me explain this, the quote unquote bailout that's actually happened. So what happened was

on Friday, the FDIC assumed control of the bank. The management was removed after this forty two billion dollars is withdrawn. And he's the CEO is up there saying, Greg Becker, stay calm, stay calm, as you point out, not calming in any way. So the FDIC seizes control. Then they announced, the Treasury, the Fed, the FDIC announced no losses associated with the resolution of this problem. The Silicon Valley Bank will be borne by the taxpayers. They now announced late last night they are stepping in to save, the Feds are stepping in to save this bank essentially, but not with taxpayer dough.

They say they're going to tap into the FDIC insurance fund made up of premiums paid by banks, not by taxpayers, that they will then replenish that fund with a quote, special assessment, not on taxpayers, but on banks. And so that's supposed to make the taxpayers feel better that we're not paying for. I mean, my general philosophy is we always pay in the end. The bank customer always pays in the end. Why would the banks just suck it up and not pass it along to the customers however they could eventually? But we can get to that eventually. The regulators, meantime, are seeking a white knight. They want somebody to step in and buy the bank and its assets. HSBC, another bank, bought at least the UK version arm of SBB for one pound. But so far, no takers on the American end. And that's where we are now with the feds in control assuring us,

David, that we are not going to pay for this. But before we get to that, can you speak to some of the vague points about how, oh, this is just the special class. And they told us all along that they weren't supposed to be essential. And that's why they were allowed to proceed under this sort of loosely regulated scheme, as opposed to that imposed by Dodd-Frank, which everybody else had to do after the 08 crash. Well, okay, let me start with a couple of points where I agree with Vivek, and then I'll go to the points where I disagree. So the part where I agree is that the management of SVB did not do a good job managing their risk. They deserve to go under. No one, as far as I know, supports a bailout of SVB. Its stockholders are wiped out. Its bondholders are wiped out. Its

stock options are wiped out. The executives are disgraced. They're probably going to spend years in litigation. Nobody is saving SVB. The question here is the depositors. And I think Vivek here is really simplifying the customer mix. You had 40,000 small businesses who used SVB to do their banking. And many of them are just small companies, 10 to 100 employees. These are not big tech companies. These are companies that have to run payroll on Wednesday. If they didn't get access to their money today, as the Fed provided, they would be furloughing and firing employees. They have employees all over the country.

They have customers all over the country. There was a CEO of one of their customers who lives in Columbus, Ohio, and she says she drives a Honda and basically took on a second mortgage to help fund her startup of 15 people. So I think it's a gross simplification here just to say these are a bunch of rich tech fat cats who are going to get hurt or a bunch of VCs who are going to get hurt by this. This is basically 40,000 small businesses. And I think they need to be protected. I think this position of basically to screw them, I think that is untenable and will lead the Republican Party to ruin. The fact of the matter is that these small businesses can't, they don't have visibility into the balance sheet of these banks. They can't make an educated decision here about

how risky the bank is. Well, but you know whether you have over $250,000 in the bank. We all know whether we have over, we all know, we all see that sign. Yeah, but let me tell you... If the IC insures up to $250,000, that's it. Beyond that, you're taking your own risks. I have companies that were using SVB for business banking, and they had more than $250,000 in there, and they sweep that money into a money market fund. But that money market fund was basically custody by SVB, and they could not get access to their money. So are you telling me that when they log into their account at SVB, and it says that their money is safe in a Morgan Stanley or BlackRock money market fund, oh, you weren't smart enough. You're SOL. You should lose that money. Is that your position? I mean, really, are we going to do that? Hold on a second. Is that

the position of the Republican Party? Is that small businesses all over the country? And if you do this for SVB, you're talking about doing it for Signature Bank, and you're talking about doing the next half dozen banks, that basically there's a run on them right now. Their stocks are tanking and are being frozen. Okay. So David, I think I want to say a couple of things here, because this worker pontification did bother me over the weekend, where actually people are just using the idea of workers. Suddenly Silicon Valley tech startups with uncapped upside, the business plans of multi-trillion dollar companies are now reclassified as small businesses with workers.

Let's talk about that for a second. Most of these are venture-backed tech companies banking with Silicon Valley Bank. Now they have uncapped equity upside that taxpayers that indirectly bear the cost of this, and they do, did not enjoy. And here's the other thing. Okay. You and I know this well, so let's not play this game where, you know what? The investors in these businesses, it would be a very painful thing to do. But if you made a mistake as the management team, the business model of every one of those tech companies is the same today as it was last week and as it was last month.

So if those business models are really viable, there's capital that those investors, frankly, people like you can be putting into those same portfolio companies. But that is a difficult thing to do. It is painful. I know it is painful. It involves dilution. It involves added capital off a venture firm's balance sheet. The founders are going to make less money when their stock goes up. And that's part of the consequence and part of the bargain of capitalism is when you make a bad risk management decision by putting way too much money in one bank, even if your business model continues to hold, you personally are going to make less money because you had to actually raise capital to make up for the hole that you created on your

balance sheet. That's how capitalism works. Now, I think this tonification of the worker to say that this is about, now it's not tech startups, let's call them small businesses. And then it's really about the workers is really actually a myth to actually protect people just from equity dilution. And here's the other thing on that point. Many people, and you know this well too, who did business with Silicon Valley Bank had special arrangements with Silicon Valley Bank. Now you and I share in common the fact that venture debt is usually a bad idea for a startup, but nonetheless, Silicon Valley Bank did provide venture debt to a lot of these startups,

which allows those founders and CEOs to own greater ownership percentage in their firms. The taxpayers directly or indirectly don't participate in that. I'm up against a break. I want to give you just a quick chance to respond, David, and then a much more full chance after the break. Yeah. So listen, I understand that tech startups

are a convenient punching bag right now for a political candidate, but we need to be specific about what these companies did wrong. They opened a checking account. They opened a bank account. They didn't manage their business in a risky way. They did what every other small business in the country would do, which is open a bank account. And you want to tell them, you want to act like it's a moral hazard if we don't make

them responsible, if they don't lose all their deposits, they didn't make risky investments here. Hold on a second. Can I finish? Let me finish. Let me finish. Let me finish. Okay, let me finish. Go ahead, David.

They did not make risky business decisions. They did not make risky investment decisions they need to be bailed out of. They opened a checking account. Give me a break. There is no moral hazard here. Listen, if you went to the doctor and he basically committed malpractice, it's not your fault because you didn't shop for a better doctor. If you go on a plane and it crashes, it's not your fault because you bought that ticket. Give me a break. Small businesses are not in the position to evaluate the balance sheet of these banks. Even Bill Ackman, a sophisticated investor, says he can't figure it out. It's up

to the Fed to do that. The Fed has to protect depositors. They have to provide confidence in the system. And the reason why you're seeing a run on the banks right now is there is not confidence. That is why we have to restore it. That is why we have to protect deposits. And if you don't protect deposits in this country, OK, then we are going to have a banking crisis like you've never seen before. Then do it for everybody the same way with one set of rules. Not to say it's $250,000 for everybody else. Yeah, sure.

Let's change the rules after the fact for Silicon Valley Bank. No, let's do it for everybody. We absolutely have to do it for everybody. Is there some endless supply of money that we don't know about that's going to back all these banks? Like that bank insurance fund sounds like it was depleted by this rescue and although they say they're going to do a special assessment on the banks to replenish it i as i said before i got worries about where that who actually pays for that in the end all right so much more to get to david and vivek this is great you guys

are awesome standby quick break back to the guys don't look now but there's something funny going on over there at the bank george i've never really one, but that's got all the earmarks of being a run. I have some news for you folks. I was just talking to old man Potter, and he's guaranteed cash payments to the bank. The bank's going to reopen next week. But George, I got my money here. Did he guarantee this place? Well, no, Charlie, I didn't even ask him we don't need potter

over here i'll take mine now no but you're you're you're thinking of this place all wrong as if i had the money back in a safe the money's not here well your money's in joe's house that's right next to yours and in the kennedy house and mrs maiklin's house and a hundred others. How much do you need? Hey, I got $2,000. Here's $2,000. This will tie us over to the bank reopens. All right, Tom, how much do you need? Paging George Bailey. We need you.

We need to know. I love Jimmy Stewart. Right. Doesn't that take you back? Here again with David Sachs and Vivek Ramaswamy discussing the failure of Silicon Valley Bank and what, if anything, you and I need to do about it. The feds say they've got it handled, that the banks are going to basically pay for it with some insurance fund, which is going to double as George Bailey's $2,000. It's basically saying, you know, when people did a run, they actually did a run on the bank on Friday and the doors were shut and they weren't getting access to their money. And I'm sure it was very scary because their money's not sitting in the bank. That's what happens. You give the bank

your money and they use it to invest in certain things and try to make more money and improve their portfolio. And the balance sheet doesn't always work out the way you want it to if you actually want to make all the deposits on the same day. So that's the situation we're in. And normally we see that little thing, FDIC insured up to $250,000. And most of us don't have more than $250,000 in a bank. So we don't really care. But if you're a business, you do. And that this bank in particular, as I understand it, only 11% of the clients had less than $250,000.

So the vast majority of people who deposited in this bank had something like $4 million in there. Then you mentioned Roku, which had like half a billion. And they weren't really paying attention to the sticker, David. They weren't paying attention to the FDIC sticker that if this bank fails is what it's basically telling you, you can kiss your money goodbye. So why isn't it a buyer beware? You mentioned the money market account, but what about Vivek's point on like Roku? It knew if this bank went under, that $500 million, maybe spread it around, maybe use some of the bigger banks, maybe just hedge your bets a bit. I don't know Roku's situation. I'd be surprised if they just had

it sitting there in a checking account. I'm sure they're using basically money market accounts, but I don't really know and it doesn't really matter. I don't think our decisions here should be based on one company. There are 40,000 small businesses who use SVB and 10,000 of them are in danger or were in danger of missing payroll on Monday and having to lay off and furlough employees because they couldn't get to their cash. That is who I'm concerned about. And I don't know why we would treat tech small businesses different than other small businesses. That's where I agree with Vivek. I mean, he's kind of using tech startup like it's a dirty businesses. That's where I agree with Vivek. I mean, he's kind of using tech startup like it's a dirty word. I don't understand that. And if Signature Bank had gone out of business the day before SVB instead of the day after,

I don't think we'd be having this debate. I think everybody would understand that we must protect our depositors. Our depositors, our small business depositors are not in a position to evaluate the balance sheets of banks. And if you subject them to the risk of losing their deposits, we're going to have runs on the bank, just like in that Jimmy Stewart movie. We're going to be right back to the Great Depression. And in fact, if you go back to American history, 100 years ago, we had runs on the bank all the time. It led to the Great Depression. Now, how do we stop the runs on the bank? We introduced FDIC in 1933, but FDIC is only 250. Like you said, it's a woefully low amount. I think where Vivek and I can agree is it needs to be a much bigger amount for business accounts.

So we need to revise and update that. But look, our problem now is so much bigger than SVB. I mean, trading of Charles Schwab, $100 billion company was halted today. The stock market is now halted to the trading of half a dozen regional banks. We are in a much bigger situation. And this, I think, discussion needs to move past just what we do for SVB and its depositors. Because one of the main reasons why I want to basically protect depositors is to make sure we don't have runs on other banks. So one possibility I really want to recognize, Megan, or I don't want to step on you, Megan, but one possibility I want to recognize immediately in the back of what David just said is consider the possibility. I don't think it's a wild

possibility. I think it's part of what happened. that Silicon Valley Bank and a lot of its egregious risk management practices, et cetera, were in part created by a culture in which we bail out banks. Now, this time we didn't bail out the banks. We bailed out the depositors who are a bunch of tech startups that put money, in my opinion, too much money without diversifying in Silicon Valley Bank. What do we do is we create the incentives for that same thing to happen again. And so in a certain way, it is important to figure out how do we actually solve for what comes after Silicon Valley Bank. But the precedents we set here affect what happened in the future. In fact, that's exactly what we saw on display here. And that's also why I separate this idea of how we should have handled Silicon Valley Bank. I believe that its depositors should have been held to account for the risks that they took

and their investors. These are many venture backed startups could have put in more money to cover the hole if needed. That's painful for them. They make less money, but this isn't about the workers handle Silicon Valley Bank that way. And then prospectively in advance, not retroactively changing the rules after the fact, but prospectively in advance, change the rules of the road for everyone else to prevent a run on the bank, which no one wants. But let me ask you this, Vivek. What about David's point of distinguishing the depositors, like the investors? That's one thing I think most of us can say they're screwed. They failed to assess the proper risk. No one's going to cry a tear when it went down for them. But and certainly nobody has any sympathy for the management team. Most

of us don't at SVB. However, the depositors, can you speak to his point of like most of us with the money in there, these small business owners, they're not looking at the balance sheet of Silicon Valley Bank. And it's like just kind of the bank that you were supposed to go to in tech. A lot of these VC firms, as I understand it, insisted that you bank with SVB. So they did. Like, what about those people who are not really trying to assume risk? They're just trying to park their money someplace. Look, I think it is fundamentally unjust for multibillion dollar companies that parked eight and nine figure sums at Silicon Valley Bank,

whose CFOs, some of which did not even know what the deposit insurance maximum was. That's part of a culture of excess in Silicon Valley created by, among other things, 10, 15 years of easy money, money raining from on high like mana from heaven from the Federal Reserve. Now that we're actually seeing the disciplining process, this is part of that disciplining, Megan. And I know this characterization of small business, I know that's the focus group lexicon we're using now, but these are people who put together business plans to create trillion dollar companies, become billionaires themselves, had upside skew, had special deals with Silicon Valley Bank to avoid dilution in their companies. But those special deals required them to put that money into Silicon Valley Bank implicitly or explicitly. These are conscious decisions that allowed people to enjoy potentially outsized

upside for themselves, including companies in David's portfolio, I'm sure. But at the end of the day, when the risk went south, we're recharacterizing them as sort of sympathetic, innocent people who didn't actually didn't do their due diligence. I'm not saying they should be punished. I'm not saying that they're doing criminal prosecution. All I'm saying is play by the same rules of the road that you played when entering. And if you don't, the next time Roku or the equivalent of them or other multibillion dollar companies that parked hundreds of millions of dollars in, that's a cardinal sin. That's a risk management failure. And what are we saying now?

The public is still going to come in and save you for making those bad decisions. What should you expect in the future? More of the same yet again. That's what we're emphasizing. But if this had been a different part of the economy, this is why I think the Silicon Valley Bank story is important. I think if it had gone in a different order, if it had been a smaller regional bank, I think we would be having a very different conversation publicly in this country because

there wouldn't be influential people like David, like Mark Cuban, et cetera, having driven a dialogue to make this a concern about a national bank run when in fact it was in part all of those people have vested interests. It's not a slight, it's just a fact. People need to evaluate this. Wait, wait, wait. Before I give it back to David, before I give it back to David, how do you... You And it's not it's not a slight. It's just a fact. Well, wait, wait, wait. But before I give it back to David, before I give it back to David, what how do you you say it's like this risk that they're overplaying of a bank run? But speak to David's point about what's happening with

Charles Schwab today and the six other regional banks and the failure of the New York bank that we mentioned, like there has been some evidence on his side that this could get a lot worse, a lot faster. Yeah. So I'm actually not denying that. You see my Wall Street Journal op ed. What I do is I draw the distinction between how you treat Silicon Valley Bank and then prospectively how you actually prevent that bank run. I think the Federal Reserve needs to play its role as the lender of last resort. This is one of the main reasons why the Federal Reserve exists. I think prospectively in the short run, even temporarily, overshoot on what you need the FDIC insured maximum to be in the short run. You play it

strong. That's how you actually prevent a bank run in the future. So I've advocated these policies. I think those banks also need to raise deposit rates to incentivize people to keep the money actually, as opposed to pursuing a bank run. So my piece in the journal today lays out a lot of that. So I'm not denying the importance. None of us here wants a bank run in America. But the weird thing that happened over the weekend is the people who were tethered to Silicon Valley Bank's fate and the depositors and the startups that had actually parked money there had a weird incentive to actually create a great fear about a bank run in America, because that justified exactly what happened on Sunday evening when those tech startups effectively got bailed out by the government, which, by the way, and I want David

to respond to this, for years, and I assume David and I are on the same side of this. We generally favor deregulation. But for years, Silicon Valley Bank has lobbied and has explicitly made the case that it would not be systemically important, that the government would not need to touch it. And yet when their hour of need in Silicon Valley's broad hour of need, what happens? The government comes in and the very people who made that argument three years ago are now talking out of the other side of their mouth. It's not right. Okay. Let him respond. I never made that argument. I don't even know what you're talking about. If Gary Becker made that argument, fine, he's disgraced and he's going to lose all his stock options and his company's bankrupt. What we're talking about is the depositors here. Now, let

me go back to this point of moral hazard. I think we need to dispense with this. The way you solve moral hazard is by wiping out the stockholders, the bondholders, and the employee stock options. And Gary Becker's going to be in litigation for years. We didn't do that in 2008. That was a huge problem with what we did in 2008 is we didn't wipe out those stockholders. That was wrong. But here we are, and this is different, and it is not a bailout of those stockholders. What we are doing here is is different, and it is not a bailout of those stockholders. What we are doing here is protecting deposits. And if there is a shortfall, it is not going to be paid for by the taxpayer. It is being paid for out of insurance premiums paid by other banks. I think that is right, good, and appropriate. And if you send the message across this country right

now, in the middle of a banking crisis, that deposits are not safe, watch out. We are going to have those Jimmy Stewart runs on the bank. This is where I find Vivek's position completely irresponsible. And I have to say, the reason why we got into such a scrap on Twitter is he was maintaining this nonsense that somehow VCs like me on Twitter who were simply noticing the problem were somehow responsible for the problem. This is a left-wing tactic where when you notice what the government has done wrong and you pointed out that somehow you're blamed for it. Listen, it was basically the Fed and the Biden administration who created this unprecedented inflation. They basically

overheated the economy and then they slammed on the brakes and created all these toxic assets and all of these banks, not just SVB, but across the country, I noticed that. I pointed it out. I didn't even tweet, actually, until SVB was already in receivership and the run on Signature Bank had already started. So this idea that VCs could have anything to do with it, I think, is ridiculous. What we were doing is noticing that, hey, we have a huge problem here. We need to jump on this. And I basically tweeted out, where is Yellen? Where is Powell? Where is Biden? They didn't say anything on Friday. They didn't say anything on this. And I basically tweeted out, where is Yellen? Where is Powell? Where is Biden?

They didn't say anything on Friday. They didn't say anything on Saturday. Then finally on Sunday morning, Yellen goes on the Sunday shows and she basically gives this wishy-washy statement that didn't inspire anyone's confidence. And you could feel the lack of confidence and the panic growing by the hour because I talked to many, many business leaders, and they were extremely worried that at the Monday morning open of this stock market, we were going to see a panic like you've never seen before. And then finally, they did the right thing on Sunday night by basically protecting deposits, and they did the right thing. And I think this is the wrong time for the sort of what I would call populist demagogues to basically

coming out saying that we shouldn't protect deposits. OK, I know it's an easy way to score political points, but we must save the banking system. We must actually, to the contrary, I can tell you the number of people that told me that they would in Silicon Valley would be donors that are not donors that are mega donors, which is why a lot of Republicans actually aren't coming out and taking the stance that I am because their incentives with their donor class actually keep them in their place. But I'm just speaking my mind, David. And I'm not blaming the venture capitalists, but I do think it's important that people understand the incentives of the people they hear from and the financial incentives. It would be malpractice not to point out that from you to

Mark Cuban to anybody else had personal financial incentives to make sure Silicon Valley depositors are saved so they can at least understand when they're evaluating an argument about a national bank run, what prism they see that through, which I think is fair game. I think you would agree with that. But here's a deeper point here. This is not about this distinction between depositors and equity holders. Well, let's double click on those depositors. Actually, it is a discussion about equity holders. It's just a different class of equity holders, equity holders in tech startups, venture capitalists and founders who are in this to make billions. And I'm not a look, I've made a lot of money in my life. You probably have to. I don't think that's a bad thing or anything to be ashamed of, but let's call this what it is. This is about people who could be

putting up more capital as investors take dilution to make up for this. It's not about have trouble meeting payroll. Great. Inject some capital back into that startup. That's painful if you're a venture investor, it hurts returns. That's painful if you're a startup founder, you won't make as much money. But I think that that is exactly who this is a bailout for, is equity holders of tech startups. And you know what? If you want one set of rules, here's what I would have done. Let's be constructive about this because we can separate the bank run from the Silicon Valley bank issue is don't reward bad behavior on the one hand. If you're Roku, if you're a $6 billion unicorn that put $200 million in, and these are all real examples, I would say that that deserves to be disciplined through the market and say that

you don't get bailed out by the public. On the other hand, going forward, we do need to send a strong signal to the markets. There, I agree with you wholeheartedly by stepping up the FDIC maximums for everyone else, Federal Reserve stepping in and taking the steps that shore up public confidence. But I think that here, what we've actually done by using Silicon Valley Bank as the instrument to solve for that broader national bank goal is actually in part created the incentives for the very kind of bad behavior, whether it's the CFO of Roku or the CFO of another unicorn that wrongly concentrated their risk in Silicon Valley bank deposits, the signal we have sent, I'm sorry to say is it's okay. You can keep doing that. And we're going to incentivize that at the public FISC.

Go ahead. Yeah. So, so I guess what I'd say is, um, if we weren't in the initial stages here of a banking crisis that really needs to be nipped in the bud, I bet you and I could get in a room and hammer out a better FDIC and a better policy that would work and make sense for everybody. And we would treat everybody the same. Okay. I'm sure we could figure out that policy, but what you're proposing right now, quite frankly, is just too complicated for the situation that we're in. The situation we're in is you either protect deposits or you don't. What's it going to be? The country needs to know. Depositors need to know. Are they safe? If you tell them that they're not... Hold on a second. Let me finish, please.

If you tell them they're not safe, we are going to have lines around the block. I'm telling you, I've already seen... There are lines around the block around SVB in Silicon Valley at their branches right now. And I've seen photos, my friends have sent me photos of who's waiting in that line and they don't look like tech bros to me. Okay, there you go. It is not tech bros. These are regular folks, and they're terrified. So we have to protect their deposits. And let me tell you who the big winner is going to be if we don't do the simple policy I'm talking about.

It's the big banks because the Fed has now created two categories of banks. There are the big four banks, which they have deemed to be what they call systemically important banks or SIBs. Those are the ones who were bailed out in 2008. And the Fed has actually made it official that they are too big to fail. So if you put your deposits, your uninsured deposits above 250 in those SIBs, you can't lose your money. But if you put money above 250 in a regional bank, you can lose your money. It's at risk if that bank fails. Basically, you're just making an unsecured loan to that bank. That's not what anyone wants to do. They just want to open a checking account. So what we're on the path to doing here is creating a two-tier system where only the biggest, biggest banks are safe. The regional banks are not safe.

I want to make the regional banks safe. I want to do it right now. I want to let the country know that regional banks are safe. I want to stop any potential for bank runs. If we don't do this and the regional banks go under, we're going to be left with four big banks who are run by politically connected figures who basically are the guys who are cozy with Washington and Davos. And I know you don't want that. So I guess my question to you is, have you thought through the consequence of this policy? Yes. So I'd say a couple of things. First of all, I'm an opponent of the 2008 bailouts and I'm very consistent, bring my position all the way today. I reject that framework and look, I'm running for US president because I want to change that system. I think it deserves to really be just raised, gutted and built from scratch from the bottom

up. You're right, that's longer term. So in the short run, what would I like to have seen done here? Distinguish the one case of the first instance, Silicon Valley Bank not change the rules in retrospect, because that sends a signal for the next 10 years that that's exactly what the government's going to do. Because under your proposal, David, we're taking the problem we created in 2008 for the big four and say, let's just effectively nationalize the whole thing and publicly backstop the whole thing or else it's unfair. I go the other direction and say, get the government out of the business of bailouts altogether and let competition win. But even in the short run, I grant your point that that's not a short run solution to the issue of what's happening this week. I would say take prospectively in advance, not after the fact

rule changing, but prospectively in advance today. I mean, let's say I'm US president right now today, what would you have done today? Actually, have the Federal Reserve step in aggressively as lender of last resort and raise the FDIC maximum to a level that would avert a bank run in the rest of the country, but not conflate what we do with the tech startup bank in Silicon Valley, where a bunch of CEOs, and this is a unique case, and there was also some unique features of this bank where, again, a disproportionately high number of their deposits were uninsured. It was actually the bank that had the highest concentration in these mortgage-backed securities. And its customer base was also concentrated for a bunch of tech startups that were tethered

to high interest rates as well to not reward that bad management, including the bad management of CFOs of multi-billion dollar companies that parked a lot of money there, not to incentivize that behavior in the future. So I would have handled that in a bifurcated way, say that Silicon Valley Bank, these are the rules, everyone played by them. Depositors, these are the rules, everyone played by them. Ask your venture investors for more money, even if that means you as the founders and CEOs make less. And then to everybody else, we're sorry that this problem has been created, but we're going to solve it by actually raising up those FDIC thresholds.

What about that point, David, about Silicon Valley's poor management decisions? Like that appeals to me as an order of fairness. You know, this management company was overextended when it came to these mortgage-backed securities and these treasury bonds, and they knew it. And others made different choices. I mean, everyone knew that the interest rates couldn't stay next to zero forever, and others

hedged their bets. And that's why they're not in this position today. So it is kind of galling to see this management team that made all of these decisions, that yes, they've been removed, but now there's no consequence. You know, they're not going to suffer the laws of natural consequences because of their decisions. Oh, well, I mean, you and I agree on that. And I think we all agree on that. No bailout for SVB and its management team. They're wiped out. Again, their bondholders are wiped out. Their stockholders are wiped out. I think they're going to find themselves

in litigation for years. It's going to be reputation-destroying, career-destroying for those people. They may have liability for the stock options they sold. Who knows? Are they going to give back their money? Because I wasn't able to get all the dough, but my team just looked back to 2018, Greg Becker, the president, CEO. In 2008 alone, he made, I think, $7.6 million. If you look through his compensation form, it goes down the list, like millions and millions of dollars. Vivek mentioned the $3.6 million stock transfer that he made off with just two weeks ago. They do say that that was pre-planned and automated. So I don't know that we can attribute that to any sort of malice on his part. But we all agree, you, me and David all

agree on the Silicon Valley bank management and their shareholders, how they're to be treated, which all of us agree. But I'm asking if they're going to get to keep that money as they get bailed out. I hope not. Does Mr. Becker get to sit there with a wash in millions out in some yacht? I hope not. I think all three of us hope not. And that is, I think, reasonable basis for being clawed back.

But I think the harder point, I'm just going to the areas of disagreement because there's probably more we agree on than we don't. But just to illuminate the discussion here, I think that their bailout is for also a bunch of startup equity founders who had equity and venture capitalists in their business who benefited from venture debt, for example, that Silicon Valley Bank provided. That was uniquely from Silicon Valley Bank that allowed them to preserve greater equity ownership in their companies, such that if they did succeed and become high-flying multi-billion dollar businesses, they would make more money. But they banked with Silicon Valley Bank as a consequence, either implicitly or explicitly from those deals. It's important to

see those are the people we're bailing out by actually giving those customers the positive. You're saying they enjoy the upside and now they're being saved from the downside of their decisions. Exactly. These are conscious decisions. And it's fundamentally unfair. So that's why I think Silicon Valley Bank, we could treat it one way and prevent a bank run in another without conflating the two. I did. I want you to respond to that. Can I just give you this update? Let me just give you this update. Now, 20 banks have been hit by this crisis via the Daily Mail, Regional Bank, Western Alliance. You mentioned that stock price plunged by three quarters. Shares in First Republic dive 67 percent. PacWest by more than 35 percent.

The major banks also hit. Wells Fargo down 7.5 percent. Bank of America 7.4. Citigroup plunging 5.8 percent. J.P. Morgan down just 2.7. Billionaire economist Bill Ackman, who's been more on the David Sachs side of this whole thing, tweeting out, Our economy will not function effectively without our community and regional banking system. That's a point you just made as well. Therefore, the FDIC needs to explicitly guarantee all deposits now. Ours

matter. David and then Vivek, go ahead. Yeah, let me respond to that. So listen, that whole venture debt product, I've always been against it, just so you understand. I talked about it on my podcast a few months ago. I thought it was stupid for startups. I thought it was stupid for SVB. But that's not what these startups are being punished for. They're being punished for opening a checking account. That's stupid. We got to protect those deposits.

And again, it's not even about SVB anymore. Megan, it's about the 20 different banks now that are basically in jeopardy. And it's about the cascade that comes next. Remember, on Thursday, it was just SVB. By Friday, it was signature. Over the weekend, it was three to five more. Now it's 20. This problem will keep growing. We have to nip this in the bud. And you know who's smiling right now? Wait, wait, David, but how? Why aren't they calmed down by what the FDIC and the feds did late last night? Because they don't know if their deposits are protected. It's too complicated.

That's why I'm trying to say that Vivek's policy, yeah, maybe we could get in a room, fine tune that in a calm period. You and I could write better legislation. But in a moment like this, what we have to do is restore confidence to the economy and to the banking system. That's a fundamental issue. And if we don't, you know who's going to love this? Jamie Dimon. He's licking his chops right now. He is licking his chops right now because you know where all these deposits are going from all these regional banks, they're flooding into the top four banks. They're flooding into JP Morgan Chase, which is the number one institution, which is too big to fail. Thanks to the bailout in 2008 that we all have problems with, he is too big to fail. And so the logical response for everybody is just to go to a big four bank. Why would you do

anything different? If the Fed is not being clear that your deposits are safe, if you have any doubt about that, if there's a 1% chance that you might lose your money, why wouldn't you go to a too big to fail bank? This is the problem. I understand the point. Megan actually made a point that we skipped over there, which I think is really important though. How do you argue this? All three of us are on the same side. We've already established that of shoring up confidence in all of the other banks after Silicon Valley Bank. But here, if you're making that observation, well, this was in a scenario where we fully

backstopped all of Silicon Valley Bank's depositors. And so my point is, and we used a lot of ammo to do it, a lot of firepower, a lot of empty powder and dry powder. Instead, actually, if we could use that as a disciplining moment, you can actually use all of that dry powder prospectively by actually making sure the rules are evenly changed for everyone else. And so my question for you is, as a man of science, as a man who follows data, et cetera, it seems like no matter what would have happened, that decision still would have been justified. If we have a banking crisis of confidence in the rest of the banks, it was still the right decision to actually give the money to Silicon Valley Bank

depositors who are uninsured. And you know what? If there wasn't a crisis, it was going to be because it was saved because we gave money to those uninsured depositors at Silicon Valley Bank. And anytime you retrospectively look at a decision and can justify it both ways, that's not a scientific decision. It's not a logical decision. It's a decision that's fundamentally about, I think, the self-interest that's at issue for people who are at Silicon Valley Bank. David, I'll give you the last word. Yeah. I think that this idea that depositors can discipline a bank, I just think that's fundamentally misguided. That's like asking patients to discipline the doctor who commits malpractice. This is a situation where we need

consumer protection. Depositors, whether they're individuals or small businesses, must be protected. Their deposits can't be at risk. Otherwise, they will all flee to the big banks and we will not have a regional banking system. I just think it's fundamentally misguided. This extreme libertarian view, I guess, I don't even know if I call it libertarian, that consumers are in the position to do something about this. They're not. That's just fundamentally wrong. You know who needs to do something about this? The regulators. Consumers look to the Fed. They look to Powell, to Yellen, and ultimately to Biden to deliver confidence in the system. It's up to the regulators to go to these banks and make sure their balance sheets are sound. And if we need

to impose more regulations and rules on them while we increase FDIC so they can't invest in risky things, We should absolutely do that. Absolutely do that. But it's up to the regulators to do their jobs here. Do not blame the victim, which is depositors who are losing their money. So, Megan, I want to draw a distinction because I think this is very helpful. We've gotten further than much of the online ecosystem has in this debate, which has made for a great discussion. But here's the issue. I think there's a distinction between if you're below the deposit insurance cap, David, you're right. The customer should not be responsible actually for doing that due diligence. That's what that cap is about. But if you're above

that cap, and let's decide what the right cap is, but if you're above that cap, you're a company. The whole point is companies have more money than $250,000 with chief executives, with CFOs that are professional. Well, in thatFOs that are professional. Well, in that case, that is a case in which, you know what, you do have a responsibility as the CFO of a multibillion-dollar company to diversify your risk and understand what your risk counterparty exposure is. That's basics. Silicon Valley has been coddled for the last decade and a half thinking somehow a CFO of a multibillion-dollar company is exempt from this responsibility. I reject that. And I think that the more we actually create incentives for people to engage in that rash behavior, the more they're going to continue to engage in it. And that's my problem

where why I think we need to separate how we handled Silicon Valley Bank from how we need to handle the crisis that we're looking at in plain sight. Okay, but let me just ask you this quickly before we go. So you both agree that we need on a go basis, to stop these alerts coming in about the number of banks that we've had to halt trading at and then the possible run at other banks, no matter what we do with Silicon Valley Bank. We need to raise the FDIC cap so that depositors have confidence that their money is safe and we'll come back to them. By how much? Do you guys have an idea, Vivek? So I actually am in the camp of overshooting this in the short run, make it temporary such that we actually can deal with these problems in the long run in a more principled way.

So I would say pick a level at which psychologically you would say 90 plus percent of bank deposits, 95 plus percent of bank deposits are insured. That's a level that we can pick in the short run. And the Federal Reserve can flood in as a lender of last resort. And that allows banks to increase deposit rates, which stop a bank run. And I think that that actually is the right way to handle this, rather than sending the signal of an emergency, which is exactly what we had to invoke. Think about the bad communication of Silicon Valley Bank's CEO. Well, what did Janet Yellen do? We're invoking emergency procedures, calling somebody

systemically important, who yesterday was not deemed to be. I think that could actually have a perverse effect of contributing to the bank run that we're seeing today. That's also a possibility that we haven't actively explored, but could be a very real effect of the emergency measures that were taken. Go ahead, David. Yeah, I fundamentally think that the Republican Party right now needs to train their fire on the right targets. The right target right now is this Biden administration. They are the ones who created this problem. Biden printed trillions and trillions. There was trillions of reckless spending we didn't need. And then they told us that inflation was transitory.

So because of that, the Fed continued QE for six more months. They printed trillions. They created a hyperinflation. And then that led to this rapid rise, the spike in interest rates, and that is what has created all these toxic assets, the $620 billion just that we know about on the balance sheets of these banks, and that is what has led to this banking crisis. They are the ones who are fundamentally responsible. Now, I am glad that last night they started to act decisively, and we need to support that. So I do not want to make a partisan point. I think that Yellen finally and Powell finally got the message last night at 6 p.m. But they need to keep doing more. We got to solve this problem. But we cannot train our fire on depositors.

I am telling you, that is a path to ruin for the Republican Party. If you want Biden to get reelected in a couple of years, do that, even though he created this crisis. Biden created crisis, I agree. But I think we have to actually look in the mirror to have standing to be able to criticize Biden and the Federal Reserve. One of the top priorities of the next president has to be reform of the Federal Reserve itself. That's actually responsible for a 20 year God complex with the fat fingers, God with the fat finger that created the conditions for these disastrous outcomes.

But in the very near term, we have to make principled decisions so that we don't create bad incentives in the future for CFOs of large multi-billion dollar companies to make the kinds of decisions they did. And I think that we can separate that while actually taking an even stronger course of action is where I agree with you, David, really strong firm course of action to prevent a near term collapse or crisis. But I do not think it's the right thing to do to conflate the way we treat Silicon Valley Bank depositors, not some innocent mom and pop with less than $250,000, but CFOs of professionally or what should be professionally run companies that are actually abdicating their responsibility.

We're actively rewarding that. And I think, again, I would just encourage you to consider an unconsidered possibility so far, which is that when you actually engage in that kind of extraordinary behavior, it's actually the kind of thing that fosters more fear in the end, where you say emergency measures, Sunday evening, and yes, we said we were never going to do this and that these institutions were not systemically important, but still were going to intervene above the $250,000 threshold and give Roku $480 million back. Is it possible? I think it is at least possible that that contributes to some of the psychological panic we're seeing to say that, wow, this really was worse than we thought, as opposed to explaining all the ways in which Silicon Valley Bank was really particularly poorly run. There's a lot in there

that we did not get to the this bank's wokeness and whether it any of that had played a role in its collapse. And I think most financial experts agree, while that may have been a problem, the biggest problem was the one that we've been kicking around for the past hour. It's poor management. It's the way it's been investing its money and not hedging its bets. President Biden, for the record, says that, quote, I am firmly committed to holding those responsible for this mess fully accountable, presumably meaning the actual executives who got the country and this bank into this mess. He should meet himself. Yeah, well, yeah, we will find out. You guys, such a great debate. Most, most, not all, but most people wouldn't have the stones to take the debate to be on Twitter, take on such a smart, well-informed opponent as you both are doing right now.

And so honored to have been a part of it. Thank you for trusting us with the discussion. Thank you, guys. Thank you, David. All the best. You both. Fascinating stuff. Over the weekend, incredible, disgusting video emerged showing a sitting, respected U.S. federal appellate court judge being shouted down, sometimes in vile and vulgar ways, by a group of protesters at Stanford Law School, which ought to be ashamed of itself today. Judge Kyle Duncan is a member of the Fifth Circuit Court of Appeals. Remember, there's the U.S. Supreme Court, and then beneath the U.S. Supreme Court, there are the Circuit Courts of Appeal. These are the courts from which we typically select our Supreme Court justices,

and Judge Kyle Duncan is on one of them, the Fifth Circuit. He was appointed by former President Trump to the position in 2018 and confirmed by the Senate. Judge Duncan was invited to speak at Stanford by the college's Federalist Society. Now, that's a more conservative-leaning group that has a more conservative judicial philosophy. That group would tend to like justices like Alito and Thomas and the late Justice Scalia and so on. This is a society before which I have spoken as well at universities like Yale Law School, without incident. So even the liberal law schools are generally, historically, respectful of the fact that there is a group on most campuses that leans more right and doesn't necessarily feel the

need to interfere with them hearing from those they respect on the bench about their judicial philosophy and so on. But something very different happened at this particular, quote, protest. The judge, for one thing, did not back down and the administration was present and part of the attack on him. Joining me now, Tim Rosenberger. Tim's the student who invited this judge to the campus and was there to witness everything that happened that day. Tim, welcome to the program. What an incredible event. It was stomach-turning when I saw what they did to your event. Let's just start with this, right, because this gets lost in the coverage. Why did you guys want to hear from Judge Duncan? Absolutely. Well, thanks for having me on, Megan. I became a daily viewer of yours in 2016 and have been a big fan ever since. And you're the perfect person to do this exclusively because of your

training as a lawyer. And we're so grateful to be on. You know, we wanted to hear from Judge Duncan, as you said, because he sits one level below the Supreme Court. This is one of the most respected judges in the country, somebody eminent in the legal profession. You know, we didn't bring him to speak about anything particularly controversial. The judge came to talk about cryptocurrency and firearm regulation. And as you saw on the tape, we didn't get to hear any of that. We had sort of like a 40-minute debacle, and then the judge had to be escorted out by Marshall. So we're hoping he can come back. We've re-invited him, but we were here to speak about some really pressing, timely issues in cryptocurrency and firearm regulation, and

that didn't happen. And it's a wonderful opportunity to hear, to get a yes from a circuit court of appeal justice, a judge. I mean, that's a great opportunity because this is a guy who will have his finger on the pulse of where the law stands, what the U.S. Supreme Court precedent is on it, how it's likely to go if it's if it's going to go up to the Supreme Court. All that should be interesting to young lawyers of any persuasion, even if you disagree with the guy's judicial philosophy, just getting his insights on how those things are likely to go. I would love to listen to that from Justice Elena Kagan or this this judge, anybody on the federal appellate court or or even trial court. So what a missed this judge, anybody on the federal appellate court or even trial court.

So what a missed opportunity by the people on the other side at Stanford, who are supposed to be among the best and brightest law students in the country. Okay. So did you know that they were planning a protest before he got there? We had heard there was going to be a protest. And in anticipation of that, I actually met with the administration on Tuesday. We went through some ground rules, and they affirmed Stanford's procedures as they are written, which say that protest is fine. We were good with that. Difficult questions in Q&A, totally fine. Sort of being present or being silent or doing a walkout, all fine.

We have a strong rule against disruption, and that's specifically supposed to be enforced as follows. If the student's disruptive, they get a warning. If they continue to disrupt an event, they're escorted out of the event. As you can see in that video, we had a very disruptive group of people. There was no warning. There was no escorting out. And actually, at one point, the DEI dean who you see in that video says, oh, well, this isn't this isn't a disruption. This hasn't crossed the line. And you've got to wonder what would cross the line, like lighting the podium on fire. Right, right. Let's give the audience a flavor of what we're talking about. Here's some of the heckling. I'll show that DEI speech in a minute. This woman, she joined. She was the protester in chief, this administrator who was supposed to be keeping the peace and and stopping disruption. We'll get to her in one second. Let's first just show some of the heckling that Judge Duncan had to deal with while he was trying to address your group. In this school, the inmates have gotten control of the asylum. Is this a law school?

Yeah. This is not a jurisdiction. This is a law school. How absurd. You're supposed to be learning to be lawyers we are that's why what court are you going to go in and act like this you just said it's a law school there's no jurisdiction why would you suggest anybody to this trigger why do you want to trigger you invite a speaker on a campus and then you you gang up and heckle them to death. And then you invite an administrator to give a stage remark. What is this? Is this like a struggle session? You guys are trying to hear what anybody has to say that doesn't agree with you.

It is laughable and everybody knows it. You know it. The Federalist Society knows it. Everybody knows it. You don't want to hear a single solitary thing. What interest do you have in what you have to say? I don't know what I have to say. Finish your remarks, Judge. If you think that I'm going to stand here and answer a bunch of hostile, ridiculous, when did you stop beating your wife type questions. So how does it feel?

You complain about people like me or judges like me or lawyers like me or whatever, you complain about them denying your rights and erasing your resistance and whatever other does where you want. And then you turn right around and do the same thing to somebody else. The same damn thing. You do it to somebody else. What does it feel to be a complete hypocrite? It's amazing.

It's I mean, they never fight back, Tim. So the judge fought back. But give us a flavor for what he was fighting back against what preceded him taking on the crowd. Yeah, absolutely. Well, he got up to the podium, he started to give a speech and no one could hear it. Right. I mean, we had a mic and it didn't matter. He was trying to get through this, just try to get onto his speech about cryptocurrency and guns. And there was just this din and people sort of yelling things at him. Before that, he'd come in the hallway and people were yelling particularly vile things about, you know, rape of various family members.

I don't know if you can see that, if your viewers can see that sign. Certainly listeners can't, but there's a sign, you know, Kyle Duncan can't find a female sex organ. And so there are these very sort of crude and sick cat calls being thrown at him, unfounded slanders about how he supposedly erased the rights of various groups. It was just just bedlam and really impossible for him to get through speech or do anything. This is a close up of the disgusting sign. OK, so he decided not to just roll over. He decided to take them on. And it's exactly right. And I look forward to seeing a repeat of that when any one of these young lawyers, aspiring lawyers,

appears in Judge Duncan's court. That will bring this full circle when one of these morons actually has to argue before the Fifth Circuit Court of Appeals. The tables are turned, and he's in charge of their client's future. This is one of the many reasons why you don't disrespect a federal court judge. It's just stupid. Okay, so he took them on, they battled. And you must have been very frustrated watching this. I mean, was it annoying for you to who just wanted to hear the guy? Well, I think it was more upsetting in that, you know, we invited a federal judge here, and we want to be a welcoming, welcoming hosts to him. And instead, we subject him sort of this utter contempt, and this horrible, crazy mob. And I just feel really guilty for what,

what happened. And I'm very sorry to the judge. And you'll see that Stanford's president and dean, after this went viral online, I would add, decided to issue an apology. But you know, that's, that's an important first step, I don't think has made it right. No, exactly right. There's a real question about how this was allowed to happen. And you shouldn't you shouldn't feel guilty at all. You tried to do the right thing. You did not do the wrong thing. Your colleagues did. These other kids, young people. All right. So he gets to the point where he says, can I speak with an administrator? Can I, you know, understanding that the policy at this school, like most, is you're not allowed to disrupt.

I mean, that's the U.S. Supreme Court law, that schools can discipline free speech when it's disruptive at the educational level. He wants to speak with somebody who can stop the disruption. Enter Tyrion Steinbach, who's the head of DEI at Stanford Law, Diversity, Equity, Inclusion, which is constantly a hammer in search of a nail. I mean, they will find some sort of diversity problem, whether it exists or not. That's what she's employed to do. And instead of getting up there and saying, put down your sign that suggests this judge can't find a woman's clitoris, forgive me, audience, that's what the sign said um she encourages them she seems to

be applauding them and she then piles on the judge while making it all about herself at the same time and how uncomfortable she feels and having to do this to this villain but you know he put her in this position so here we go here is a little from from Tyrion Steinbach. I have to write something down because I'm so uncomfortable. I'm uncomfortable because this event is tearing at the fabric of this community that I care about and I'm here to support. Is the juice worth the squeeze? Your advocacy, your opinions from the bench land as absolute disenfranchisement of their rights and does land. Let me get to the point.

It's uncomfortable to say that for many people here, your work has caused harm. In my role at this university, my job is to create the space of belonging for all people in this institution. And it doesn't feel comfortable and it doesn't always feel safe, but there are always places of safety. I'm also uncomfortable because it is my job to say you are invited into this space. You are absolutely welcome in this space. We believe that the way to address speech that feels abhorrent, that feels harmful,

that literally denies the humanity of people, that one way to do that is with more speech and not less, and not to shut you down or censor you or censor the student group that invited you here. That is hard, that is uncomfortable. I hope you can learn too while you're in this learning institution. I hope you can look for the spectacle and the noise to the people holding the signs. They are here

because they feel harmed not just by your speech if it was just words that would be one thing. You have authority. You all chose to be here today. Many people go before Judge Duncan who do not so choose to be there. And they have to listen to everything he says. You have a choice. You do not need to stay here if this is not where you want to be. And then half the students walked out. I mean, the Tim, it's got all the DEI buzzwords and behavior.

First of all, the woman wrote it down. So this is planned. She was looking forward to her little moment hijacking your event, your dean of DEI. She's uncomfortable. All about her. How does she feel? How about, how does Tim feel? How does the Federalist Society feel?

How does the judge feel? She didn't care. The clicking, literally when I was in my college sorority at age 17, 18, that's when we used to click. We used to snap like that instead of clap. Juvenile, pathetic way of showing your support. Disenfranchised, of course, she blames the judge and all of his rulings of disenfranchising people, but he pointed out in his rebuttal, what about the people you're disenfranchising by not letting me speak? And if I heard that phrase one more time, Tim, she said it at least four times, is the juice worth the squeeze? You're allowed to be here. You were invited here. But what you need to ask yourself as you address

this group to which you've done harm is whether the juice is worth the squeeze. So how did you feel when you listened to this woman hijack your event? I think we felt pretty set up. And it rings hollow because we had 15 minutes of 15, 20 minutes of bedlam where the judge wasn't able to get anything out. Then we have this seven minute pre-prepared speech on DEI and on, you know, people being uncomfortable. And then and only then, now this is an hour long event, so now we're about halfway through it. Then and only then is there some modicum of order where the judge can speak. So, you know, if that's what we're going to call free speech now, I think it's sort of over.

I think, though, it's important to realize this isn't about 1D. This isn't about Stanford. This is just about sort of the insanity that's at universities now. And it got caught on tape, right? Some things that are normally said in the shadows were said out loud at the podium on tape during the Federalist Society event. But this is the attitude. If you're a DEI dean, you know, you may be a fine person.

We've had fine conversations with Tyrion in the past. But your primary customer is the craziest, loudest, most nuts student. And so, you know, you're responding to that incentive and that means doing whatever this was. The hubris of this woman to look at Judge Duncan and tell him he needs to learn. He needs to learn while he's in that room from her. She never sat on a federal court of appeal. She's never been a judge. No one in that school has even passed the bar exam sitting in front of him that day. The audacity to say that to a sitting judge was stunning, even to meet him. Well, I'm really disappointed to hear that, but we'd love to have you at Stanford if you'd like to have the full experience.

Oh, I'll go. I'll go. And I expect I would be treated with more respect because I guess I've said some things in the past or done some things in the past that these folks would approve of. But I have no desire for their good approval. I have no desire for the just like Judge Duncan to be in their company. And I think more judges need to do what we've seen a couple of judges do and say, we will not be recruiting anyone from these law schools outside of the Federalist Society. We won't be recruiting anybody who doesn't stand up for principles of free speech. I mean, what do you make of that? I think that's a good step. I think there are a lot of pressure points we can take, but judges absolutely should think critically about how their students are acting. You know, you saw 100 students. We're not that big of a law school. I mean, this is a big group of students showed up to jeer at this judge to wave obscene signs. You know, since since we're not doing a sort of family programming roles, the judge got into it, the guy with that poster. And actually, this guy yelled at him, you know, I'm a gay man, I have sex with men, I can find the prostate, why can't you find the clitoris? I mean, this is

something yelled at a federal judge when he comes to visit what's supposed to be America's preeminent law school. And so maybe think again about whether this is America's preeminent law school. Yeah, we actually have a bit of that exchange since we are in the R-rated camp. Let's play it. Stop for. No, but... What? I can't get you to sign. I can't get you to sign. No, I'm sorry. I was distracted by the stupid, infantile 14-year-old sign. Yeah, right. It's so rare to see somebody call out the nonsense.

And you know what? It's a little reminiscent, is it not, Tim, of what happened to Brett Weinstein at Evergreen, where the students turned on him, shouted him down just for having a totally normal position, which is it's not right for the black students to demand that the white students not show up a day at school, at a university for which they've paid, which is what was happening. And Brett Weinstein lost his job. He got shouted down. He got treated like a terrorist for that. But isn't it reminiscent of that? Absolutely. Absolutely. And it's reminiscent of things you hear about all over the country. You know, again, the difference is this was caught on

tape. That's what got the apology. That's why we're here today. Well, let's talk about the apology. So the school, some were praising the Stanford Law School over the weekend because it issued a statement sort of falling on its sword here. In part, the Stanford Law Dean, Jenny Martinez, issued the following statement. So these are some highlights saying, okay, it's a violation of the disruption policy

to prevent the effective carrying out of a public event. Hackling, other forms of interruption that prevent a speaker from making or completing a presentation are inconsistent with the policy. She goes on to say, tempers flared along multiple dimensions. That's

both siding this event. That's not inappropriate. You know, one side hijacked and the other side was irritated. In such situations, an optimal outcome involves de-escalation that allows the speaker to proceed and then for counter speech to occur in an alternative location, alternative location. However, well-intentioned attempts at managing the room in this instance went awry. Clearly a reference to Steinbach. Wouldn't you agree? I think that's how I interpret it. Yeah. But I think things have gotten pretty out of hand before we even got into the room, right? You had sort of this gauntlet. The judge had to go through a crazy yelling face painted people. You had a poodle mix painted as a trans flag running around. you had these posters i brought one with me today that have uh headshots of our entire board they went with a very thin and young headshot of me so

i'm grateful for that but uh you know it says you should be ashamed these were up all over campus they had you know posters sort of alleging various slanders against the judge all over so uh you know the de-escalation probably needed to happen earlier and probably even months ago, you know, probably with having some diversity on the faculty, probably with having as a normal part of the work of the law school being exposed to opposing views and having to debate them rigorously. You know, if the only time you see an opposing view is when the Federalist Society brings in a sitting federal judge, then, yeah, you're probably not going to respond to it particularly well. Well, the Stanford president weighs in and says the following is a joint

statement with the law dean as well after her statement alone and says, we write to apologize to Judge Duncan for the disruption. What happened was inconsistent with our policies on free speech. We're very sorry about your experience here. And then he goes on to say, in addition, staff members who should have enforced university policies failed to do so, clearly referenced to Tyrion Steinbeck and others who were there. She wasn't the only administrator and instead intervened in inappropriate ways that are not aligned with the university's commitment to free speech. We are taking steps to ensure that something like this does not happen again. And the judge responded today, accepting the apology or yesterday to his credit, pleased to accept their apology, and says, I hope you tender one as well to the Stanford Law School community most harmed by the mob action, the members of the Federalist Society, and then says your apology promises to take steps to make sure this kind of disruption doesn't happen again. Given the disturbing nature of what happened, clearly concrete and comprehensive steps are necessary. I look forward to learning

what measures Stanford plans to take to restore a culture of intellectual freedom. I'll tell you, Tim, I'll tell you my position. Tyrion Steinbeck needs to be fired if she had any honor she would resign, since her mission is clearly not aligned with that of the university, as stated by the president and the law school dean. Short of that, she should be fired. Do you agree? I think they hire people like this to be scapegoats, right? I think they've put her in a bad position. They tell her, your customer is the craziest student. You should do things like this. I mean, why? There were five administrators in that room. Why was the DEI dean, including the acting dean of students, why was the poor DEI dean sent down to de-escalate?

There's, you know, this is somebody they have set up as a scapegoat. And I'm not sure she should be fired. That's my position. Maybe this shouldn't be a job. Maybe they should be clearer on what the actual role of creating belonging is. But you shouldn't just create a role that sort of is head activist. And then you can sort of parade that person out when you want to get out of trouble. So I think this is about a bigger change than firing this dean who has very little actual power. It's a very good point. It's a very good point. The fact that her position exists is

Stanford's fault. As I said, they created the hammer in search of the nail. But what she did was disgraceful. It was disrespectful. I mean, as a member of the bar, I was horrified by her behavior and treatment of that judge. I hope you learn. You learn. You sit down and be quiet and learn for once, madam. I'll say this. Now, the administration has a new message for you and the Federalist Society. They want you, because I understand there have been some threats coming your way, and they're worried that you're just as fragile as the people at that protest. They want you to reach out to the DEI group for mental health assistance. Literally, Tim, is there one member of the Federalist Society in any chapter of the United States who needs mental health assistance because of a protest?

I don't think so. Again, this happens often, or at least this attitude happens often. You saw 100 of our classmates showed up to wave signs and yell sort of wicked things. And so there's a bigger group that sort of is hostile. And so we're used to the hostility. We can take the heat. And in a way, maybe this is what gives us a great legal training. It's not sort of the one-sided use, but it's spending three years in hostile arguments. Well, it's so true. You would think the other side would appreciate that opportunity as well, because these law students, I've never seen people so thin-skinned, and they're always worried about their emotional trauma. Do you have any idea what happens in a deposition, in a courtroom? Do you know what a

hot bench does to you? It's all about humiliating you. All about you. I remember this judge yelling at me after a default judgment had been entered against my client prior to our involvement in the case, screaming at me from the federal bench. Do you understand what willful blindness is? Do you know what willful blind humiliating me? It wasn't my error, but I took it. I could go on. Depositions get very ugly. You can't just go cry in your soup like a little baby and then snap when you get a favorable ruling. I would love to practice against these people. But the threats are a different matter. And is it true that you and or your your friends in the Federalist Society

have been getting some? No, I haven't received any threats, but I have been sort of staying off of most of my social media. So who knows? I have heard that there have been some things involving others, but I don't think anything that serious. I think this is more about mental health. And, you know, we have our own support networks, right? We'll be OK. We don't need to go talk with the agitators to feel supported. No, I mean, honestly, my impression is no one is going to go seek mental health assistance

from the DEI group, no less, because they're not feeling hurt and wounded. They're mad. They're ticked off. You know what you do when you get mad and ticked off? You plan. You think about it. You come up with a better plan and you fight.

That's what you do. They've only inspired, I think, members of the Federalist Society to fight back and beyond, not just the Federalist Society. Those of us who don't want to see this corruption of our college institutions, our law school institutions, our medical institutions, the just boneheaded training of our young people and the reinforcement that they're too weak to hear opposing point of views the Federalist Society believes. And the reference of all of you back to the three administrators who were there and letting it happen is just salt in the wounds, Tim. I'm amazed. I really hope that you are resolved to fight and to get yourself not only out in the practice of law, but on federal benches so you can sit next to guys like Judge Duncan and handle these litigants when they come before you appropriately. I'll give you the last word.

Thanks for having us, Megan. We are undeterred. We have this week, Jonathan Mitchell, John Yu, and Gene Hamilton from America First Legal. And we're really grateful for the professors who have stood with us at Stanford, the folks at the Global Liberty Institute, like Josh Brown, Scott Atlas, Russell Berman, the Humanities Department, and of course, our advisor, Michael McConnell. Absolutely, you know, take pressure. If you have kids, think about where you're sending them for school. And finally, we need prayer, because if you see that video, there's something beyond sort of thought and reason happening. We need prayer to change hearts and minds and really get to a place where we can love and forgive each other. So thank you, Megan. So well said. So well said. And I accept your invitation. I will come

anytime you guys want me. It would be my honor. Thank you. Last night were the Oscars. I didn't watch. I got to admit, I'm not into it. You know, they went woke. They're still kind of woke. They're annoying. Hollywood hates everybody who's on the right or center.

And we know it. But there were some nice moments. And one was when the actress Michelle Yeoh, who starred in Everything Everywhere All at Once, which literally won Everything Everywhere All at Once last night. It won everything. She won Best Actress, and listen to what she said. This is proof that dreams dream big, and dreams do come true.

And ladies, don't let anybody tell you you are ever past your prime. Never give up. Love that. Apparently she's 60 years old. She looks amazing. And it was a middle finger to Don Lemon. As I told you, that was not a left right issue. That was just a, you know, are you a moron or not issue? And she's not. Also, best actor, Brendan Fraser for The Whale. So good to see that, right? Like he, I love a comeback story. America's great with those. And he seems to have really earned it. And then there was a great moment when best actor in a

supporting role, Ki-Hoo Kwan, he starred, he was the kid in the Indiana Jones movies, played Shorty, remember? And he and Harrison Ford had a nice moment where they hugged on stage. That's really sweet. I like when they do the emotional stuff and not the woke luxury stuff. And he had a moment that I'm stealing right now from NPR's Up First this morning. It was a great soundbite. Take a listen. My journey started on a boat. I spent a year in a refugee camp and somehow I ended up here on Hollywood's biggest stage. They say stories like this only happen in the movies. I cannot believe it's happening to me. This, this is the American dream.

You know what? We need more of that. Shoot it in my veins, as the kids say. He loves America and he's not afraid to say it. Is it any accident? You know, a lot of immigrants who come to the country are the ones who love the country the most and are the biggest proselytizers for it. So it was wonderful to see him get up there

and remind people of how awesome living in the United States is and being in this country is for all of us. So good for him. Glad he won. Jamie Lee Curtis won. I predict we're going to get a Jamie Lee Curtis speech soon. That sounds like that Sally Field thing, apologizing for her privilege.

Anyway, overall, doesn't sound like it was as woke as it could have been. And I am very glad to see those supporting actor and actresses in particular. So anyway, that's my take on it. We will see you tomorrow. Thanks for joining us live from Montana. Thanks for listening to The Megyn Kelly Show. No BS, no agenda, and no fear.