Exclusive: Fmr. Treasury Secretary Mnuchin on NYCB Investment 3/7/24

Carl Quintanilla (0:00)

Market Moving Insight and Analysis join Jim Cramer, David Faber and me, Carl Quintanilla, on the opening bell hour of CNBC Squawk on the Street.

Good Thursday morning, welcome to Squawk on the Street. I'm Carl Quintanilla with Jim Cramer, David Faber at Post 9 of the New York Stock Exchange. Pre-market's got a little pep, as some of the eco data today is encouraging.

Productivity revised higher, unit labor costs revised lower. Big jobs number tomorrow, but for now, tenure 406, lowest in five weeks. A roadmap begins with regional bank stocks mixed after embattled lender New York Community Bancorp secures that billion-dollar cash injection. Steven Mnuchin, who led the raise, gonna join us exclusively in a few minutes.

David Faber (0:36)

Plus shares of Novo Nordisk, they are hitting a new high early trial data of an experimental obesity drug, another one showing that it may be more effective than Wigovia.

And big tech struggles, Apple. While those shares are looking for a bounce after a six-day sell-off, Tesla, similar story. No longer one of the most valuable S&P 500 companies.

Carl Quintanilla (1:00)

Let's begin with NYCB's billion-dollar equity investment led by former Treasury Secretary Mnuchin's firm, Liberty Strategic Capital. He's gonna join us in a few moments. Jim, got some clarifications today, some more data on deposits, the percentage that are insured and so forth.

Jim Cramer (1:17)

Yeah, I think it's important to know that when the former Secretary of Treasury did a previous deal, IndyMac, which was a deal involving a bank that was really one of the worst-run banks in the country, came in, had the bid that was best for the FDIC, the cover bid, the second bid was much lower.

It ended up making him a lot of money, and that's being dredged up again as somehow against him. David, the reason I mention that is because the risks may even be bigger here, if only just because we're dealing with so many rent-controlled units, and the law changed in 2019 to make it so that those who think this is going to be a quick windfall may be completely ill-advised. I think that...

David Faber (1:57)

You're talking about multifamily.

Jim Cramer (1:59)

Yes, because that is preponderance.

David Faber (2:00)

Which represents 44%, I believe, is the number of their loans. That's, yeah.

Jim Cramer (2:04)

To me, it looks great multifamily until...

David Faber (2:06)

Right, because multifamily in New York, which is where this bank does a lot of its business, is actually, you'd imagine, quite strong, given rents are at all-time highs and things of that nature. But to your point, if you can't raise the rents in certain of their portfolio of buildings, then when people have to come to refinance at a higher rate, it should be difficult, something we're going to ask.

Jim Cramer (2:27)

They've got this little window to produce in about. But, David, anything was curious?

There's no law sharing agreement with the government.

David Faber (2:35)

No, no, no, no. This is a private transaction.

Jim Cramer (2:38)

I'm just saying that I already read stories about it's a giveaway, because there's been such dilution. I mean, David, this bank was 48 hours from being a New York non-community bank.

David Faber (2:48)

Although the deposit flight was the one characteristic that it wasn't as horrible as I would have thought. It was not as bad. It's always hard to know exactly, but it's something they talked about in the conference call that began at 8 a.m. this morning.

So, you know, the stock price may have been collapsing, which it did, but it wasn't clear that the deposit base had a similar rate.

Jim Cramer (3:08)

That's true, and that's why there's not fear.

David Faber (3:09)

Meanwhile, Mnuchin's firm, along with a number of other significant investors, that includes Citadel, a firm called Reverence, which is run by an old friend of mine, Milton Berlinski, who once ran financial institutions at Goldman Sachs, and they've done a lot of these sort of difficult type of financially focused deals.

They're doing great. I mean, it's 1.05 billion overall. It's common and a preferred. Now, it's a pipe, remember, so it's got to get registered.

They're not in this for some quick trade. But by the way, when you buy at two, and then they have warrants for 60 percent of that value at 250, I mean, they're in the money looking great already, Jim. So far, so good. Obviously, they've replaced a lot of the board with their own. I mean, Mnuchin is on the board. Berlinski is on the board now.

Jim Cramer (3:59)

Yeah, they've got some serious hitters.

David Faber (4:02)

So they'll be in this for quite some long period of time, but started off pretty well for them as an investment.