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    Lawmakers Rebuke Biden for Bypassing Congress in Trade Deal With Japan

    A statement from two Democrats called the Biden administration’s deal “unacceptable,” saying it should have been made available to Congress and the public for review.WASHINGTON — Lawmakers on Tuesday issued a sharp rebuke of a limited trade deal the Biden administration reached with Japan, saying that it should have been made available to Congress and the public for review and that it lacked important protections for the environment and workers.In a statement viewed by The New York Times, Representative Richard E. Neal of Massachusetts, the Democratic ranking member of the Ways and Means Committee, and Senator Ron Wyden, Democrat of Oregon and the chairman of the Finance Committee, called the agreement “unacceptable.”“Without enforceable environmental or labor protections, the administration abandons worker-centric trade policy and jeopardizes our climate work by opening the door for another environmental catastrophe,” wrote the lawmakers, who are the two most powerful Democrats in Congress on trade issues.“Agreements should be developed transparently and made available to the public for meaningful review well before signing,” they added, “not after the ink is already dry.”The Biden administration announced late Monday that it had reached an agreement with Japan over supplies of critical minerals like lithium, cobalt and nickel, which are used to make car batteries. The agreement provides a potential workaround for the Biden administration in its disagreement with allies over the terms of the Inflation Reduction Act, which invests $370 billion to transition the United States to cleaner cars and energy sources.That law has angered some allies who were excluded from its benefits, which include generous tax incentives for companies that make electric vehicles in North America or source material for batteries from the United States or countries with which it has a free-trade agreement. That category does not include Japan or European Union countries.But because the Inflation Reduction Act does not technically define what constitutes a free-trade agreement, U.S. officials have found what they believe to be a workaround. They are arguing that countries will be able to meet the requirement by signing a more limited trade deal instead. The Treasury Department is expected to issue a proposed rule this week clarifying the provisions of the law..css-1v2n82w{max-width:600px;width:calc(100% – 40px);margin-top:20px;margin-bottom:25px;height:auto;margin-left:auto;margin-right:auto;font-family:nyt-franklin;color:var(–color-content-secondary,#363636);}@media only screen and (max-width:480px){.css-1v2n82w{margin-left:20px;margin-right:20px;}}@media only screen and (min-width:1024px){.css-1v2n82w{width:600px;}}.css-161d8zr{width:40px;margin-bottom:18px;text-align:left;margin-left:0;color:var(–color-content-primary,#121212);border:1px solid var(–color-content-primary,#121212);}@media only screen and (max-width:480px){.css-161d8zr{width:30px;margin-bottom:15px;}}.css-tjtq43{line-height:25px;}@media only screen and (max-width:480px){.css-tjtq43{line-height:24px;}}.css-x1k33h{font-family:nyt-cheltenham;font-size:19px;font-weight:700;line-height:25px;}.css-1hvpcve{font-size:17px;font-weight:300;line-height:25px;}.css-1hvpcve em{font-style:italic;}.css-1hvpcve strong{font-weight:bold;}.css-1hvpcve a{font-weight:500;color:var(–color-content-secondary,#363636);}.css-1c013uz{margin-top:18px;margin-bottom:22px;}@media only screen and (max-width:480px){.css-1c013uz{font-size:14px;margin-top:15px;margin-bottom:20px;}}.css-1c013uz a{color:var(–color-signal-editorial,#326891);-webkit-text-decoration:underline;text-decoration:underline;font-weight:500;font-size:16px;}@media only screen and (max-width:480px){.css-1c013uz a{font-size:13px;}}.css-1c013uz a:hover{-webkit-text-decoration:none;text-decoration:none;}How Times reporters cover politics. We rely on our journalists to be independent observers. So while Times staff members may vote, they are not allowed to endorse or campaign for candidates or political causes. This includes participating in marches or rallies in support of a movement or giving money to, or raising money for, any political candidate or election cause.Learn more about our process.A fact sheet distributed late Monday by the Office of the United States Trade Representative said that the United States and Japan had promised to encourage higher labor and environmental standards for minerals that power electric vehicles. The parties also promised to promote more efficient use of resources and confer on how they review investments from foreign entities in the sector, among other pledges.In a call with reporters on Monday, a senior official said the Biden administration had consulted with Congress and received input from lawmakers. But the official said the administration had the authority to negotiate limited agreements without submitting them to Congress for approval.Katherine Tai, the United States trade representative, had been expected to sign the agreement on Tuesday.“It’s clear this agreement is one of convenience,” Mr. Neal and Mr. Wyden said in the statement. “As we warned Ambassador Tai last week, the administration does not have the authority to unilaterally enter into free trade agreements.”Administration officials have argued that key members of Congress always intended U.S. allies to be included in the law’s benefits. But other lawmakers have also criticized the Biden administration for sidestepping Congress’s authority over new trade deals, a tactic that the Trump administration also frequently used.In a statement on Tuesday, Representative Jason Smith, Republican of Missouri and the chairman of the Ways and Means Committee, said the agreement with Japan did not shift critical mineral supply chains from China.“Equally shameful is the fact that the Biden administration is distorting the plain text of U.S. law to write as many green corporate welfare checks as possible,” Mr. Smith said. “The administration has not been transparent with the American people and has ignored major concerns raised by Congress, including failing to provide an analysis of the effects this agreement would have on American workers.”Representative Dan Kildee, Democrat of Michigan, said on Tuesday that the administration was taking the wrong approach with the deal.“I believe the administration must come to Congress if they want to enter new free trade pacts,” he said in a statement. 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    SVB Hearing Takeaways: Bank Failures Spur a Blame Game, But Few Solutions

    Federal regulators faced more than two hours of intense questioning from lawmakers on Tuesday about what caused the failures of Silicon Valley Bank and Signature Bank, the red flags that went unheeded and the steps that must be taken to avoid future collapses that could rattle the United States financial system.There was bipartisan concern about the state of the nation’s banks that in many cases blurred the usual party lines, where Democrats want more strict oversight and Republicans call for looser regulations. But there was also a substantial amount of buck-passing and finger pointing as the officials from the Federal Reserve, the Federal Deposit Insurance Corporation and the Treasury Department sought to make sense of the second largest bank failure in American history.The hearing — featuring Michael S. Barr, the Federal Reserve’s vice chair for supervision, Martin Gruenberg, chair of the Federal Deposit Insurance Corporation and Nellie Liang, the Treasury’s under secretary for domestic finance — marked the beginning of what will be an extended inquiry by Congress and the regulators themselves into what went wrong.Regulators blamed the banks.From the outset, the regulators made clear what they believed to be the primary reason that Silicon Valley Bank failed: It was poorly managed and allowed risks to build up to the point that the bank collapsed.Mr. Barr said in his testimony that “SVB’s failure is a textbook case of mismanagement.” He added that Fed officials flagged problems to the bank as far back as November 2021, but the bank failed to deal with them.Punishment for executives is on the table.Lawmakers remained intent on ensuring that the executives of the banks are punished if they did anything improper leading up to the failures. They also expressed particular concern about last minute stock sales by Silicon Valley Bank officials.Regulators said that they were limited in their power to claw back compensation but that they can impose financial and other penalties if their continuing investigation finds wrongdoing.Regulators blamed Silicon Valley Bank’s collapse on poor management during more than two hours of questioning, Kenny Holston/The New York TimesThe Fed could have done more.The Federal Reserve is under particular scrutiny regarding when it knew that things were amiss at SVB.Even though Fed supervisors had flagged weaknesses at SVB as far back as 2021, Mr. Barr said he first learned of SVB’s problems last month — suggesting it took a long time for concerns to be escalated to the Fed board and its vice chair of supervision.Mr. Barr said that the Federal Reserve officials will be discussing any potential missed warning signs in their internal review and that “we expect to be held accountable.”Regulators say they need more authority.All three regulators said that they believed that financial regulations needed to be tightened following the recent stress in the banking sector.Mr. Barr pointed to Federal Reserve regulations, which were enacted during the Trump administration in 2019, that exempted Silicon Valley Bank from being stress tested and suggested that those need to be revisited.Some Democrats on the committee emphasized the notion that deregulation left agencies without the tools they needed to address issues at smaller banks.What’s next?The House Financial Services Committee will hold its own hearing on Wednesday, and question the same officials.Reviews by the F.D.I.C. and the Fed are expected to be completed by May 1 and members of the Senate committee from both parties suggested they’d be interested in hearing from regulators after those inquiries are concluded.There is also an ongoing debate about raising the bank deposit insurance cap from $250,000 and imposing stiffer penalties on executives at banks that fail.Lawmakers have also asked the Government Accountability Office to study the effectiveness of the bank supervisory regime and make recommendations for changes. But it’s not clear whether any suggested changes would have enough bipartisan support to overcome a divided Congress. More

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    Congress grilled regulators on their actions before and after the failures.

    Top officials from the Federal Reserve, the Treasury and the Federal Deposit Insurance Corporation on Tuesday defended their response to the collapse of two banks that shocked the global financial system this month and ramped up the risk of a recession in the United States.The officials blamed the leaders of the two failed banks, Silicon Valley Bank and Signature Bank, saying gross mismanagement had led to the crisis. While members of the Senate Banking Committee also cited executives’ failures, they sharply questioned the regulators about their actions.Michael S. Barr, the vice chair for supervision at the Fed, SVB’s primary regulator, said the bank failed because “its management failed to appropriately address” clear risks that were pointed out to it more than two years ago. But he later acknowledged that he did not learn about the severity of the bank’s problems until the middle of last month.Here’s what to know:The officials who testified were Mr. Barr; Martin Gruenberg, the chair of the F.D.I.C.; and Nellie Liang, the Treasury’s under secretary for domestic finance. Read more about them.Mr. Barr said the run that led to the failure of Silicon Valley Bank was of “an extraordinary pace and scale.” The bank had $42 billion flow out on March 9 — the fastest run ever — and the bank expected an outflow of $100 billion the next day, when regulators stepped in. Catch up on what happened with the banks at the center of the crisis.Some Democrats on the committee emphasized the notion that deregulation left agencies without the tools they needed to address issues at smaller banks like SVB. Some Republicans sought to link government spending and the Fed’s broader agenda — including on issues like climate change — to the crisis. Both sides expressed concern about the effect the turmoil could have on the broader economy. In response to questions about their actions to backstop deposits at the failed banks, Mr. Gruenberg said that there would have been “contagion” — a spreading of the crisis. Ms. Liang agreed, saying without federal action, bank runs “would have intensified and caused serious problems.” Here are the regulatory proposals that the White House is weighing. This was the first of two days of testimony. The same officials will appear before the House Financial Services Committee on Wednesday. More

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    Will Bank Turmoil Tank the Economy?

    As government officials testify before congressional committees on the fallout from recent banking collapses, a major question looms: What will this mean for the economy?Federal Reserve officials have been clear that they expect a slowdown in bank lending tied to the tumult to weigh on economic growth this year, but the magnitude is uncertain. And much of the potential fallout depends on what comes next.If the banking turmoil blows over in the coming weeks, lending and financing standards could return to something like normal — and the economic fallout might not be substantial.But if the upheaval continues, or if it creates knock-on effects in other parts of financial markets and the economy, the hit could be meaningful. If the banking trouble makes it harder to take out loans or issue debt, it means fewer businesses can expand and hire staff, among other troubles. Those problems could even be enough to push America toward a recession.“It definitely brings us closer” to a downturn, Neel Kashkari, the president of the Minneapolis Fed, said on CBS News’s “Face the Nation” this weekend. “Right now what’s unclear for us is how much of these banking stresses are leading to a widespread credit crunch.”Mr. Kashkari noted that some capital markets have been largely closed for weeks, and that if “capital markets remain closed because borrowers and lenders remain nervous, then that would tell me, OK, this is probably going to have a bigger imprint on the economy.”The riskiest companies have been mostly frozen out of debt markets since early this month. At the same time, some of the healthiest corporate borrowers have managed to issue bonds again this week — a hopeful sign — though their borrowing costs were unusually elevated.Investors and economists are watching for other risks, like the effect of banking turmoil on commercial real estate, which was already confronting pandemic-spurred office vacancies and which has traditionally relied on small and midsize banks for loans.With the scope of the fallout so unpredictable, Fed officials have been hesitant to react too decisively. Central bankers raised interest rates by a quarter-point last week as they continued their fight against inflation, while also suggesting that they did not know what would come next.“Events in the banking system over the past two weeks are likely to result in tighter credit conditions for households and businesses, which would in turn affect economic outcomes,” Jerome H. Powell, the Fed chair, said at a news conference after the rate increase. “It is too soon to determine the extent of these effects and therefore too soon to tell how monetary policy should respond.” More

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    How Far Can Regulators Go to Protect Uninsured Deposits?

    A decision by federal regulators to ensure that depositors at Silicon Valley Bank and Signature Bank did not lose money regardless of how much they had in their accounts, has aroused populist anger as well as questions of what government agencies can and cannot do to protect uninsured accounts.Under current law, the government insures bank deposits only up to $250,000. Any increase in that limit would require congressional authorization. But regulators can protect deposits over that amount, like they did at Silicon Valley Bank and Signature Bank, if they determine that the banks’ failures pose a systemic risk.They can also request approval from Congress to temporarily raise the cap or eliminate it altogether, though some lawmakers have already expressed unwillingness to do so.Janet L. Yellen, the Treasury secretary, suggested last week that regulators were ready to make uninsured depositors at other banks whole if necessary and “if smaller institutions suffer deposit runs that pose the risk of contagion.”Amid widespread bank failures in the Great Depression, Congress created the Federal Deposit Insurance Corporation in 1933 to insure deposits under $2,500. It has increased that limit over the years, recently lifting it to $250,000 from $100,000 for IRAs in 2006 and for checking accounts in 2008. The Dodd-Frank Act of 2010 made the increase permanent.In the wake of the 2008 financial crisis, the F.D.I.C. evoked the systemic risk exception to create a program that guaranteed new debt issued by banks for three years and insured all deposits if they did not bear interest (typically, accounts used by businesses for payroll).The decision to grant the exception was reached “after three days of intense negotiation,” according to an account of the episode by the F.D.I.C.’s historian, and had to be approved by the Treasury secretary in consultation with the president and two-thirds of the boards of both the F.D.I.C. and the Federal Reserve.But regulators no longer have the ability to create such a program unilaterally, as the Dodd-Frank Act eliminated the F.D.I.C.’s authority to temporarily insure accounts with more assets than the statutory limit. Under that law, the agency can only do so if it is the receiver of a failed bank or if it has approval from Congress.“Congress was so concerned with moral hazard and ‘bailouts’ that it seemed to limit the receipt of F.D.I.C. assistance to the imposition of an F.D.I.C. receivership, unless Congress specifically approved a subsequent F.D.I.C. alternative,” said Jeffrey N. Gordon, a law professor at Columbia University and expert on financial regulation.During the coronavirus pandemic, Congress in 2020 temporarily lifted the deposit limit on noninterest bearing accounts. But in congressional testimony last week, Ms. Yellen said her agency was not seeking to lift the cap altogether and insure all deposits over $250,000. Rather, she said, regulators would seek the systemic risk exception for failed banks through a “case-by-case determination.”Others, though, have pushed for more sweeping coverage. Some lawmakers are considering temporarily increasing the deposit cap while others have proposed eliminating it altogether.The Dodd-Frank Act provides a fast-track process for such requests, allowing the Congress to expedite approval by adopting a joint resolution. Sheila Blair, the former president of the F.D.I.C. during the financial crisis, recently urged Congress to initiate the procedure.“We want people to make payroll. We want people to be able to pay their businesses and others to pay their bills. So I think that is one area where unlimited coverage, at least on a temporary basis, makes a lot of sense,” she said in a Washington Post event last week.News reports have also suggested that regulators are looking at other mechanisms of acting without Congress, specifically by tapping into the Exchange Stabilization Fund. The Treasury secretary has broad authority to use the emergency reserve, which was created in 1934 to stabilize the value of the dollar but has been used over the years for a host of other purposes.Mr. Gordon noted that using the exchange fund alone would not work to protect uninsured deposits, given that it is “paltry compared to the Deposit Insurance Fund and unlike the D.I.F. has no mechanism for replenishment.” But he said it would be possible to use the fund as a backstop in a program operated by the Federal Reserve that lends against bank assets.“What this means is that banks would have an easy way to raise cash to pay off all deposits,” he said. More

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    BlackRock warns that investors are making a mistake by betting on the Fed to cut rates

    Market pricing as of Tuesday morning pointed to the Fed holding its benchmark interest rate at current levels and then starting to reduce as early as July.
    The expectation for cuts would be consistent with a recession and an accompanying fall in inflation, assumptions that Wall Street strategists think are dubious.
    “We think the Fed could only deliver the rate cuts priced in by markets if a more serious credit crunch took hold and caused an even deeper recession than we expect,” BlackRock strategists wrote.

    Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, March 27, 2023.
    Brendan McDermid | Reuters

    Investors are too confident the Federal Reserve will cut interest rates this year and could pay the price later, according to asset management giant BlackRock and others on Wall Street.
    Market pricing as of Tuesday morning pointed to the Fed holding its benchmark interest rate at current levels and then starting to reduce as early as July, according to CME Group calculations. Those cuts could total as much as a full percentage point by the end of the year, the firm’s FedWatch gauge shows.

    related investing news

    That comes despite multiple public statements from central bank officials, who indicated in their “dot plot” unofficial forecast last week that they see probably another quarter percentage point hike and then no cuts at least through the end of 2023.
    The expectation for cuts would be consistent with a recession and an accompanying fall in inflation, assumptions that Wall Street strategists think are dubious.
    “We don’t see rate cuts this year – that’s the old playbook when central banks would rush to rescue the economy as recession hit,” BlackRock said in its weekly client note. “Now they’re causing the recession to fight sticky inflation and that makes rate cuts unlikely, in our view.”
    The investing implications are ominous: BlackRock, which manages about $10 trillion in client money, says it is underweight stocks in developed markets such as the U.S. Instead, it recommends clients focus on investments like fixed income that is indexed to inflation, as well as very short-duration government bonds.
    Resilience in stocks, the firm said, is coming largely because markets are still holding onto hope that the Fed starts to ease after a year of tightening that sent the benchmark federal funds rate up 4.75 percentage points.

    “We think the Fed could only deliver the rate cuts priced in by markets if a more serious credit crunch took hold and caused an even deeper recession than we expect,” BlackRock strategists wrote.

    A slowing economy with high inflation

    Projections the Fed released following its latest rate hike last Wednesday imply a shallow recession for later this year.
    The median expectation for gross domestic product growth for the full year is 0.4%. Considering that the first quarter gain is tracking, according to an Atlanta Fed gauge, at 3.2%, the math would require at least some negative growth the rest of the way to get to the 0.4% estimate.
    At the same time, officials estimate a 4.5% unemployment rate by the end of the year, from the current 3.6%. Getting there would require a loss of more than 571,000 jobs, according to an Atlanta Fed calculator.
    Though that would be challenging, the Fed is likely to prioritize its inflation fight, particularly if the data continue to indicate elevated prices, Citigroup economist Andrew Hollenhorst wrote.
    “Financial stability concerns are likely to remain at least somewhat elevated over the next few months. That means a more cautious Fed and markets pricing a higher probability of more dovish policy outcomes,” Hollenhorst said. “But to the extent financial sector risks do not materialize, focus will gradually shift back to inflation.”
    Bank of America analysts note the paradox of investors simultaneously pricing in a Fed that will relax policy to fight an economic slowdown while also betting that stocks will continue to climb.
    “The major US equity indices seem to be looking past the type of shock or economic slowdown that would get the Fed to cut rates, and yet are trading on expectations of a lower (eventually) discount factor,” BofA said. “This is despite two important facts: (i) recessions are reliably negative for equities throughout history and not discounted in advance, and (ii) the FOMC projections and dots imply no rate cuts even if we get a mild recession this year.”
    Like BlackRock, Bank of America is advising clients to bet against U.S. stocks and instead focus on strategies that pay when the market falls. More

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    Silicon Valley Bank’s Risks Went Deep. Congress Wants to Know Why.

    Lapses at the bank will be a focus as a top Federal Reserve official testifies to House and Senate committees this week.WASHINGTON — The nation’s top financial regulators will face a grilling from lawmakers on Tuesday over the collapse of Silicon Valley Bank as they push to understand why the firm was allowed to grow so rapidly and build up so much risk that it failed, requiring a government rescue for depositors and sending shock waves across global markets.Michael S. Barr, the Federal Reserve’s vice chair for supervision, will testify before the Senate Banking Committee on Tuesday alongside Martin Gruenberg, chair of the Federal Deposit Insurance Corporation, and Nellie Liang, the Treasury’s under secretary for domestic finance. The same officials are set to testify before the House Financial Services Committee on Wednesday.Lawmakers are expected to focus on what went wrong. The picture that has emerged so far is of a bank that grew ravenously and ran itself more like a start-up than a 40-year-old lender. The bank took in a large share of big — and uninsured — depositors even as it used its assets to double down on a bet that interest rates would stay low.Instead, the Fed raised rates sharply to slow rapid inflation, reducing the market value of Silicon Valley Bank’s large holdings of longer-term bonds and making them less attractive as new securities offered higher returns. When SVB sold some of its holdings to shore up its balance sheet, it incurred big losses.That spooked its customers, many of whom had deposits far above the $250,000 limit on what the government would guarantee in the event the bank failed. They raced to pull their money out, and the bank collapsed on March 10.The question is why supervisors at the Fed failed to stop the bank from making dangerous mistakes that seem obvious in hindsight. And the answer is important: If the Fed missed the problems because of widespread flaws in the ways banks are overseen and regulated, it could mean other weak spots in the industry are slipping through the cracks.Here is a rundown of what is already known, and where lawmakers could push for firmer answers this week.As Silicon Valley Bank grew, the Fed found problems.Silicon Valley Bank went to just above $115 billion in assets at the end of 2020 from $71 billion at the end of 2019. That growth catapulted it to a new level of oversight at the Fed by late 2021 — into the purview the Large and Foreign Banking Organization group.That group includes a mix of staff members from the Fed’s regional reserve banks and its Board of Governors in Washington. Banks that are large enough to fall under its remit get more scrutiny than smaller organizations.Silicon Valley Bank would most likely have moved to that more onerous oversight rung at least a couple of years earlier had it not been for a watering-down of rules that the Fed carried out under Randal K. Quarles, who was its supervisory vice chair during the Trump administration.By the time the bank had come under intense scrutiny, problems had already started: Fed officials found big issues in their first sweeping review.Supervisors promptly issued six citations — called matters requiring attention or matters requiring immediate attention — that amounted to a warning that SVB was doing a faulty job of managing its ability to raise cash in a pinch if needed.It is not clear precisely what those citations said, because the Fed has not released them. By the time the bank went through a full supervisory review in 2022, supervisors were seeing glimmers of progress on the issues, a person familiar with the matter said.Michael S. Barr, the Federal Reserve’s vice chair for supervision, is scheduled to testify at the hearings.Alex Wong/Getty ImagesSilicon Valley Bank was given a ‘satisfactory’ rating despite its issues.Perhaps in part because of that progress, SVB’s liquidity — its ability to come up with money quickly in the face of trouble — was rated satisfactory last year.Around that time, bank management was intensifying its bet that rates would stop climbing. SVB had been maintaining protection against rising rates on a sliver of its bond portfolio — but began to drop even those in early 2022, booking millions in profits by selling off the protection. According to a company presentation, SVB was newly focused on a scenario in which borrowing costs fell.That was a bad call. The Fed raised interest rates at the fastest pace since the 1980s last year as it tried to control rapid inflation — and Silicon Valley Bank was suddenly staring down huge losses.The bank’s demise set off cascading concerns.By mid-2022, Fed supervisors had focused a skeptical eye on SVB’s management, and it was barred from growing by buying other institutions. But by the time Fed officials had reviewed the bank’s liquidity fully again in 2023, its problems had turned crippling.SVB had been borrowing heavily from the Federal Home Loan Bank of San Francisco for months to raise cash. On March 8, the bank announced that it would need to raise capital after selling its bond portfolio at a loss.On March 9, customers tried to pull $42 billion from SVB in one day — the fastest bank run in history — and it had to scramble to tap the Fed’s backup funding source, the discount window. What loans it could get in exchange for its assets were not enough. On March 10, it failed.That only started the problems for the broader banking system. Uninsured depositors at other banks began to nervously eye their own institutions. On March 12 — a Sunday evening — regulators announced that they were closing another firm, Signature Bank.To forestall a nationwide bank run, regulators said they would make sure even the failed banks’ big depositors were paid back in full, and the Fed opened a new program to help banks get cash in a pinch.But that did not immediately stem the bleeding: Fed data showed that bank deposits fell by $98 billion to $17.5 trillion in the week that ended March 15, the biggest decline in nearly a year. But even those numbers hid a trend playing out under the surface: People moved their money away from smaller banks to banking giants that they thought were less likely to fail.Deposits at small banks dropped by $120 billion, while those at the 25 largest banks shot up by about $67 billion. Government officials have said those flows have abated.As customers and investors began to probe for weak spots in the financial system, other banks found themselves in tumult — including Credit Suisse in Switzerland, which was taken over, and First Republic, which took a capital injection from other banks.Lawmakers from both parties want answers.“It is concerning that Federal Reserve staff did not intervene in a timely manner and use the powerful supervisory and enforcement tools available to prevent the firm’s failure and subsequent market uncertainty,” Republicans on the House Financial Services Committee wrote in a letter released Friday.Senator Rick Scott, Republican of Florida, and Senator Elizabeth Warren, Democrat of Massachusetts, have introduced legislation to require a presidentially appointed and Senate-confirmed inspector general at the Fed and the Consumer Financial Protection Bureau. The Fed already has an internal watchdog, but this one would be appointed by the president.Recent bank failures “serve as a clear reminder that banks cannot be left to supervise themselves,” Ms. Warren warned. She has also pushed for an inspector general review of what went wrong with Silicon Valley Bank.Congress wants to know whom to blame.Much of the focus in recent weeks has been on who at the Fed is to blame. Mr. Barr started in his role midway through 2022, so he has mostly been left out of the finger-pointing.Some have pointed to Mary C. Daly, president of the Federal Reserve Bank of San Francisco. Presidents of regional Fed banks typically do not play a leading role in bank oversight, though they can flag gaping problems to the Federal Reserve Board in extreme cases.Others have pointed to Mr. Barr’s predecessor, Mr. Quarles, who left his supervisory vice chair post in October 2021. Mr. Quarles helped to roll back regulations, and people familiar with his time at the Fed have said his tone when it came to supervision — which he thought should be more transparent and predictable — led many bank overseers to take a less strict approach.And some critics have suggested that Jerome H. Powell, the Fed chair, helped to enable the problems by voting for Mr. Quarles’s deregulatory changes in 2018 and 2019.An internal Fed review of what went awry is set for release on May 1. And the central bank has expressed an openness to an outside inquiry.“It’s 100 percent certainty that there will be independent investigations and outside investigations and all that,” Mr. Powell said at news conference last week. “Of course we welcome that.” More

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    Tinkering With ChatGPT, Workers Wonder: Will This Take My Job?

    In December, the staff of the American Writers and Artists Institute — a 26-year-old membership organization for copywriters — realized that something big was happening.The newest edition of ChatGPT, a “large language model” that mines the internet to answer questions and perform tasks on command, had just been released. Its abilities were astonishing — and squarely in the bailiwick of people who generate content, such as advertising copy and blog posts, for a living.“They’re horrified,” said Rebecca Matter, the institute’s president. Over the holidays, she scrambled to organize a webinar on the pitfalls and potential of the new artificial-intelligence technology. More than 3,000 people signed up, she said, and the overall message was cautionary but reassuring: Writers could use ChatGPT to complete assignments more quickly, and move into higher-level roles in content planning and search-engine optimization.“I do think it’s going to minimize short-form copy projects,” Ms. Matter said. “But on the flip side of that, I think there will be more opportunities for things like strategy.”OpenAI’s ChatGPT is the latest advance in a steady march of innovations that have offered the potential to transform many occupations and wipe out others, sometimes in tandem. It is too early to tally the enabled and the endangered, or to gauge the overall impact on labor demand and productivity. But it seems clear that artificial intelligence will impinge on work in different ways than previous waves of technology.The positive view of tools like ChatGPT is that they could be complements to human labor, rather than replacements. Not all workers are sanguine, however, about the prospective impact.Katie Brown is a grant writer in the Chicago suburbs for a small nonprofit group focused on addressing domestic violence. She was shocked to learn in early February that a professional association for grant writers was promoting the use of artificial-intelligence software that would automatically complete parts of an application, requiring the human simply to polish it before submitting.The platform, called Grantable, is based on the same technology as ChatGPT, and it markets itself to freelancers who charge by the application. That, she thought, clearly threatens opportunities in the industry.“For me, it’s common sense: Which do you think a small nonprofit will pick?” Ms. Brown said. “A full-time-salary-plus-benefits person, or someone equipped with A.I. that you don’t have to pay benefits for?”Artificial intelligence and machine learning have been operating in the background of many businesses for years, helping to evaluate large numbers of possible decisions and better align supply with demand, for example. And plenty of technological advancements over centuries have decreased the need for certain workers — although each time, the jobs created have more than offset the number lost.Guillermo Rubio has found that his job as a copywriter has changed markedly since he started using ChatGPT to generate ideas for blog posts.In-camera double exposure by Mark Abramson for The New York TimesChatGPT, however, is the first to confront such a broad range of white-collar workers so directly, and to be so accessible that people could use it in their own jobs. And it is improving rapidly, with a new edition released this month. According to a survey conducted by the job search website ZipRecruiter after ChatGPT’s release, 62 percent of job seekers said they were concerned that artificial intelligence could derail their careers.“ChatGPT is the one that made it more visible,” said Michael Chui, a partner at the McKinsey Global Institute who studies automation’s effects. “So I think it did start to raise questions about where timelines might start to be accelerated.”That’s also the conclusion of a White House report on the implications of A.I. technology, including ChatGPT. “The primary risk of A.I. to the work force is in the general disruption it is likely to cause to workers, whether they find that their jobs are newly automated or that their job design has fundamentally changed,” the authors wrote.For now, Guillermo Rubio has found that his job as a copywriter has changed markedly since he started using ChatGPT to generate ideas for blog posts, write first drafts of newsletters, create hundreds of slight variations on stock advertising copy and summon research on a subject about which he might write a white paper.Since he still charges his clients the same rates, the tool has simply allowed him to work less. If the going rate for copy goes down, though — which it might, as the technology improves — he’s confident he’ll be able to move into consulting on content strategy, along with production.“I think people are more reluctant and fearful, with good reason,” Mr. Rubio, who is in Orange County, Calif., said. “You could look at it in a negative light, or you can embrace it. I think the biggest takeaway is you have to be adaptable. You have to be open to embracing it.”After decades of study, researchers understand a lot about automation’s impact on the work force. Economists including Daron Acemoglu at the Massachusetts Institute of Technology have found that since 1980, technology has played a primary role in amplifying income inequality. As labor unions atrophied, hollowing out systems for training and retraining, workers without college educations saw their bargaining power reduced in the face of machines capable of rudimentary tasks.The advent of ChatGPT three months ago, however, has prompted a flurry of studies predicated on the idea that this isn’t your average robot.One team of researchers ran an analysis showing the industries and occupations that are most exposed to artificial intelligence, based on a model adjusted for generative language tools. Topping the list were college humanities professors, legal services providers, insurance agents and telemarketers. Mere exposure, however, doesn’t determine whether the technology is likely to replace workers or merely augment their skills.Shakked Noy and Whitney Zhang, doctoral students at M.I.T., conducted a randomized, controlled trial on experienced professionals in such fields as human relations and marketing. The participants were given tasks that typically take 20 to 30 minutes, like writing news releases and brief reports. Those who used ChatGPT completed the assignments 37 percent faster on average than those who didn’t — a substantial productivity increase. They also reported a 20 percent increase in job satisfaction.A third study — using a program developed by GitHub, which is owned by Microsoft — evaluated the impact of generative A.I. specifically on software developers. In a trial run by GitHub’s researchers, developers given an entry-level task and encouraged to use the program, called Copilot, completed their task 55 percent faster than those who did the assignment manually.Those productivity gains are unlike almost any observed since the widespread adoption of the personal computer.“It does seem to be doing something fundamentally different,” said David Autor, another M.I.T. economist, who advises Ms. Zhang and Mr. Noy. “Before, computers were powerful, but they simply and robotically did what people programmed them to do.” Generative artificial intelligence, on the other hand, is “adaptive, it learns and is capable of flexible problem solving.”That’s very apparent to Peter Dolkens, a software developer for a company that primarily makes online tools for the sports industry. He has been integrating ChatGPT into his work for tasks like summarizing chunks of code to aid colleagues who may pick up the project after him, and proposing solutions to problems that have him stumped. If the answer isn’t perfect, he’ll ask ChatGPT to refine it, or try something different.“It’s the equivalent of a very well-read intern,” Mr. Dolkens, who is in London, said. “They might not have the experience to know how to apply it, but they know all the words, they’ve read all the books and they’re able to get part of the way there.”There’s another takeaway from the initial research: ChatGPT and Copilot elevated the least experienced workers the most. If true, more generally, that could mitigate the inequality-widening effects of artificial intelligence.On the other hand, as each worker becomes more productive, fewer workers are required to complete a set of tasks. Whether that results in fewer jobs in particular industries depends on the demand for the service provided, and the jobs that might be created in helping to manage and direct the A.I. “Prompt engineering,” for example, is already a skill that those who play around with ChatGPT long enough can add to their résumés.Since demand for software code seems insatiable, and developers’ salaries are extremely high, increasing productivity seems unlikely to foreclose opportunities for people to enter the field.That won’t be the same for every profession, however, and Dominic Russo is pretty sure it won’t be true for his: writing appeals to pharmacy benefit managers and insurance companies when they reject prescriptions for expensive drugs. He has been doing the job for about seven years, and has built expertise with only on-the-job training, after studying journalism in college.After ChatGPT came out, he asked it to write an appeal on behalf of someone with psoriasis who wanted the expensive drug Otezla. The result was good enough to require only a few edits before submitting it.“If you knew what to prompt the A.I. with, anyone could do the work,” Mr. Russo said. “That’s what’s really scares me. Why would a pharmacy pay me $70,000 a year, when they can license the technology and pay people $12 an hour to run prompts into it?”To try to protect himself from that possible future, Mr. Russo has been building up his side business: selling pizzas out of his house in southern New Jersey, an enterprise that he figures won’t be disrupted by artificial intelligence.Yet. More