Week of March 13th, 2023

Plus, what the San Francisco Federal Reserve Bank knew about SVB.

The FDIC allows coverage of different types of accounts at the same bank. There are also services that help you spread your money around.

Even if you don’t bank with Silicon Valley Bank or Signature Bank, the fallout from their collapses has probably grabbed your attention.

Back in the ’30s, news of bank runs traveled slowly. Nowadays, messaging chains and apps contribute to rapid bank collapses. Plus, the Federal Reserve finds itself between a rock and a hard place.

Chatter among the bank’s depositors on social media and texting groups may have exacerbated its demise.

Consumer sentiment isn’t as gloomy as the failure of Silicon Valley Bank might lead you to expect.

In China, each woman went from having about three children in the late 1970s to now one. Decades later, the Chinese government wants women to have three children again but is meeting resistance.

A beer industry group’s data shows a steep decline for the craft segment in February as consumers spent more consciously.

It’s St. Patrick’s Day, meaning people around the world will be wearing green and celebrating Irish culture — even those who don’t have roots there. But according to the BBC’s Leanna Byrne, it’s also a big day for Irish diplomacy and business, as the country uses its widely-recognized national day to foster economic ties around the world. And, we spoke with Yale’s Steven Kelly about the limits of comparing the now-defunct Silicon Valley Bank with the rest of the financial system. 

This past week, banks have been ramping up their cash borrowing at record rates to shore up reserves in the wake of recent bank failures. We look at who’s been lending smaller institutions money, including the Federal Reserve and larger banks, and why it matters. New academic research on America’s banking sector has found that the real value of the industry is less than it looks on paper because of rising interest rates. And, a trip to Louisiana, where residents of a former “Black Wall Street” community are raising questions about how the construction of a highway has damaged the area’s economic welfare. 

A midcentury expressway tore through New Orleans’ historic Black neighborhood of Tremé. A federal initiative wants to address that damage.

From the BBC World Service: There have been protests inside and outside the French parliament as President Emmanuel Macron invoked special constitutional powers to pass his contentious pensions bill, which he said is needed to ensure the system does not go bust. BBC Paris Correspondent Hugh Schofield was watching proceedings unfold in the French capital. Plus, today is St Patrick’s Day, so how does Ireland make the most of this opportunity when it comes to trade? Marketplace’s Leanna Bryne’s been finding out.

Econ Extra Credit newsletter #142

The collapse of two crypto-friendly banks has only strengthened some users’ belief in decentralized currency, says journalist Laura Shin.

Another day, another bank story.

Investing in long-term government bonds and mortgage-backed securities hurt the bank as interest rates rose and bond prices plummeted.

VCs have been among the loudest voices calling for government insurance amidst SVB’s collapse, after pulling their funds out of the struggling bank.

Banks may get stingier and more selective with loans, and that could hurt businesses that need them.

How the changing financial environment is influencing Federal Reserve policy and the availability of loans. Plus, is “moral hazard” to blame for Silicon Valley Bank’s collapse?

“Financial conditions” lately have been anything but simple.

Insurance can create perverse incentives, making risk seem less risky. Is “moral hazard” to blame for SVB’s meltdown?

Some attribute it to pent-up demand. Others think the American consumer may have changed.

A group of Wall Street banks is planning a rescue package of around $30 billion for First Republic Bank, sources told The Associated Press on Thursday.

The Biden administration has called for a boost in funding for the Environmental Protection Agency in the wake of the derailment of a Norfolk Southern train in Ohio. The ask came in form of the president’s budget request to Congress, where it faces long odds in the divided legislature. Credit Suisse, the megabank that received a lifeline of over $50 billion this morning from the Swiss central bank, has been a risky institution for a long time, explains 7IM’s Ben Kumar. And, a look at how the latest economic data may influence the Fed’s upcoming decision on interest rates.

The White House is proposing $12 billion to fund the agency, nearly 20% more than the EPA’s budget this year.

PFAS are linked to health issues including cancer. Critics are concerned about the costs of complying with the proposed standards.

Part of the government’s rescue actions amid the collapse of Silicon Valley Bank and Signature Bank was the establishment of a new Fed emergency lending program for banks in crisis. According to analyst Joseph Wang, the program could incentivize riskier behavior at banks. Credit Suisse, one of the world’s largest banks, has been extended a lifeline by the Swiss central bank. And, Biden administration has proposed stricter standards to regulate so-called “forever chemicals” in drinking water.

From the BBC World Service: Credit Suisse shares have bounced back after a $54bn vote of confidence from Switzerland’s central bank. But how will volatility in the banking sector affect an interest rate decision due today from the European Central Bank? Plus, in the Netherlands a farmers’ protest party has emerged as the big winner in provincial elections. They’ve been campaigning against government plans to buy livestock farms with the aim of cutting ammonia and nitrogen oxide emissions.

The Fed’s new program may incentivize banks to take more risks, says analyst Joseph Wang.

Yes, there’s an image problem, says Sarah Kunst of Cleo Capital. So let’s support diverse founders and investors.

It’s part real, part panic.

SVB has a “$15 billion hole,” says Semafor’s Liz Hoffman. Banks big enough to take on the challenge were initially not invited to bid.

Following the Silicon Valley Bank debacle, some worry that Credit Suisse’s troubles may spread to the global financial system. Plus, who wants to buy SVB at this point?

The channeling of NIL cash to athletes poses a risk to athletic department funding. Author Bruce Schoenfeld explains.

They’re letting depositors know that their money is safe and highlighting differences between their banks and the ones that failed.

It’s a spending category that looks at core services other than housing. The Fed says it could be key to understanding the future of inflation.

The bank, much larger than SVB, found problems in its financial reporting. Its Saudi funders ended support, but Swiss officials may step in.

The failure of Silicon Valley Bank and Signature Bank has put a spotlight on the stability of regional banks.

“The Uncertain Hour” is back! We’re diving deep into work requirements.

Consumers can’t get enough of makeup, skincare and hair products even as inflation persists and a potential recession looms.

One of the many questions around the two recent U.S. bank failures is why depositors became so spooked even when their bank held supposedly-safe assets like Treasury bonds. The answer, says Susan Schmidt, is largely because of those bonds’ decreased value because of higher interest rates. Credit Suisse, one of the world’s largest financial institutions, saw its stock nosedive this morning after it revealed it had been audited for shoddy accounting practices. And, a look at why sustainable versions of popular products are finding a growing niche in the market. 

An exhibit at New York City’s Fofografiska museum spotlights how poverty and inequality in the 1970s helped create the genre.

The last few days have been particularly unstable for mortgage rates, which were already volatile amid recent interest rate hikes.

Some homeowners are filling their walls with eco-friendly alternatives to synthetic insulation — but that can be costly.

Ajay Banga, the former CEO of Mastercard and U.S. nominee for the World Bank presidency, is on a global “listening tour” to garner support for his bid. While speaking with global business and government leaders, one thing he underscored was the importance of the fight against climate change in the upcoming years. Mortgage rates have been down in recent days amid unease about the financial sector following the collapse of two U.S. banks. And, a look at how hip-hop was shaped by economic pain in 1970s New York City. 

From the BBC World Service: The European Union’s banking regulator says it doesn’t see “any threat to financial stability of European Banks”, following the collapse of SVB. We ask an economics professor at a French business school why European banks are less likely to fail. We spoke to him before Credit Suisse’s shares collapsed after a major shareholder said it would not continue to invest. Also, the UK Government will be hoping for less turmoil as it prepares to announce its budget; the last one led to the pound reaching record lows and cost the then Prime Minister her job. Plus, we report from Beirut where the Lebanese currency is in freefall.

Microsoft’s Bing chatbot has displayed some strange, inappropriate responses. Could training in ethics help?

Today, we’ll look at the regulators involved in the banking blowup and chart where they can go from here. Plus, a quarterly report hints at how Federal Reserve policy may unfold.

What’s really behind the movement to ban the Chinese-owned app.

The cost of shelter is driving more than 70% of inflation right now, according to the Bureau of Labor Statistics. So what gives?

An explanation of the CRB raw industrials spot price index, a “predictor” of macroeconomic trends.

Regulators didn’t catch Silicon Valley Bank before it failed. What can they do to catch others?

The Summary of Economic Projections lays out what Fed leaders are thinking.

“We’ve just seen an uptick in moral hazard,” Daniel Tarullo says of the U.S. government covering uninsured deposits.

The feds didn’t take possession of Silicon Valley Bank and Signature Bank. That was up to state regulators in California and New York.

Meta and other tech companies have been hiring aggressively in recent years but have recently begun to let some of those workers go.

The SVB banking mess complicates the Federal Reserve’s path forward on interest rates — there are concerns about higher rates putting stress on the financial system, but the latest Consumer Price Index shows that inflation is still too high. Jeffrey Cleveland of Payden & Rygel has more. The banking crisis has prompted questions around whether regulators failed to detect — or act upon — red flags in either of the failed banks, explains Wharton professor Peter Conti-Brown. And, last week’s jobs report showed that women are becoming increasingly involved in the labor force after a pandemic-era dip.

Regulators likely failed to catch and act upon red flags at both failed banks, argues Wharton professor Peter Conti-Brown.

Women’s labor force participation is approaching pre-pandemic levels, but childcare is still limiting some women’s return to paid work.

The money’s coming from a fund run by the FDIC that derives most of its revenue from banks.

Since the government takeover of the failed Silicon Valley and Signature banks, questions have been swirling about where the money is coming from to ensure depositors’ money. We look at the agencies involved and how costs may eventually be passed on to consumers, despite officials’ assurances to the contrary. Amid the SVB crisis, there’s also been a reckoning about the rules and oversight that govern small and medium-sized financial institutions. And, schools in parts of Maine are seeing an unexpected drop in funding because of higher property values in surrounding communities. 

From the BBC World Service: With global markets still reeling from the failure of Silicon Valley bank, we hear from the CEO of HSBC who bought the UK arm for £1 on Monday. BBC Beijing correspondent Stephen McDonnell reports from China where the doors to foreign visitors will open from next week. Plus, is there hidden Nazi gold in a Dutch town? The BBC’s Anna Holligan has been to find out.

Starbucks? Home Depots? They’re everywhere.

TechCrunch’s Natasha Mascarenhas says some of Silicon Valley Bank’s startup customers are wondering what to do next.

Fifteen years later, a strange sense of déjà vu.

The collapsed banks were granted a “systemic risk exception,” which means the Federal Deposit Insurance Corp. can guarantee uninsured deposits.

The rollback of Dodd-Frank reforms exempted many of the country’s largest banks from stricter regulations put in place after 2008.

As the government moved to backstop depositors affected by the collapse of Silicon Valley Bank and Signature Bank, surviving banks will end up footing the costs, says Laurie Stewart at Sound Community Bank in Seattle.

On today’s show, we’ll feature special coverage of how the markets, Washington, the financial industry and consumers are all responding.

Viral terms like “bank run” do not help when we’re already looking at high prices, rising interest rates and big layoffs in tech.

High office vacancy rates can be an opportunity to create more housing amid a shortage in the state.

President Biden, in remarks delivered Monday morning, said that the U.S. banking system is “safe” and that depositors at the failed Silicon Valley and Signature banks would have full access to their deposits. The president’s messaging comes amid a wider campaign by federal officials to tame potential panic over this weekend’s banking debacle, according to Marketplace’s Sabri Ben-Achour. And, we got in touch with economist Julia Coronado to discuss how higher interest rates — which have come after a sustained period of near-zero rates — could have contributed to the crisis. 

Since the collapse — and subsequent government takeover — of Silicon Valley Bank on Friday, the fallout on the wider financial system has led to a new federal lending program and the shutdown of Signature Bank. We talk with Karen Petrou, managing partner at Federal Financial Analytics, about what steps regulators have taken in the wake of the debacle — and what they may have missed in the leadup to the chaos. And, a word from the UK’s top financial official on HSBC’s acquisition of SVB’s operations in that country.

From the BBC World Service: After late night discussions SVB’s UK operation has been snapped up by HSBC, for one pound. Francis Coppola, an independent banking analyst explains what impact the failure of SVB has had in the UK. Plus, with Oscars handed out we look at the growth of the movie industry in Nigeria, which now produces more films every year than Hollywood.

Aniket Bera, computer science professor at Purdue, is training AI models on data from diverse communities, trying to bring emotional intelligence to artificial intelligence.