The biggest takeaways from the 2023 Milken Institute Conference

Yahoo Finance's Brian Sozzi, Allie Garfinkle, and Rick Newman join the Live show from the 2023 Milken Institute Global Conference to discuss how business leader's are addressing the impact of the recent banking crisis and adoption of artificial intelligence.

Video transcript

AKIKO FUJITA: Finance's mighty team on the ground. We've got Brian Sozzi, Allie Garfinkle, and Rick Newman there. Guys, I was out there yesterday. It feels like there's a bit of a split picture, would you say, in terms of how people are feeling about where the financial system is right now? On the one hand, Brian, you had that conversation with Jane Fraser, who said, look. The fact that banks could step in was a good sign. And yet, you've got other executives who are saying the implications for the US economy are just beginning.

BRIAN SOZZI: It was so great to see you, Akiko. Yes. This has been a very crowded, crowded conference, guys. 4,000 people, 280 panels. And it has felt like 4,000 people and 280 panels. But really, a takeaway for me is despite all the banking concerns, Citi CEO Jane Fraser telling us she views the banking system as stable. Nobody really knows where the economy is going. You have a camp saying we are in a recession. You have a camp saying there might be a recession later this year.

And you have a camp saying things are optimistic and fit into this theme, Rick, of a thriving universe, which to me, is-- it's hard to stand up and believe in when we're just, what, 24, 48 hours after. One bank got gobbled up by a very giant bank in JP Morgan.

RICK NEWMAN: Right. And Citi CEO Jane Fraser told the whole conference yesterday the last piece of uncertainty is out of the way. And guess what? No one believes her. I mean, the market, at least to say-- fair to say the market doesn't believe her. Otherwise, we wouldn't have more regional banks plunging today. So the conversation today has now shifted to, OK, how do we get out of this? And I heard a really interesting idea from former Secretary Steven Mnuchin at a panel just a couple of hours ago.

He favors raising the FDIC deposit insurance limit to $25 million. Right now, it's $250,000. He says raise it to $25 million. That's not a crazy idea. This is actually an idea that's out there. The idea is instead of having this cutoff point where some deposits of banks are insured and then above that, they're uninsured, it's those uninsured deposits that are the problem right now. Those are the deposits coming out. So Mnuchin-- there are others who say, just have unlimited FDIC insurance.

You're not protecting shareholders. You're only protecting depositors. But I thought it was quite interesting to have Mnuchin sign on to that idea. Charlie Scharf, the CEO of Wells Fargo, was on that same panel. He was kind of like--

BRIAN SOZZI: They've had a lot of troubles. Of course.

RICK NEWMAN: Oh he's--

ALLIE GARFINKLE: Yes.

RICK NEWMAN: Charlie Scharf is like, 25 million. I don't know about that. Because somebody has to pay for that extra insurance. So-- masters of the universe out here, and they're trying to figure out how to solve this problem just like everybody else.

ALLIE GARFINKLE: Well--

BRIAN SOZZI: The thing is, really, they might raise it to 25 million. But it doesn't solve how management teams are going to run these banks.

ALLIE GARFINKLE: Exactly.

BRIAN SOZZI: The argument could be made, Allie, that a lot of the risks we are seeing now, a lot of these bank failures have been because of bad management teams, misguided compensation packages, and a whole lot of people doing a whole lot of things wrong.

ALLIE GARFINKLE: Because what this feels like to me, Brian? This feels like first Republican JPM was Monday. Now it's Tuesday and we have to press forward.

BRIAN SOZZI: Wait, it is Tuesday?

ALLIE GARFINKLE: It is Tuesday, right? No one-- a bunch of economists I've been talking to are staring down the barrel of this fed meeting. And they're split too, what they're saying. I was talking to one yesterday that the flux report chief economist who was saying, nope, there's going to be many more rate hikes. I was talking to another who was saying, nope. This has to be the last one or the economy will absolutely rebel. Though the thing is, I will say the only place I'm hearing optimism is AI.

I was expecting to hear a lot more skepticism. But in fact, what I'm hearing is just opportunity. Opportunities in fintech.

BRIAN SOZZI: I would have come back on that because--

ALLIE GARFINKLE: Well then, we're going to come back to it to be fair.

BRIAN SOZZI: I want to keep keep doing the name dropping here.

ALLIE GARFINKLE: All right. Let's do it. Let's do it.

BRIAN SOZZI: OK, TCW's CO, Katie Koch, new CO--

ALLIE GARFINKLE: I did her makeup.

BRIAN SOZZI: Six weeks at the job, used to cover tech a lot at Goldman Sachs. She said it's going to be a job destroyer, AI. And I think that fits really well to the story woke up this morning with Chegg. The stock getting absolutely slaughtered because of what is happening and what may happen down the line because of AI.

ALLIE GARFINKLE: And what I'm hearing from absolutely everyone else is job creator, and that Chegg is an anomaly. The actual interesting thing-- the most interesting thing I heard, I'd argue, is that from Greycroft co-founder Dana Settle, more name dropping, who said to me that actually, there is one area that AI won't touch. And that is the consumer. Consumer goods, AI-- ChatGPT can do a lot of things for you. But it's not going to make your skin care.

BRIAN SOZZI: Rick, final word to you. Biggest takeaway from this conference.

RICK NEWMAN: Let's go back to banking. There's something-- there's a second wave coming in banking. And it's going to be what happens when the credit crunch. So the people here at the Milken Conference are the people who issue the credit, who take out the debt at every level of the capital structure. And we know this is going to hit commercial real estate. But I've been hearing specifics about what part of commercial real estate. It's mostly business properties in large cities. And it's second-tier business properties in large cities.

And the implications, or the outright predictions, are that we're going to see bankruptcies. There are going to be a lot of companies, maybe middle companies, that are going to get stuck in that funding squeeze. And that is what this credit crunch is going to be later this year.

BRIAN SOZZI: Tremendous insights and tremendous work from both of you. I thank you both for being here and doing all that work. Guys, back to you in New York.

AKIKO FUJITA: All right, great work out there. Thanks so much for that. Our team out there at the Milken Conference in LA.