PacWest’s Plunge Reignites Fears About America’s Regional Banks

Despite Fed Chairman Jay Powell’s assessment that the worst is over, PacWest shares have plummeted more than 35% in pre-market trading, leaving the regional banking sector teetering again.

The Los Angeles-based lender said it talk to potential investors According to the following reports, he was considering selling. Investors may be feeling a sense of déjà vu after witnessing two major bank failures and billions of dollars in market capitalization wiped out since the Silicon Valley bank crash in March. not.

PacWest is not alone in free fallS&P 500 futures fell slightly after the Fed signaled a possible end to rate hikes, while shares of Western Alliance, Comerica and Zions Bancorp also fell sharply.

news of potential PacWest sales, Bloomberg first reported — and confirmed by DealBook — came just hours after Mr. Powell declared the banking system to be “healthy and resilient.”

Despite Mr. Powell’s reassurances, big questions remain. among them: Can local banks like PacWest find a private sector solution, or will regulators have to step in again?

This fix is ​​a tough one, as First Republic’s month-long search for rescuers has made clear. JPMorgan Chase only bought lenders rear Although seized by the FDIC PacWest, deposits have increased since the end of March, with 75% of them insured. But we need to raise capital quickly.

Selling downed stocks would be costly for Pacwest. This could make depositors and investors even more anxious and could end up in the hands of short sellers targeting the sector. On the other hand, a fire sale of assets, including loans (the bank’s $2.7 billion lender financial loan portfolio has been blocked) and securities pegged to low interest rates, may not be very profitable. The sale itself could be difficult, not just because the pool of potential buyers has shrunk significantly since the Morgan-First Republic deal.

Criticism of the Fed and calls for regulatory action are mounting. Mohamed El-ErianMr. Powell, an economist and an adviser to Allianz, said Mr. Powell’s sale of First Republic had largely resolved the sector’s problems, accusing it of disrupting the market.and Bill Ackman, billionaire investors called on regulators to modernize the deposit insurance system to restore public confidence in local lenders. (He added that his hedge fund is neither long nor short the banking sector.)

The following markets: The European Central Bank is expected to raise interest rates on Thursday, but whether by a quarter or half a percentage point is an open question.

Oil prices are whipsaw in volatile trading. Crude oil benchmark rose on thursdaybut not enough to make up for yesterday’s plunge driven by investor concerns about slowing global demand. shell reported Earnings exceeded expectations as lower costs and favorable trading results offset lower oil and gas prices.

Jamie Dimon could reportedly testify about Jeffrey Epstein later this month. a JPMorgan Chase CEO DepositIt is scheduled for May 26 and 27, according to CNBC, as part of two lawsuits over the bank’s relationship with a convicted sex offender.Meanwhile, the Wall Street Journal reports that Epstein Previously unreported meetings Along with Larry Summers and LinkedIn co-founder Reid Hoffman, Epstein’s private island has been sold for $60 million.

Goldman Sachs is reportedly seeking to settle a discrimination lawsuit. Wall Street banks discussed payment hundreds of millions of dollars To settle accusations that it systematically discriminated against female employees, The Wall Street Journal reports. A trial in the case is set for next month.

UAW withholds endorsement of President Biden. The National Auto Workers Union, one of the most powerful unions in the United States, said it was concerned about the White House’s plans to “move to electric vehicles” but said it would back the White House later in the 2024 race. I haven’t ruled out the possibility. This shows how Biden’s climate change policy could cost him support from key voters.

Meta and the FTC are in a heated battle over what the social media giant does with its users’ data. Meta accused the company and its chairman, Lina Khan, of committing a “political stunt” after moving to impose a “total ban” on the company’s collection of personal data from young people.

The agency has previously lashed out at Meta for its handling of user data. In 2020, it imposed a $5 billion consent order, forcing Meta, which owns Facebook and Instagram, to review its privacy practices. The FTC yesterday said the company didn’t do so, accusing it of being “reckless” and “endangering young users.”

The potential penalties are severe. Meta is prohibited from profiting from data collected from users under the age of 18, and regulators want to extend that to 18-year-olds as well.

Meta swore to fight. “Despite three years of continuous engagement with the FTC regarding our agreement, the FTC has not offered an opportunity to discuss this new and completely unprecedented theory,” the company said in a statement. His “alleged use of all means, even unsubstantiated, against American business has reached a new low.” The company has been given 30 days to appeal. increase.

Congress has also targeted social networks. Massachusetts Senator Edward Markey and Louisiana Republican Senator Bill Cassidy yesterday reintroduced a bill to update the Children’s Online Privacy Protection Act.lawmakers said in a statement statement They “want to ban targeted advertising aimed at children and stop not only Meta and others under the FTC’s consent order, but all online platforms from exploiting and profiting from an entire generation.” said.

Tech giants like Alphabet, Amazon, Meta and Microsoft have beaten expectations in their earnings calls this season. Apple will report next after the closing bell on Thursday. Here are some of the biggest things to look out for.

Share buyback: Investors are hopeful that Apple, which has spent more money buying back shares than any other company, will keep at it.The consensus number this quarter was $90 billion.

China: About 25% of Apple’s revenue comes from China, and supply chain disruptions in China have resulted in costly shortageiPhone maker sales should continue to rebound as China’s economy reopens after Covid, and Apple chief executive Tim Cook says production problems have calmed down. of analysts concerned about the company’s survival overly dependent on China.

artificial intelligence: Tech leaders have spent a lot of time on revenue conference calls touting their progress in adding features like ChatGPT to their products.Apple has been criticized can’t keep up With the latest advances. Investors want to know if Cook presents a broader vision for the technology.

Leaders of companies working on artificial intelligence, including Alphabet, Microsoft and OpenAI, met with Vice President Kamala Harris on Thursday after the White House announced a new initiative to curb the fast-growing technology. increase.

This is the latest sign that governments are trying to tame AI as the tech world races to harness the power of products like ChatGPT. Critics have warned that technology threatens to reshape society in potentially negative ways.

White House officials have pledged to release draft guidelines for the use of AI in government. To protect the rights and safety of the American people. The announcement comes a day after FTC Chairman Lina Khan called for tighter regulation of the technology.

International regulators are also making moves. The head of the UK’s competition regulator told the Financial Times: Rethinking the AI ​​Market, looks to potential guardrails to protect consumers and small businesses. This follows several plans for the world by the European Union. the broadest law Regulate AI

Other AI News:

HSBC’s annual meeting in Birmingham, England on Friday will focus on one topic: whether to break up Europe’s largest bank. HSBC management claims lenders benefit from integrated global operations. But the company’s largest shareholder, Chinese insurer Ping An, wants HSBC to spin off its main Asian business.

A shareholder initiative to force HSBC to regularly review its structure may fail on Friday, but the pressure on banks to rethink their future won’t go away anytime soon.

HSBC’s China business accounts for almost half of its revenue — But Ping An says the sector is being held back by having to subsidize slow-growing Western businesses.Asian investors also say British banks will stop paying quarterly dividends I was also angry at the 2020 Royal Decree by the Bank of England. (HSBC said this week it would resume those payments.)

Last month, in response to management objections, Ping An proposed a less drastic measure to give its Hong Kong-based Asian operations their own stock listing.

HSBC remains unconvinced. Management said the split risks disrupting a thriving business, pointing to efforts to cut non-essential operations such as retail banking in North America.a Earnings reports that exceed expectations It helped strengthen their case on Tuesday.

The battle is likely to continue beyond Friday. HSBC is expected to win the vote on the shareholder proposal, but analysts admit HSBC faces mounting pressure from worsening tensions between Beijing and the West.

Given that Ping An shows no signs of leaving, the battle for HSBC’s future is expected to continue.



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  • Ajay Banga, President Biden’s nominee for World Bank president, was confirmed yesterday to take on the role. (NYT)

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