Wall Street Fears a Banking Crisis Despite First Republic’s Sale

Wall Street is still in crisis

After JPMorgan Chase secured a deal to buy the beleaguered First Republic, banking giant Jamie Dimon said the market’s downfall caused by the collapse of Silicon Valley Bank had come to an end. “This part of the crisis is over,” he told analysts Monday.

But Wall Street is still not convinced. Investors are concerned that potential new regulations and lending restrictions could endanger a fragile economy. That skepticism was immediately apparent at the Milken Institute Global Conference, which brought together high-powered investors in Los Angeles. “I tend to breathe a sigh of relief on mornings like this, in his opening remarks. ‘Actually, we’re just getting started.'”

What are the vulnerabilities of regional banks? Analysts say First Republic’s issues are unique and not widely shared across the industry. That view was also reflected in how slightly the financial sector of the S&P 500 moved on Monday after the bank sale was announced.

However, smaller lenders face significant concerns.they account for approx. 80% of commercial real estate mortgages 45% of consumer finance, according to Goldman Sachs. This exposes them to further declines in office property values ​​and consumer spending, which could lead to a wider credit crunch.

Beware of short sales. Hedge funds betting on stocks have made huge returns on the demise of the First Republic. (By last Friday, more than a third of his shares in the bank were held by short sellers.)

Those investors have also set their sights on other regional lenders such as Bank OZK, Western Alliance and Zions Bancorp, and the market prices of these shares have risen in the year to last Friday, according to data from S3 Partners. We recorded a valuation gain of $5.3 billion.

The outlook for revised banking regulation remains uncertain. The FDIC asked Congress on Monday to consider insuring a wider range of deposits to forestall future bank runs. Senator Elizabeth Warren, a Democrat for Massachusetts, said the issue of the First Republic was Need for tighter oversight.

But what about the sale of First Republic — “lingering chicken gameIt suggests that future bank bailouts may not be resolved quickly between regulators and potential buyers, leading to prolonged market uncertainty. And the Biden administration has asked JP Morgan, the country’s largest bank, to get even bigger.

The health of banks will certainly be on the Fed’s mind on Wednesday. When they get together to discuss the next move on interest rate policy. Futures markets this morning saw the central bank see a rate hike a quarter of a percentage point behind him, but it’s unclear how much the economic slowdown and bank vulnerabilities will influence that decision.

Some believe that banking conditions may be an important factor. “Rising uncertainty around the impact of financial stress in the banking sector” should be the Fed’s main focus, Nomura U.S. economist Aichi Amamiya wrote to investors, saying Wednesday’s rate hike The end of this tightening cycle.

First Republic Details: Monday trading to JP Morgan Wealthy Client’s New Crop To expand our thriving wealth management business. And he’s clearly two of his heirs to Mr. Dimon, who heads JPMorgan’s consumer banking division. Marianne Lake and Jennifer Piepzakwill co-oversee the acquisition of First Republic.

this is what is happening

Janet Yellen warns US could run out of cash by June 1st. The Treasury secretary said the federal government could not pay the bill sooner than expected, putting more pressure on the White House and Congress to reach a fiscal deal.President Biden will meet next week to seek a solution. I appealed to the top legislators.

The White House is considering two candidates for the Fed. The Biden administration is considering nominating Adriana Kugler, the US Executive Director of the World Bank, as the first Latino member of the central bank’s board of directors. It could also try to make Philip Jefferson her second Black Vice Chairman of the Fed. Both would effectively fill the roles previously held by Lael Brainard, who became Biden’s chief economic adviser in February.

Vice is preparing for bankruptcy. DealBook’s Lauren Hirsch and The Times’ Ben Mullin broke the news that struggling digital media outlets can file for Chapter 11 in the coming weeks. Five companies have expressed interest in buying Vice, but a sale is becoming increasingly unlikely.

EY admits the split plan fell through. The leaders of the company, commonly known as Ernst & Young, recently told employees that they were not working on the following proposals. Separated audit and consulting departmentsDespite publicly promising to split eventually, according to The Wall Street Journal. His 13,000 partners at EY largely supported the idea, but the company’s U.S. division vehemently opposed the move.

Corporate America is considering further shrinking its workforce. Morgan Stanley plans 3,000 jobs cut According to Bloomberg, the quarter was primarily due to the banking and trading divisions.Meanwhile, IBM believes it will suspend hiring for back-office roles (departments such as HR) replaceable by AI in the next few years.

streaming led strike

Keyboards across Hollywood go silent on Tuesday after the labor union representing film and TV writers called for the first strike in 15 years. Immediate effects: Late night and variety shows go dark quickly.

Behind the strike is growing concern over the new economics and practices of the streaming age. The economic health of a wide range of stakeholders depends on reaching a compromise.

What writers want: Writers Guild of America requested A baseline for the number of screenwriters and weeks of employment in production, and the termination of a mini-room, or underpaid team, to write a television show script before it is officially commissioned. The union is also demanding guardrails from studios adopting AI-powered tools that can create new scripts.

Additionally, writers want a revamped balance payment system. Previously, writers would get residuals every time a show was delivered to syndication or DVD, but this doesn’t happen with streaming services like Netflix. Guilds also require residuals that determine the success of the show. This will require disclosing viewing data that streaming services have been zealously guarding.

The studio is strongly pushing back. They’re willing to raise the minimum wage and some surpluses, but they’re not going to change the baseline staffing. The biggest reason is that they are already under pressure to reduce the cost of content, as investors are plagued by the extravagant spending that companies once used to expand their streaming businesses.

Businesses can be hit in many different ways by a strike.

• With a sizable backlog of shows already and a plethora of unscripted foreign series available, Netflix is ​​in a strong position.

• Warner Bros. Discovery, which produces a lot of reality TV, could also do well, but HBO will ultimately suffer from a lack of new celebrity shows. Disney relies on sports programming and its vast library.

• Traditional stations such as Paramount Global and Comcast’s NBCUniversal could quickly be hit by the lack of new programming.

No one wants a long vacation Like the 100 days strike in 2007. Both writers and studios were hit hard by the pandemic, which brought production to a halt for months. And both point out that communities that are economically dependent on film and television filming could be severely impacted by prolonged strikes.

One thing to watch out for is what other major unions are doing. Hollywood’s deal with the Directors’ and Actors’ Guild expires in June, putting more pressure on studios that could be hit by a broader work stoppage.

“It’s hard to see how we can prevent bad actors from exploiting it.”

— Researcher Jeffrey Hinton, known as Hinton, the “Godfather of AI” quit job at google To speak publicly about the risks of the technology he spent his life pioneering and the new technology arms race to advance it.

Republicans step up backlash against tracking gun purchases

For a while, the financial industry appeared to be trying to apply some of the mechanisms it uses to detect fraud to limit mass shootings. But a Republican backlash that started at the state level could now become nationwide, making such change much more difficult.

A special code approved last year has raised hopes among gun control advocates. The International Organization for Standardization, which sets standards for payment transactions, has decided to create special category codes for gun stores to use when processing credit and debit card transactions. Such codes are used in nearly every retail category, and may allow credit card companies to identify suspicious gun-buying patterns.

Visa, Mastercard and American Express are delaying code implementationThey quoted Florida, Texas and West Virginia Bills and several other states aimed at banning the new approach. federal ban Take those bans nationwide.

Opponents argue that this is a gun rights and privacy issue. West Virginia Rep. Alexander Mooney, a co-sponsor of the bill, told DealBook:

Politics aren’t the only hurdles. As DealBook wrote last year, credit card companies should force merchants to use codes and create algorithms to identify suspicious activity.But gun control advocates say the industry has Extensive experience handling similar tasksfrom finding fraudulent purchases and stolen credit cards to money laundering.

speed lead

bargain

• Electric car maker Rosetown Motors has warned that Foxconn’s financing deal is in jeopardy. it may file for bankruptcy. (CNBC)

• Venture capital firm founded by Ashton Kutcher and Guy Oseary Raises $240 million Investment in AI business. (variety)

• Jeb Bush’s private equity firm Reportedly met with NSO groupIsraeli tech company behind spyware Pegasus to sell in US (FT)

• Facebook’s parent company, Meta, reportedly $8.5 billion worth of bonds sold, becoming the first tech giant to tap into the investment-grade bond market since the collapse of the Silicon Valley Bank. (Bloomberg)

policy

• The Florida board that oversees Disney theme parks in the state has sued the media giant in an attempt to regain control over its expansion plans.(NYT)

• West Virginia Democrat Senator Joe Manchin helped create the Inflation Reduction Act.now he wants repeal part of the law to reduce the national debt. (Bloomberg)

• The American Edge Project, a technology advocacy group that fought antitrust law, reportedly said: received $34 million With support from Facebook. (CNBC)

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