Finance
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Essential financial news & intel to start your day.
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April 6, 2023
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Today’s Top News
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House Speaker Kevin McCarthy (R-Calif.) said in an interview with Bloomberg TV that Wall Street should be “very concerned” about the political stalemate between Republicans and Democrats over the looming debt ceiling, saying that the GOP is “never going to move a bill that just raises the debt ceiling.” (Bloomberg) A GOP aide said that Republican lawmakers in the House plan to focus on passing the 12 annual federal government spending bills and pushing for spending cuts as those bills move through the appropriations process, which the aide said is likely to begin in May. (Fox News)
- The Federal Deposit Insurance Corp. has engaged BlackRock Inc.’s advisory arm to help it sell $114 billion in securities that remain in its possession after the agency put Silicon Valley Bank and Signature Bank into receivership in March. The FDIC said the sale of the securities — consisting of mortgage-backed securities, collateralized mortgage obligations and commercial mortgage-backed securities — will be “gradual and orderly” and “aim to minimize the potential for any adverse impact on market functioning by taking into account daily liquidity and trading conditions.” (Financial Times)
- A group of colleges have asked the Supreme Court to consider overturning a November decision by a California-based federal judge approving a class-action settlement that could entitle student loan borrowers who attended schools that engaged in misconduct to more than $6 billion in debt forgiveness. The colleges seeking the hearing — including the for-profit schools Lincoln Educational Services Corp. and American National University, as well as the not-for-profit Everglades College — operate institutions that the federal government placed on a list of schools linked with claims of “substantial misconduct,” and the colleges argue that Education Secretary Miguel Cardona has exceeded his authority in canceling debt “en masse.” (NBC News)
- Shares of Western Alliance Bancorp. fell as much as 19% yesterday after the bank announced that its first-quarter deposits were down 11% compared to the end of 2022, as customers pulled funds out of the bank amid turmoil at U.S. mid-size banks in March. Deposits totaled $47.6 billion as of March 31, down from $53.6 billion at the end of last year, and the bank said roughly 68% of its deposits were insured. (Reuters)
Worth watching:
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St. Louis Fed President James Bullard will discuss the U.S. economy and monetary policy at the Arkansas State Bank Department’s Day with the Commissioner event.
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| A MESSAGE FROM MORNING CONSULT |
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What Else You Need to Know
Bob Lee, Cash App Founder, Fatally Stabbed in San Francisco
Alyssa Lukpat, The Wall Street Journal
Bob Lee, the founder of money-transfer company Cash App and the chief product officer at cryptocurrency company MobileCoin Inc., was killed in San Francisco on Tuesday, his father said.
Fear of economic ‘lost decade’ hangs over world leaders in Washington
Zachary Warmbrodt, Politico
Tensions are rising, with rich nations furiously hiking interest rates to kill inflation but creating crushing debt burdens in the developing world.
The developing countries facing a debt crisis
Reuters
The record number of developing nations at risk of a debt crisis will be high on the agenda next week when central bankers, finance ministers and political leaders convene for the World Bank Group and International Monetary Fund (IMF) spring meetings.
Car payments are $1,000 for a lot of consumers. Here’s why.
Michelle Singletary, The Washington Post
High vehicle prices coupled with rising car loan rates are pushing consumers to the edge of affordability.
To counter China, US trade rep seeks closer ties to allies
Paul Wiseman and Josh Boak, The Associated Press
The Biden administration is pressing its case for a new approach to global trade, arguing that America’s traditional reliance on promoting free trade pacts failed to anticipate China’s brass-knuckled brand of capitalism and the possibility a major power like Russia would go to war against one of its trading partners.
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Economic and Fiscal Policy
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Bank Failures. High Inflation. Rising Rates. Is the Resilient Jobs Market About to Crack?
Sarah Chaney Cambon, The Wall Street Journal
Hiring in U.S. has surged since the start of last year, but economic risks threaten to cool the gains.
Bond-market’s most deeply inverted gauge is pointing to ‘large slowdown in economic growth’ and ‘deep recession’
Vivien Lou Chen, MarketWatch
The most deeply inverted part of the U.S. yield curve is one that hasn’t sent a false signal about the prospects of a U.S. recession in more than a half-century of research.
Ukraine War and Inflation to Limit Global Trade Growth in 2023, WTO Says
Yuka Hayashi and Jason Douglas, The Wall Street Journal
The war in Ukraine and stubborn inflation around the world are expected to hold back growth in global trade this year, restraining the pace of economic recovery even as the world emerges from the height of the pandemic.
Job market milestone: Shrinking employment gap for Black workers
Courtenay Brown, Axios
The economy hit a quiet milestone in recent months: The labor market is seeing more equitable employment outcomes across racial groups than it has in years. For the half-century data has been available, white workers have enjoyed higher rates of employment than Black workers. That gap still exists, but it has been shrinking notably.
House G.O.P.’s Plan to Cut Food Stamps Faces a Tough Vote
Catie Edmondson, The New York Times
A proposal to tighten work requirements for federal nutrition programs has generated fissures among Republicans, highlighting the difficult choices ahead in coming up with a budget plan.
Women More Likely to Be Rejected When They Ask for More Pay
Jeff Green, Bloomberg
Most men and women still don’t ask for more money than they’re offered in a job interview. But if they do, women are more likely to get turned down.
‘We may be looking at the end of capitalism’: One of the world’s oldest and largest investment banks warns ‘Greedflation’ has gone too far
Will Daniel, Fortune
When costs go up, so do profits? That’s not how capitalism is supposed to work, but that is the recent trend.
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Goldman Sachs fined $3 mln by FINRA over mismarking short sale orders
Reuters
The Financial Industry Regulatory Authority, Wall Street’s self-funded watchdog, fined Goldman Sachs Inc $3 million on Tuesday for mistakenly marking some of its stock orders as “long” instead of “short”, and for trade reporting violations.
U.S. banks are dangling promotions to lock in customer deposits, analysts say
Nupur Anand and Koh Gui Qing, Reuters
For months, consumers have clamored for banks to pay out more for deposits as the Federal Reserve raised interest rates. Now analysts say after the banking crisis shook markets last month, lenders appear to be rejigging offers in an effort to keep customers’ cash parked in their accounts for longer.
Is commercial real estate a ticking time bomb for small banks?
Jim Dobbs, American Banker
Maturing commercial real estate debt could become the next big concern for smaller banks, and lenders’ exposure to this corner of the credit market is sure to draw attention during the earnings season that gets underway next week.
New CFPB rule could raise costs for credit unions
Frank Gargano, American Banker
Credit unions are threatening to retreat from originating small-business loans due to the cost of complying with the Consumer Financial Protection Bureau’s final data collection rule.
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Financial Products and Investments
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Crypto and Financial Technology
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Jane Street, Tower and Radix Are Unnamed ‘VIPs’ in Binance Case
Lydia Beyoud et al., Bloomberg
Jane Street Group, Tower Research Capital and Radix Trading are the three unidentified trading firms cited as “VIP” clients of Binance Holdings Ltd. in a top US regulator’s lawsuit against the cryptocurrency exchange, according to people with direct knowledge of the matter.
NYDFS Chief Dismisses ‘Choke Point 2.0’ Theory of Signature’s Closure as ‘Ludicrous’
Cheyenne Ligon, CoinDesk
Adrienne Harris, the superintendent of the New York Department of Financial Services, said the decision to close the bank was instead due to a “new-fashioned bank run.”
Collapse of FTX deprives academics of grants, stokes fears of forced repayment
Elizabeth Howcroft, Reuters
The collapse of crypto exchange FTX and its grant-making body, the FTX Future Fund, has left some researchers at top universities without the funds they were promised and others trying to repay grants before they could be ordered to. Launched in February 2022, the FTX Future Fund was part of the FTX Foundation, the philanthropic arm of Sam Bankman-Fried’s crypto empire which fell apart last year, in what U.S. prosecutors called an “epic” fraud.
Acorns targets next generation of customers in GoHenry deal
Anna Hrushka, Banking Dive
A longer-term investing horizon, coupled with calls for increasing financial literacy among teens, make the youth market an attractive target for the investing fintech.
Hidden Inside MacOS, the Bitcoin Whitepaper
Sam Reynolds, CoinDesk
Someone has hidden the Bitcoin Whitepaper inside every copy of MacOS shipped since 2017.
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Opinions, Editorials and Perspectives
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The government can’t operate efficiently with so many posts vacant
Editorial Board, The Washington Post
At the tail end of a global pandemic that claimed more than 1 million American lives, there is still no permanent director of the National Institutes of Health (NIH). And in the midst of the historic banking turmoil that followed the collapse of Silicon Valley Bank last month, the Treasury Department still lacks an official comptroller of the currency, an office whose mission is “ensuring a safe and sound federal banking system for all Americans.”
Millennials are not as badly-off as they think — but success is bittersweet
John Burn-Murdoch, Financial Times
Highly educated and with earnings to match, this generation still falls behind boomers in the housing market.
The Fraud Case Does Not Look Good for Charlie Javice
Kevin T. Dugan, New York magazine
On Tuesday, just a few blocks from where Donald Trump was arraigned, there was another Wharton graduate whose criminal fraud case was also just getting started. At the federal courthouse downtown was Charlie Javice, the former high-flying CEO of a student-loan fintech called Frank, in sad, gray yoga clothes, fresh from her apprehension at Newark Airport after a flight from Miami a few hours earlier.
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