How do you avoid the bank’s next crackdown?
If there’s been a lesson from the recent bank failures, it’s that deposit flight can happen quickly. Tellers no longer have to hand over money to customers waiting in long lines around the block. Tens of billions of dollars can disappear in hours or minutes.
That is why guaranteeing deposits has become so important. The Federal Deposit Insurance Corporation expressly insures the first $250,000 of any account, but no more. The Biden administration has thus far implicitly guaranteed all deposits by triggering a “systemic risk exception,” but such implicit guarantees have been subject to crackdowns at multiple banks simultaneously. not truly tested against.
While there are valid arguments for the FDIC to insure all deposits, there may be more strategic, surgical and free-market solutions.
Consider this: What if the banking system was consolidated around another insurance program (called FDIC+) for deposits over $250,000?
Banks can decide whether or not to use insurance programs. If so, they can market and advertise that all deposits are insured. Requirements and other restrictions may be requested.
The Consumer Financial Protection Bureau can require banks to use the equivalent of tobacco warning labels to indicate which accounts are uninsured. This warning will appear on the customer’s app or statement to clearly indicate to the customer that their money is not insured and will not be reimbursed.
Such restrictions would be a strong incentive for banks to participate in the FDIC+ program. The program also incentivizes better business models, as banks pay to guarantee large deposits.
Silicon Valley Bank, which collapsed last month, was aimed at the wealthy. The same is true for First Republic Bank, whose fate remains uncertain, with its stock down more than 43% on Friday.bloomberg report This morning, the FDIC asked JPMorgan Chase and PNC to submit final bids for ailing lenders this weekend to broker an orderly sale.
Silicon Valley Bank offered lucrative deals to tech executives on mortgages and more. Many of these executives encouraged the companies they invested in to bank their funds. The First Republic used a similar business tactic. It stood out for offering jumbo mortgages to wealthy customers and providing superb white-gloved customer service.
So the bank had a huge amount of deposits in excess of $250,000, but these were not backed by the government’s deposit insurance fund. Nearly 90% of the approximately $88 billion in SVB was uninsured.and about Two-thirds of First Republic deposits Uninsured at the end of last year.
This left the bank vulnerable to flights. Not only did they have the large amount of uninsured deposits that businesses typically hold in their accounts, but they also had a large number of customers with strong networks, which meant they could sense problems and fix them faster than businesses. was able to escape to The bank run at SVB “appears to have been facilitated by social media and his SVB’s centralized network of venture capital investors and technology firms,” a report released by the Federal Reserve concluded. I’m here.
Maybe FDIC+ would have prevented that. — Andrew Sorkin and Lauren Hirsch
in case you missed
Fox News banished Tucker Carlson. Fox Corporation’s board of directors made its decision after discovering offensive private messages from Carlson redacted in the legal documents of Dominion Voting Systems’ defamation lawsuit against Fox. After Carlson’s dismissal, Russian state media reported. offered him a job, and viewership on conservative news channel Newsmax soared. CNN fired the caster this week. Don Lemon spoke out in February about women and aging, which is widely perceived as sexist.
UK regulators have blocked Microsoft’s $69 billion deal with Activision. This surprising decision reinforced the claims of global antitrust regulators. Microsoft’s acquisition deadline is his July 18th. If the appeal is dismissed, Microsoft will likely have to walk away and pay Activision his $3 billion split fee.
price check. The latest economic data show that inflation is slowing but stubborn as Federal Reserve officials prepare to make an interest rate decision next week. Fed-recommended inflation rose 4.2% over the year to March from 5.1% in February, while wages rose 5.1% year-on-year in March, down 1.2% from December. rose. Inflation-adjusted gross domestic product grew by only 1.1% annually in the first quarter, according to data released Thursday.
It’s not just tech companies talking about AI
With the launch of ChatGPT in November, companies seem to have started talking about artificial intelligence. References to “AI” or “artificial intelligence” in corporate calls, which have increased over the past decade, increased 50% from the fourth quarter of last year to the first quarter of this year. This is from AlphaSense, a market intelligence platform that tracks data from over 9,000 publicly traded companies that host calls in English.
Of the 2,007 companies hosting corporate calls since April 1, 334 have mentioned the technology. And it’s not just technology companies.
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Roger S. Penske, chief executive of transportation services company Penske, said his company uses artificial intelligence to answer basic customer inquiries and book sales. “We’re scheduling better. We’re more efficient and we’re able to use different periods in scheduling to make our technology better,” he said. told investors.
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Coca-Cola CEO James Quincy told investors: Bringing AI into the future. “
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Arthur Sadoun, chief executive of Publicis Groupe, a public relations and advertising conglomerate, believes AI will speed up the creative process, but the loss of revenue from working faster is a major threat to personalization at scale. Creative assets by. “
When Anchor Gets Fired, This Lawyer Is Hired
Tucker Carlson and Don Lemon, the TV newscasters who made big news when they were fired this week and made the news on the air, have hired the same attorney, Brian Friedman. Although not announced, Friedman’s hiring could be a sign of a legal battle.
The prominent Hollywood lawyer has a reputation as an aggressive court fighter. In his 1997 he founded the company Freedman + Taitelman in Los Angeles with Michael Taitelman. List of “Power Lawyers”, The Hollywood Reporter described Friedman as “an expert in crisis litigation, the type that weighs in on late-night phone calls and corporate drama.”
One of his specialties is securing large payouts for TV stars facing controversy. His clients include former CNN anchor Chris Cuomo, who was ousted after evidence emerged that he counseled his brother Andrew Cuomo during a sexual harassment scandal (he was 15 years old for wrongful dismissal). seeking $25 million). Megyn Kelly secured full payment for his contract when he left NBC after questioning on air that it would be inappropriate to dress up in blackface for Halloween. Former host and executive producer of “Jeopardy!” Mike Richards has resigned after the report. clearly An offensive comment he made on a podcast a few years ago. And his Chris Harrison from “The Bachelor” later resigned after making racist-denying remarks.
Friedman has also represented Quentin Tarantino, Julia Roberts, Mariah Carey, Seth Rogen and Gabrielle Union.
Our Radar: On Giannis Antetokounmpo’s ‘Failure’
After the No. 1-seeded Milwaukee Bucks suffered a season-ending loss in the NBA playoffs Wednesday, a reporter asked Bucks star player Giannis Antetokounmpo if he considers the season a “failure.” passionate reaction Since then, wisdom for moving forward from loss has been handed down, “Do you get a promotion every year at your job?” he asked. “No right? So every year you work is a failure — yes or no? You work toward a goal — it’s not a failure, it’s a step toward success.”
thank you for reading! see you on monday.
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