• The U.S. government could provide financial backing to facilitate a deal for the faltering First Republic Bank, according to people with knowledge of the situation. Wall Street leaders and federal officials have been discussing numerous options to help close a deal for the bank, including removing assets that have damaged its balance sheet, easing limits on ownership stakes, offering liability protection and applying capital rules more adaptably, but sources said it was still unclear how the government might provide such support. (Bloomberg)
• Lawyers for SVB Financial Group, the former parent company of Silicon Valley Bank, said in the company’s first bankruptcy hearing that the Federal Deposit Insurance Corp. has improperly frozen the bank’s accounts, blocking access to its nearly $2 billion in cash deposits. SVB Financial attorneys also claimed that when the FDIC put Silicon Valley Bank into receivership, the agency directed the bank to claw back transfers SVB Financial had made to other bank accounts, and the agency cut off communications with SVB Financial. (The Wall Street Journal)
• After New York Community Bancorp Inc. buys select assets of Signature Bank, which was put into receivership by the FDIC earlier this month, the federal government will be left with an $11 billion commercial real estate debt portfolio composed largely of rent-controlled apartments, higher-risk assets some investors describe as “toxic waste.” The commercial real estate debt has higher debt-to-value ratios than comparable portfolios at other big banks, and the ability for the loans to be refinanced has been hamstrung by a 2019 law prohibiting rent hikes as well as rising interest rates, though it’s possible the FDIC could still find a buyer for the loans. (Bloomberg)
• The median sales price of existing homes fell 0.2% to $363,000 in February, the first drop in year-over-year prices in 11 years. Amid a recent drop in interest rates, sales of previously owned homes were up 14.5% in February compared to the month before, but sales were down 22.6% year over year. (The Wall Street Journal)
  

Worth watching:

• The Federal Open Market Committee concludes its policy meeting, with Fed Chair Jerome Powell’s press conference at 2 p.m.
• Former FDIC vice chairman and former Kansas City Fed President Thomas Hoenig will join a panel at the Mercatus Center, where he currently serves as a distinguished fellow, to provide a briefing on the collapse of Silicon Valley Bank.
• The final day of the American Bankers Association Washington Summit features panelists including Senate Banking Committee Chairman Sherrod Brown (D-Ohio) and ranking member Tim Scott (R-S.C.), as well as House Financial Services Committee Chairman Patrick McHenry (R-N.C.) and ranking member Maxine Waters (D-Calif.).
• Citigroup Inc. CEO Jane Fraser will speak at the Economic Club of Washington, D.C.
• Treasury Secretary Janet Yellen will appear before the Senate Subcommittee on Financial Services and General Government to discuss the Treasury Department’s budget justification.

The Silicon Valley Bank Collapse Drove Some U.S. Adults to Diversify

Morning Consult

U.S. SEC delays vote on private investment reporting rule

Reuters

Wall Street’s top regulator said on Tuesday it had postponed a planned vote on a proposed rule to help protect the stability of the financial system by detecting risk in the $20 trillion private asset management sector.

Top Biden advisor: Regulating junk fees is popular and ‘also smart economics’

Ben Werschkul, Yahoo Finance

The White House wants to keep talking about junk fees. Its latest effort to focus on the issue came Tuesday afternoon at a White House gathering where Biden’s top economic advisor, Lael Brainard, kicked off a panel discussion by laying out the economic case for banning those annoying add-ons that “sneak up on” Americans.

Former FDIC chair: SVB ‘bailout’ was an ‘overreaction’

Nick Robertson, The Hill

Sheila Bair, who chaired the Federal Deposit Insurance Corp. (FDIC) during the 2008 financial crisis, said the Biden administration’s decision to guarantee all deposits at the failed Silicon Valley and Signature banks was an “overreaction” during an appearance as part of “The Washington Post Live” series.

Ukraine, IMF agree on $15.6 billion loan package

David McHugh, The Associated Press

Ukraine and the International Monetary Fund have agreed on a $15.6 billion loan package aimed at shoring up government finances severely strained by Russia’s invasion and at leveraging even more support by reassuring allies that Ukraine is pursuing strong economic policies.

What to Watch From the Fed Meeting

Nick Timiraos, The Wall Street Journal

The Federal Reserve faces on Wednesday one of its thorniest policy decisions in years: whether to lift interest rates again to fight high inflation or hold them steady amid the most intense banking crisis since 2008.

Banking crisis emboldens House Republicans on debt limit

Max Cohen and Brendan Pedersen, Punchbowl News

The recent collapse of two large regional banks rattled global markets, raising concerns about financial stability during a precarious moment for the U.S. economy. Would this backdrop of uncertainty, we wondered, cause House Republicans to grow wary of launching a debt limit showdown?

Chicken-or-egg game is on as Congress barrels toward debt limit

David Lerman and Lindsey McPherson, Roll Call

A House budget resolution will be delayed in part to allow for negotiations with President Joe Biden on a debt limit increase paired with some sort of concessions on spending and other policies acceptable to Republicans, according to House Budget Chairman Jodey C. Arrington.

Banking Turmoil Tests the American Consumer

Gabriel T. Rubin, The Wall Street Journal

American consumers are facing another test, from banking-sector turmoil and tighter financial conditions, as households already grappling with elevated inflation and rising interest rates threaten to trim the spending that has been a hallmark of the resilient U.S. economy.

Los Angeles School Workers Go on Strike, Alleging Unfair Labor Practices

Sara Randazzo, The Wall Street Journal

Bus drivers, special-education aides, custodians and other support staff in Los Angeles schools walked off the job Tuesday, triggering a citywide strike that shut down schools for 420,000 students as workers demand higher wages. The strike is being led by a union of 30,000 workers integral to running the nation’s second-largest school district, with 35,000 teachers joining the walkout in solidarity.

UBS to enter talks with Michael Klein to terminate First Boston deal

Stephen Morris et al., Financial Times

Executives at Swiss bank believe Wall St veteran secured terms from Credit Suisse that were too generous.

First Republic Bank Taps Lazard for Help With Review of Strategic Options

Lauren Thomas and Laura Cooper, The Wall Street Journal

First Republic Bank is beefing up its adviser ranks as the troubled lender seeks to stay afloat and plan for a postcrisis future amid a trans-Atlantic crisis of confidence in the banking system.

US officials talked about raising deposit insurance without Congress -sources

Pete Schroeder and Andrea Shalal, Reuters

Government officials discussed the idea of increasing deposit insurance without obtaining approval from Congress as they brainstormed various approaches to solving the turmoil in banking, two sources familiar with the talks said on Tuesday.

Warren Seeks to Tie Higher FDIC Insurance to Tighter Regulation

Steven T. Dennis, Bloomberg

Senator Elizabeth Warren said Tuesday she doesn’t think multibillion-dollar banks should get an increase in federal insurance without tighter regulation. “You bet I’d tie them together,” the Massachusetts Democrat told reporters at the Capitol.

Commercial Property Debt Creates More Bank Worries

Konrad Putzier and Peter Grant, The Wall Street Journal

A record amount of commercial mortgages expiring in 2023 is set to test the financial health of small and regional banks already under pressure following the recent failures of Silicon Valley Bank and Signature Bank.

Regional Banks and Regulators Try to Soothe Depositors’ Fears

Stacy Cowley, The New York Times

In the panic after Silicon Valley Bank collapsed in early March, some small and medium-size businesses yanked their money from regional banks and deposited it with the biggest ones, seeking the security of their gigantic balance sheets and the government’s implicit backstop of lenders deemed too big to fail.

Bank Failures Train Spotlight on Shortcomings in Risk Management

Richard Vanderford, The Wall Street Journal

Bank boards have risk committees tasked with forestalling problems. But the members of those committees don’t always have the skills or stature to make themselves heard.

UBS buys back nearly $3 billion in bonds issued under a week ago

Reuters

UBS Group said on Wednesday it would buy back 2.75 billion euros ($2.96 billion) worth of debt it issued less than week ago, seeking to boost confidence among investors rattled by its $3 billion rescue of rival Credit Suisse at the weekend.

How the Last-Ditch Effort to Save Silicon Valley Bank Failed

Hannah Miao et al., The Wall Street Journal

Depositors were draining their accounts via smartphone apps and telling their startup networks to do the same. But inside Silicon Valley Bank, executives were trying to navigate the U.S. banking system’s creaky apparatus for emergency lending and to persuade its custodian bank to stay open late to handle a multibillion-dollar transfer.

SVB’s Loans to Insiders Tripled to $219 Million Before It Failed

Silla Brush et al., Bloomberg

As Silicon Valley Bank deteriorated late last year and regulators began internally flagging flaws in its risk management, the lender opened up the credit spigot to one group: insiders.

UBS Is Buying Credit Suisse’s Emissions Burden, Too

Alastair Marsh, Bloomberg 

The Swiss lending giant had a better climate profile than its troubled rival. Now it has another problem to clean up.

Credit Suisse bondholders prepare lawsuit after contentious $17 billion writedown

Elliot Smith, CNBC

Swiss regulator FINMA announced that the AT1s, widely regarded as relatively risky investments, will be written down to zero, while stock investors will receive payouts as part of the takeover. California-based global litigation firm Quinn Emanuel Urquhart & Sullivan announced on Monday that it had put together a “multi-jurisdictional team of lawyers from Switzerland, the U.S. and the U.K.” to discuss “possible legal actions” with Credit Suisse bondholders.

Big investor in Credit Suisse bonds says ‘bail-in’ system worked

Herbert Lash, Reuters

One of the largest investors of the Credit Suisse bonds that were wiped out in the UBS takeover of the troubled Swiss bank still believes in the value of the debt class and the “bail-in” system designed to save banks seen as too big to fail.

Judge in Archegos founder’s criminal case unlikely to dismiss charges

Jody Godoy and Jonathan Stempel, Reuters

A U.S. judge on Tuesday signaled he was unlikely to dismiss an indictment accusing Bill Hwang of fraud in the collapse of his $36 billion Archegos Capital Management LP, after Hwang accused prosecutors of misconduct for duping him into cooperating with their probe.

Rent Inflation for US Single-Family Homes Drops Near Two-Year Low

Alexandre Tanzi, Bloomberg

Rent increases for US single-family homes eased for a ninth straight month in January, pushing the annual rate to the lowest since the spring of 2021, according to CoreLogic.

Senators Had Questions for the Maker of a Rent-Setting Algorithm. The Answers Were “Alarming.”

Heather Vogell, ProPublica

After a ProPublica investigation, RealPage answered questions from lawmakers about its product. In response, the senators sent a letter to the Justice Department.

Bank Crisis Could Cast Pall Over Commercial Real Estate Market

Matthew Goldstein, The Wall Street Journal

The market hadn’t fully rebounded from the pandemic. Some worry that another slowdown could add to fears of a recession.

U.S. Supreme Court divided over Coinbase arbitration dispute

Andrew Chung and John Kruzel

U.S. Supreme Court justices on Tuesday appeared divided over a bid by cryptocurrency exchange Coinbase Global Inc to halt customer lawsuits, including by a user who sued after a scammer stole money from his account, as it pursues an effort to move the disputes out of courts and into private arbitration.

U.S. Senate’s Warren Calls for Crackdown on ‘Sham’ Crypto Audits

Jesse Hamilton, CoinDesk

The senator and her Democratic colleague Ron Wyden asked the U.S. auditing watchdog to rein in bogus audits in the digital assets sector.

White House Takes Aim at Crypto in Scathing Economic Report

Nikhilesh De, CoinDesk

The report, authored by the White House Council of Economic Advisers, laid out a number of issues seen within the digital asset ecosystem.

Bitcoin Booms in Wake of Bank Crisis

Vicky Ge Huang and Caitlin Ostroff, The Wall Street Journal

The world’s largest cryptocurrency has risen almost 70% so far this year.

IRS calls for public feedback on taxing NFTs as collectibles

Turner Wright, CoinTelegraph

Those wishing to offer feedback to the IRS on having NFTs treated as collectibles, such as coins or works of art, have until June 19 to submit comments.

Circle Picks Crypto-Friendly France for European Headquarters

Benoit Berthelot and Emily Nicolle, Bloomberg

Stablecoin giant Circle Internet Financial Ltd. is planning to locate its European headquarters in Paris, citing the crypto-friendly climate created by President Emmanuel Macron’s government as instrumental to the decision.