• Several of the large U.S. banks that vowed to contribute a combined $30 billion in deposits to shore up the faltering First Republic Bank are setting aside additional reserves of about $100 million each, according to people with knowledge of the matter. JPMorgan Chase & Co., Wells Fargo & Co., Citigroup Inc. and Bank of America Corp. each contributed about $5 billion in deposits to First Republic, and while the exact amount of reserves will vary by each of the 11 banks, the moves are a sign that the funding infusion into First Republic is seen as having some risk to the depositors. (Bloomberg)
• Consumer Financial Protection Bureau Director Rohit Chopra said he is “very worried” about the trend of consumers storing money in digital wallets and money-transfer apps such as PayPal and CashApp, noting that consumers may not realize that funds held in these platforms may not be fully insured by the Federal Deposit Insurance Corp. Chopra said regulation is key to ensure the prevalence of relationship banking as digital services expand, adding that he thinks it would be a mistake for the United States to copy China’s financial system, which he said is “dominated in many ways by WeChat Pay, AliPay when it comes to payments.” (The Hill)
  
• In separate remarks, Federal Reserve officials diverged on whether more interest rate hikes were needed, with Chicago Fed President Austan Goolsbee, an FOMC voting member, urging “prudence and patience” and suggesting the Fed may need to hold off on another rate hike until they can assess the possible economic repercussions. New York Fed President John Williams and Minneapolis Fed President Neel Kashkari, also FOMC voting members, offered more hawkish views, saying there was more work to do by officials to stem rising inflation. (Bloomberg)
• The International Monetary Fund said in a report that it expects U.S. banks’ lending capacity to fall by 1% this year, which in turn will lower the U.S. gross domestic product by 0.44 percentage point in 2023. A tightening in lending comes amid decreasing values of bank stocks as investors weigh the health of U.S. midsize banks, and the IMF noted that since regional and smaller banks account for more than one-third of total bank lending, a pullback could have “a material impact on economic growth and financial stability.” (The Wall Street Journal)

Worth watching:

• The Federal Open Market Committee releases minutes from its March 21-22 meeting.
• National Economic Council Director Lael Brainard, former Council of Economic Advisers Chair Jason Furman, U.S. Trade Representative Katherine Tai and Mastercard Inc. Vice Chairman and President Michael Froman are among the speakers at Semafor’s World Economy Summit.
• Treasury Secretary Janet Yellen delivers remarks during the World Bank-International Monetary Fund meeting.
• FDIC Vice Chairman Travis Hill will join the Bipartisan Policy Center to discuss the FDIC’s role and response to the recent bank failures and instability in the financial markets.
• Richmond Fed President Thomas Barkin will deliver opening remarks at the Investing in Rural America 2023 conference.

Inflation expectations are on the rise again

Axios

Ernst & Young Halts Breakup Plan After Revolt by U.S. Leaders

Jean Eaglesham, The Wall Street Journal

EY spent more than $100 million on split between auditing, consulting business.

Transcript: The Path Forward: Consumer Protection with Rohit Chopra

Washington Post Live

Chopra spoke with The Post’s Lori Montgomery in a live event Tuesday.

Global financial regulator calls for tougher rules after bank panic

Laura Noonan, Financial Times

FSB chair says rising interest rates, volatility and tight liquidity mean ‘more challenging’ outlook.

Almost 6 in 10 living paycheck-to-paycheck: survey

Julia Mueller, The Hill

Almost 6 in 10 U.S. adults in a new poll report they’re living paycheck-to-paycheck amid an economic landscape fraught with inflation and recession fears.

Yellen Downplays Banking Woes, Says World Economy Has Improved

Christopher Condon and Viktoria Dendrinou, Bloomberg

US Treasury Secretary Janet Yellen shrugged off recent banking spasms to declare the economy better off than six months ago, saying she didn’t believe the banking turmoil had restricted the availability of credit in the US.

Thousands of Katrina Survivors Were Freed From Debt to the State. Those Who Already Paid Are Out of Luck.

Richard A. Webster, Verite, and David Hammer, WWL-TV for ProPublica

Amid outcry, the state said it was no longer suing residents who had improperly used hurricane recovery money. That doesn’t change anything for the 425 who already paid a total of $6.8 million back to the state.

US inflation expected to have eased to lowest level in two years

Colby Smith, Financial Times

Latest data comes amid debate at Federal Reserve over whether another rate rise will be needed in May.

GOP eyes new work requirements for millions on Medicaid, food stamps

Tony Romm and Rachel Roubein, The Washington Post

House Republicans are eyeing new work requirements for millions of low-income Americans who receive health insurance, money to buy food and other financial aid from the federal government, reprising the party’s historic crusade against welfare as some lawmakers seek new ways to slash spending.

Why Ron DeSantis Is Taking Aim at the Federal Reserve

Jeanna Smialek and Linda Qiu, The Washington Post

Florida’s governor has been blasting Jerome H. Powell, the Fed chair, while spreading misinformation about central bank digital currency.

IRS Vets Reveal What’s Broken at America’s Most Hated Agency

Ben Steverman, Bloomberg Businessweek

Former auditors dish on truant taxpayers, decrepit tech and why $80 billion might not be enough to fix everything that’s wrong.

How many calls is the IRS answering? Depends on who you ask

Brian Faler, Politico Pro

The metric, a key barometer for how lawmakers view the agency’s performance, is a subject of intense debate.

Unions ‘sound the alarm’ over worsening staff attrition at SSA

Drew Friedman, Federal News Network

Poor work-life balance. Insufficient pay. Unmanageable workloads. Few opportunities for teleworking. The challenges for the Social Security Administration’s workforce are virtually unending, and if SSA leadership doesn’t change course soon, the agency’s metaphorical ship could capsize, the American Federation of Government Employees said.

World markets pause with all eyes on inflation, Fed minutes

Yoruk Bahceli and Ankur Banerjee, Reuters

World stocks and bond yields stalled on Wednesday as markets anticipated crucial U.S. inflation data which could give signals on how soon the Federal Reserve will end its aggressive rate hikes.

Swiss parliament’s lower house rejects Credit Suisse rescue package

Reuters

The lower house of Switzerland’s parliament voted late on Tuesday to retrospectively reject the 109 billion Swiss francs of financial guarantees the government gave to Credit Suisse as part of a hastily cobbled-together rescue package.

Credit Suisse, SEC letters show months-long reporting errors debate

Chris Prentice, Reuters

Credit Suisse and the U.S. Securities and Exchange Commission (SEC) engaged in a months-long debate over the severity of reporting deficiencies that led the Swiss bank to delay its annual report last month.

Appetite for expanded FDIC insurance is strong. Will it last?

Miriam Cross, National Mortgage News

First Internet Bancorp has been extending federal deposit insurance above the standard limit to its commercial customers for more than six years. These include municipalities or nonprofits that are conservative in nature and want to ensure their entire balance is insured.

Gen Z and millennials are so broke they’re ruining their parents’ retirements

Megan Leonhardt, Fortune

A majority of U.S. parents have made financial sacrifices to set their adult children up for success, many times at the expense of their own savings.

AI Can Write a Song, but It Can’t Beat the Market 

Gregory Zuckerman, The Wall Street Journal

Quants have tried for decades with limited success at their biggest challenge.

Blackstone closes $30.4 billion opportunistic real estate fund

Arleen Jacobius, Pensions & Investments

Blackstone on Tuesday announced the close of its largest real estate fund, Blackstone Real Estate Partners X, at $30.4 billion, a news release said.

Mortgage lenders are losing money on loans for the first time in years

Adam Barnes, The Hill

Mortgage lenders lost hundreds of dollars on average for each loan they originated last year while soaring interest rates dampened demand, according to a new report.

Houston Apartment Owner Loses 3,200 Units to Foreclosure as Multifamily Feels the Heat

Will Parker and Konrad Putzier, The Wall Street Journal

Building values are falling, interest rates are rising and rent growth is slowing.

In wake of failures, bank economists expect weaker credit quality, lighter lending

Jim Dobbs, National Mortgage News

Credit conditions are bound to weaken in the second quarter and beyond as the economy slows and fallout from the recent banking crisis washes over the industry.

Misinformation about FHA mortgage modification spreads on TikTok

Connie Kim, Housing Wire

Some TikTok content claims FHA announced a 40-year mortgage for homebuyers.

Housing politics divide the suburbs

Caitlin Owens, Axios

State and local governments across the country are trying to alleviate their housing crises by allowing denser development in areas dominated by single-family homes. The nation’s affordable housing crisis has significantly worsened over the last few years, but allowing builders to build more housing has sparked a backlash among some homeowners.

Binance.US to delist digital asset tokens TRON, Spell

Reuters

The U.S. arm of cryptocurrency exchange Binance said it will remove digital asset tokens TRON and Spell from its trading platform, sending the prices of both down sharply on Wednesday.

G-7 Will Focus on Helping Developing Nations Introduce CBDCs

Amitoj Singh, CoinDesk

“The collapse of FTX was a serious wake-up call on the need for proper consistent regulation across borders,” said Masato Kanda, Japan’s senior financial diplomat.

Crypto winter shows hint of thaw, bitcoin tops $30,000

Nathan Bomey, Axios

Crypto was in freefall in late 2022 as faith in digital assets suffered amid the FTX scandal and the collapse of other notable crypto companies. Bitcoin on Tuesday topped $30,000 for the first time since June.

Ex-Deutsche Bank investment banker charged in US with crypto fraud

Luc Cohen, Reuters

A former Deutsche Bank AG (DBKGn.DE) investment banker has been charged in an indictment unsealed on Tuesday with misappropriating funds from investors whom he wooed with promises of big returns from cryptocurrency trading.