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    Credit Suisse to Borrow as Much as $54 Billion From Swiss Central Bank

    Credit Suisse said on Thursday that it plans to borrow as much as $54 billion from the Swiss central bank to improve its liquidity after the lender’s shares plunged to a new low.The bank will also access a “short-term liquidity facility” and will buy back about $3 billion in debt, it said in a statement released on its website.Credit Suisse, a 166-year-old institution, ended Wednesday fighting for its life. Its shares tumbled 24 percent on the SIX Swiss Exchange, hitting a new low, and the price of its bonds dropped sharply as well. The cost of financial contracts that insure against a default by the bank spiked to their highest levels on record.After European markets closed on Wednesday, the Swiss National Bank and Finma, the country’s financial regulator, issued a joint statement certifying Credit Suisse’s financial health and saying the central bank would backstop the bank if needed. Hours later, Credit Suisse said it planned to borrow 50 billion Swiss francs from the Swiss National Bank.The immediate catalyst for a perilous drop in the bank’s stock price was a comment by Ammar al-Khudairy, the chairman of the Saudi National Bank, which is the bank’s largest shareholder. In a televised interview with Bloomberg News, Mr. al-Khudairy said that the state-owned bank would not put more money into Credit Suisse.Credit Suisse has been battered by years of mistakes and controversies that have cost it two chief executives over three years. These include huge trading losses tied to the implosions of the investment firm Archegos and the lender Greensill Capital; they also include an array of scandals, from involvement in money laundering to spying on former employees.The firm has embarked on a sweeping turnaround plan, which includes thousands of layoffs and the spinoff of its Wall Street investment bank. But investors have questioned whether continuing losses and client departures — the firm lost about $147 billion worth of customer deposits in the last three months of 2022 — have endangered that effort. More

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    French Protesters Rally in Last Angry Push Before Pension Bill Vote

    Many believe the legislation to raise the retirement age to 64 from 62 will pass Parliament, and they are looking beyond the vote to fight on.PARIS — Hundreds of thousands of French protesters on Wednesday swarmed cities across the country, and striking workers disrupted rail lines and closed schools to protest the government’s plan to raise the legal retirement age, in a final show of force before the contested bill comes to a vote on Thursday.The march — the eighth such national mobilization in two months — and strikes embodied the showdown between two apparently unyielding forces: President Emmanuel Macron, who has been unwavering in his resolve to overhaul pensions, and large crowds of protesters who have vowed to continue the fight even if the bill to raise the retirement age to 64 from 62 passes Parliament — which many believe it will.“Macron has not listened to us, and I’m no longer willing to listen to him,” said Patrick Agman, 59, who was marching in Paris on Wednesday. “I don’t see any other option than blocking the country now.”But it remains unclear what shape the protest movement will take from here, with plenty of room for it either to turn into the kind of unbridled social unrest that France has experienced before or to slowly die out.Even as throngs marched in cities from Le Havre in Normandy to Nice on the French Riviera on Wednesday, a joint committee of lawmakers from both houses of Parliament agreed on a joint version of the pension bill, sending it to a vote on Thursday.While it remained unclear if Mr. Macron had gathered enough support from outside his centrist political party to secure the vote, the prime minister could still use a special constitutional power to push the bill through without a ballot. It’s a tool the government used to pass a budget bill in the fall, but it risks exposing it to a no-confidence motion.Although many French people surveyed expect the bill to pass, opponents of the legislation signaled they intended to keep fighting.Laurent Cipriani/Associated PressIn a sense, the demonstrations on Wednesday were a last call to try to prevent the bill from becoming law. “It’s the last cry, to tell Parliament to not vote for this reform,” Laurent Berger, the head of the country’s largest union, the French Democratic Confederation of Labor, said at the march in Paris.Three-quarters of French people believe the bill will pass, according to a study released by the polling firm Ellabe on Wednesday. And many protesters were looking beyond the vote, convinced that a new wave of demonstrations could force the government to withdraw the law after it is passed.Some teachers said they had already given notice of another strike to their principals. Others said they had saved money in anticipation of future strike-related wage losses.“The goal is really to hold on as long as possible,” said Bénédicte Pelvet, 26, who was demonstrating while holding a cardboard box in which she was collecting money to support striking train workers.All along the march route in Paris, colorful signs, banners and graffiti echoed the determination to continue the fight regardless of the consequences. “Even if it’s with garbage, we’ll get out of this mess,” red graffiti on a wall read, a reference to the heaps of trash that have piled up throughout cities in France because garbage workers have gone on strike.Rémy Boulanger, 56, who has participated in all eight national demonstrations against the pension bill, said anger had grown among protesters toward a government that he said “has turned a deaf ear to our demands.”France relies on payroll taxes to fund the pension system. Mr. Macron has long argued that people must work longer to support retirees who are living longer. But his opponents say the plan will unfairly affect blue-collar workers, who have shorter life expectancies, and they point to other funding solutions, such as taxing the rich.A strike by garbage workers has led to a pileup of trash on French streets.Christophe Archambault/Agence France-Presse — Getty ImagesAbout 70 percent of French people want the protests to continue, and four out of 10 say they should intensify, according to the Ellabe poll.Union leaders have hinted that the mobilization would not stop, but they have yet to reveal their plans. “It’s never too late to be in the street,” Philippe Martinez, the head of the far-left C.G.T union, said on Wednesday.France has a long history of street demonstrations as a means to win, or block, changes. Most recently, the Yellow Vest movement that was born in 2018 led to demonstrations that went on for months and forced the government to withdraw plans to raise fuel taxes. But the last time the French government bowed to demonstrators and withdrew a law that had already passed was in 2006, when a contested youth-jobs contract was repealed.“Redoing 2006 would be ideal,” Mr. Boulanger said. But he acknowledged that a sense of fatigue was spreading among protesters — Wednesday’s protests were smaller than those a week ago. He said he was instead looking to the next presidential election, more than four years away, to bring about change.Other protesters pointed to 1995, when strikes against another pension bill paralyzed France for weeks, forcing the government to abandon its plan to send the proposed law to a vote.Ms. Pelvet, another demonstrator, acknowledged that the unions’ vow to bring the country “to a standstill” last week had failed, with a fair number of trains and public services still operating.“Nobody wants to go home,” Ms. Pelvet said. “But the road ahead is not clear yet.”Catherine Porter More

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    After SVB Collapse, Fed and Lawmakers Eye Bank Rules

    The stunning demise of Silicon Valley Bank has spurred soul-searching about how large and regional banks are overseen.The Federal Reserve is facing criticism over Silicon Valley Bank’s collapse, with lawmakers and financial regulation experts asking why the regulator failed to catch and stop seemingly obvious risks. That concern is galvanizing a review of how the central bank oversees financial institutions — one that could end in stricter rules for a range of banks.In particular, the episode could result in meaningful regulatory and supervisory changes for institutions — like Silicon Valley Bank — that are large but not large enough to be considered globally systemic and thus subject to tougher oversight and rules. Smaller banks face lighter regulations than the largest ones, which go through regular and extensive tests of their financial health and have to more closely police how much easy-to-tap cash they have to serve as a buffer in times of crisis.Regulators and lawmakers are focused both on whether a deregulatory push in 2018, during the Trump administration, went too far, and on whether existing rules are sufficient in a changing world.While it is too early to predict the outcome, the shock waves that Silicon Valley Bank’s demise sent through the financial system, and the sweeping response the government staged to prevent it from inciting a nationwide bank run, are clearly intensifying the pressure for stronger oversight.“There are a lot of signs of a supervisory failure,” said Kathryn Judge, a financial regulation expert at Columbia Law School, who also noted that it was too early to draw firm conclusions. “We do need more rigorous regulations for large regional banks that more accurately reflect the risks these banks can pose to the financial system,” she said.The call for tougher bank rules echoes the aftermath of 2008, when risky bets by big financial firms helped to plunge the United States into a deep recession and exposed blind spots in bank oversight. The crisis ultimately led to the Dodd-Frank law in 2010, a reform that ushered in a series of more stringent requirements, including wide-ranging “stress tests” that probe a bank’s ability to weather severe economic situations.But some of those rules were lightened — or “tailored” — under Republicans. Randal K. Quarles, who was the Fed’s vice chair for supervision from 2017 to 2021, put a bipartisan law into effect that relaxed some regulations for small and medium-size banks and pushed to make day-to-day Fed supervision simpler and more predictable.Critics have said such changes could have helped pave the way for the problems now plaguing the banking system.“Clearly, there’s a problem with supervision,” said Daniel Tarullo, a former Fed governor who helped shape and enact many post-2008 bank regulations and who is now a professor at Harvard. “The lighter touch on supervision is something that has been a concern for several years now.”Jerome H. Powell, right, the chair of the Federal Reserve, and Randal K. Quarles, then the vice chair for supervision, at the Fed, in 2018. “The events surrounding Silicon Valley Bank demand a thorough, transparent and swift review,” Mr. Powell said in a statement this week.Aaron P. Bernstein/ReutersThe Federal Reserve Bank of San Francisco was in charge of overseeing Silicon Valley Bank, and experts across the ideological spectrum are questioning why growing risks at the bank were not halted. The firm grew rapidly and took on a large number of depositors from one vulnerable industry: technology. A large share of the bank’s deposits were uninsured, making customers more likely to run for the exit in a moment of trouble, and the bank had not taken care to protect itself against the financial risks posed by rising interest rates.Worsening the optics of the situation, Greg Becker, the chief executive of Silicon Valley Bank, was until Friday on the board of directors at the Federal Reserve Bank of San Francisco. The Fed has said reserve bank directors are not involved in matters related to banking supervision.Questions about bank oversight ultimately come back to roost at the Fed’s board in Washington — which, since the 2008 crisis, has played a heavier role in guiding how banks are overseen day to day.The board has indicated that it will take the concerns seriously, putting its new vice chair of supervision, Michael Barr, in charge of the inquiry into what happened at Silicon Valley Bank, the Fed announced this week.“The events surrounding Silicon Valley Bank demand a thorough, transparent and swift review by the Federal Reserve,” Jerome H. Powell, the Fed chair, said in a statement.It is unclear how much any one of the 2018 rollbacks would have mattered in the case of Silicon Valley Bank. Under the original postcrisis rules, the bank, which had less than $250 billion in assets, most likely would have faced a full Fed stress test earlier, probably by this year. But the rules for stress tests are complex enough that even that is difficult to pinpoint with certainty.“Nobody can say that without the 2018 rollbacks none of this would have happened,” Ms. Judge said. But “those rules suggested that banks in this size range did not pose a threat to financial stability.”But the government’s dramatic response to Silicon Valley Bank’s collapse, which included saving uninsured depositors and rolling out a Fed rescue program, underlined that even the 16th-largest bank in the country could require major public action.Given that, the Fed will be paying renewed attention to how those banks are treated when it comes to both capital (their financial cushion against losses) and liquidity (their ability to quickly convert assets into cash to pay back depositors).There could be a push, for instance, to lower the threshold at which the more onerous regulations begin to apply. As a result of the 2018 law, some of the stricter rules now kick in when banks have $250 billion in assets.Another major focal point will be the content of stress tests. While banks used to be run through an “adverse” scenario that included creative and unexpected shocks to the system — including, occasionally, a jump in interest rates like the one that bedeviled Silicon Valley Bank — that scenario ended with the deregulatory push.An interest rate shock will be included in this year’s stress test scenarios, but the larger question of what risks are reflected in those exercises and whether they are sufficient is likely to get another look. Many economists had assumed that inflation and interest rates would stay low for a long time — but the pandemic upended that. It now seems clear that bank oversight made the same flawed assumption.The collapse of Silicon Valley Bank could precipitate changes for financial institutions that are not large enough to be considered globally systemic and thus subject to tougher oversight and rules.Jason Henry for The New York TimesMany people were wrong about the staying power of low rates, and “that includes regulators and supervisors, who are supposed to think about: What are the possibilities, and what are the scenarios?” said Jonathan Parker, the head of the finance department at the Massachusetts Institute of Technology’s Sloan School of Management.And there is a bigger challenge laid bare by the current episode: Several financial experts said the run on Silicon Valley Bank was so severe that more capital would not have saved the institution. Its problem, in part, was its huge share of uninsured deposits. Those depositors ran rapidly amid signs of weakness.That could spur greater attention in Congress and among regulators regarding whether deposit insurance needs to be extended more broadly, or whether banks need to be limited in how many uninsured deposits they can hold. And it could prompt a closer look at how uninsured deposits are treated in bank oversight — those deposits have long been looked at as unlikely to run quickly.In an interview, Mr. Quarles pushed back on the idea that the changes made under his watch helped to precipitate Silicon Valley Bank’s collapse. But he acknowledged that they had created new regulatory questions — including how to deal with a world in which technology enables very rapid bank runs.“Certainly, none of this resulted from anything that we changed,” Mr. Quarles said. “You had this perfect flow of imperfect information that really increased the speed and intensity of this run.”In the days after the collapse, some Republicans focused on supervisory failures at the Fed, while many Democrats focused on the aftershocks of deregulation and possible wrongdoing by the bank’s executives.“All the regulators had to do was read the reports that Silicon Valley Bank was submitting, and they would have seen the problem,” Senator John Kennedy, Republican of Louisiana and a member of the Banking Committee, said on the Senate floor.By contrast, two Senate Democrats — Elizabeth Warren of Massachusetts and Richard Blumenthal of Connecticut — sent a letter to the Department of Justice and the Securities and Exchange Commission on Wednesday urging the agencies to investigate whether senior executives involved in the collapse of Silicon Valley Bank had fallen short of their regulatory responsibilities or violated laws.Ms. Warren also unveiled legislation this week, co-sponsored by roughly 50 Democrats in the House and Senate, that would reimpose some of the Dodd-Frank requirements that were rolled back in 2018, including regular stress testing.Senator Sherrod Brown, Democrat of Ohio and chairman of the Banking Committee, told reporters that he intended to hold a hearing examining what happened “as soon as we can.”Mr. Barr, who started at the Fed last summer, was already reviewing a number of the Fed’s regulations to try to determine whether they were appropriately stern — a reality that had spurred intense lobbying as financial institutions resisted tougher oversight.But the episode could make those counterefforts more challenging.Late on Monday, the Bank Policy Institute, which represents 40 large banks and financial services companies, emailed journalists a list of its positions, including claims that the failures of Silicon Valley Bank and Signature Bank were caused by “primarily a failure of management and supervision rather than regulation” and that the panic surrounding the collapses proved how resilient big banks were to stress, since they were largely unaffected by it.The trade group also emailed those talking points to congressional Democrats, but other trade groups, including the American Bankers Association, have stayed silent, according to a person familiar with the matter.“We share President Biden’s confidence in the nation’s banking system,” a spokesman with the American Bankers Association said. “Every American should know that their accounts are safe and their deposits are protected. Our industry will work with the administration, regulators and Congress to further bolster that trust.”The fallout could also kill big banks’ attempts to roll back regulations that they say are inefficient. The largest banks had wanted the Fed to stop forcing them to hold cash equivalents to what they say are safe securities like U.S. government debt. But Silicon Valley Bank’s failure was caused in part by its decision to keep a large portion of depositors’ cash in longer-dated U.S. Treasury bonds, which lost value as interest rates rose.“This definitely underscores why it is important that there be some capital requirement against government-backed securities,” said Sheila Bair, a former chair of the Federal Deposit Insurance Corporation.Catie Edmondson More

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    No, Diversity Did Not Cause Silicon Valley Bank’s Collapse

    Blaming workplace diversity or environmentally and socially conscious investments for the firm’s downfall signals a “complete lack of understanding of how banks work,” one expert said.WASHINGTON — A growing chorus of conservative pundits and politicians have said the failure of Silicon Valley Bank was the result of the bank’s “woke” policies, blaming the California lender’s commitments to workplace diversity and environmentally and socially conscious investments.These claims are without merit. The bank’s collapse was due to financial missteps and a bank run.Moreover, the firm’s policy on diversity, equity and inclusion — also known as D.E.I. — is similar to ones that have been broadly adopted in the banking sector. So is its approach to taking environmental and social considerations into account when investing — referred to as E.S.G. — although that has become a target of conservatives.In fact, Silicon Valley Bank is considered about average in the industry when it comes to these issues.Here’s a fact check.What Was Said“They were one of the most woke banks in their quest for the E.S.G.-type policy in investing.”— Representative James R. Comer, Republican of Kentucky, in an appearance on Fox News on Sunday“This bank, they’re so concerned with D.E.I. and politics and all kinds of stuff. I think that really diverted from them focusing on their core mission.” — Gov. Ron DeSantis of Florida on Fox News on SundayThis lacks evidence. First, experts have broadly agreed that the bank’s demise had little to do with “wokeness.” As The New York Times and others have explained, the collapse was due to a bank run precipitated by a decline in start-up funding, rising interest rates and the firm’s sale of government bonds at a huge loss to raise capital.The bank’s loans to environmental and community projects “were not an important factor behind the collapse of SVB,” said Itay Goldstein, a finance professor at the University of Pennsylvania’s Wharton School. “There is no immediate indication that these loans precipitated the run by investors.”Silicon Valley Bank also was not an outlier in its diversity goals or its E.S.G. investments. U.S. investments in those assets are expected to rise to $33.9 trillion by 2026. A 2022 report by the Consumer Financial Protection Bureau found that 59 percent of banks had lending programs specifically for women- and minority-owned businesses, financing that would fit under the “social” umbrella of E.S.G.George Serafeim, a professor at Harvard Business School, said that blaming the collapse on such initiatives reflected either “a complete lack of understanding of how banks work or the intentional misattribution of causality for the bank’s failure.”Maretno Harjoto, a professor of finance at Pepperdine University and expert in E.S.G. investing, agreed that “there is no truth” to the claims. He added that banks will often set E.S.G. and diversity goals due to pressure from investors and stakeholders.Silicon Valley Bank said in a recent report that it would invest about $16.2 billion over the next few years to finance small businesses and community development projects, affordable housing and renewable energy. That level of investment was equivalent to about 8 percent of its $209 billion in assets.But Silicon Valley Bank was hardly alone in pursuing these types of investments. Of the 30 largest banks in the United States — Silicon Valley Bank ranked No. 16 — all but one (First Citizens Bank) have made E.S.G. investments and released reports on them. And the three largest U.S. banks — JPMorgan Chase & Company, Bank of America and Citigroup — all dedicated 8 percent to 14 percent of their overall assets toward social and environmental investments in 2021. All three have committed to at least $1 trillion in sustainable investments by 2030.Among all banking institutions, Silicon Valley Bank actually ranked about average on E.S.G. issues, according to three metrics developed separately by the financial research firms MSCI, Morningstar and Refinitiv. Among the 30 top banks, its middling A rating from MSCI put it on par with 11 banks, while 11 others received the higher AA rating, characterizing them as leaders. The California lender’s score from Morningstar was among the worst of all 30 banks. And its Refinitiv score was worse than all but one financial institution and on par with Signature Bank, which failed this week.Silicon Valley Bank’s commitment to improving diversity among its leadership was fairly typical as well. The largest 30 banks in the United States all have a stated commitment to more inclusive career advancement.The bank’s latest inclusion report noted that 38 percent of senior leadership and 42 percent of its board members were women, and that 30 percent of leadership and 8 percent of its board were nonwhite.By these demographics, Silicon Valley Bank was one of the more racially diverse financial institutions, but not extraordinarily so. Analyses have found that about 19 percent of senior leadership in financial services were nonwhite and 30 percent were women.While The Times was unable to find data on the demographics of boards of directors in the finance sector overall, the boards of the eight banks in the United States considered systemically important were more racially diverse on average than Silicon Valley Bank. Of the 104 board members who govern these banks, 23 percent were members of a racial or ethnic minority and 39 percent were women. More

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    Long-awaited Fed digital payment system to launch in July

    FedNow, the Federal Reserve’s digital payments system, will debut in July.
    The system will allow bill payments, money transfers and other consumer activities to move more rapidly and at lower cost.

    The Marriner S. Eccles Federal Reserve Board Building in Washington, D.C.
    Sarah Silbiger | Reuters

    The Federal Reserve’s digital payments system, which it promises will help speed up the way money moves around the world, will debut in July.
    FedNow, as it will be known, will create “a leading-edge payments system that is resilient, adaptive, and accessible,” said Richmond Fed President Tom Barkin, who is the program’s executive sponsor.

    The system will allow bill payments, money transfers such as paychecks and disbursements from the government, as well as a host of other consumer activities to move more rapidly and at lower cost, according to the program’s goals.
    Participants will complete a training and certification process in early April, according to a Fed announcement.
    “With the launch drawing near, we urge financial institutions and their industry partners to move full steam ahead with preparations to join the FedNow Service,” said Ken Montgomery, the program executive and first vice president at the Boston Fed, which helped spearhead the project under former Boston Fed President Eric Rosengren.
    Institutions that participate in the program will have seven-day, 24-hour access, as opposed to a system currently in place that closes on weekends.
    Program advocates say it will get money out to people much more quickly. For instance, they said, government payments like those issued in the early days of the Covid pandemic would have been credited to accounts immediately rather than the days it took to reach most people.
    Some Fed officials say the program even could supplant the need for a central bank digital currency.

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    One of the best ways to figure out what the Fed will do next is to look at regional bank stocks

    The probability for no Fed rate hike next week shot up to as high as 65%, according to CME Group data Wednesday morning.
    Fed policymakers will resolve the question by watching macroeconomic reports as well as small banks for larger clues about the health of the financial sector.

    Federal Reserve Board Chair Jerome Powell speaks at a news conference following a two-day meeting of the Federal Open Market Committee, Wednesday, Sept. 18, 2019, in Washington.
    Patrick Semansky | AP

    Markets have changed their mind — again — about what they think the Federal Reserve will do next week regarding interest rates.
    In a morning where more banking turmoil emerged and stocks opened sharply lower on Wall Street, traders shifted pricing to indicate that the Fed may hold the line when it meets March 21-22.

    The probability for no rate hike shot up to as high as 65%, according to CME Group data Wednesday morning. Trading was volatile, though, and the latest moves suggested nearly a 50-50 split between no rate hike and a 0.25 percentage point move. For most of Tuesday, markets indicated a strong likelihood of an increase.
    Chairman Jerome Powell and his fellow Fed policymakers will resolve the question over raising rates by watching macroeconomic reports that continue to flow in, as well as data from regional banks and their share prices that could provide larger clues about the health of the financial sector.
    Smaller banks have been under intense pressure in recent days, following the closures of Silicon Valley Bank and Signature Bank, the second- and third-largest failures in U.S. history. The SPDR Regional Bank ETF fell another 1.5% on Wednesday and is down more than 23% over the past five trading days.

    Stock chart icon

    SPDR S&P Regional Bank ETF, 5 days

    In a dramatic move Sunday evening, the central bank launched an initiative it called the Bank Term Funding Program. That will provide a facility for banks to exchange high-quality collateral for loans so they can ensure operations.
    Inflows to impacted banks could be reflected through their share prices to indicate how well the Fed’s initiative is working out to maintain confidence in the industry and keep money flowing.

    Central bank officials also will get data in coming days to see how active banks are in using the facility.
    If banks are using the BTFP to a large extent, that could indicate significant liquidity issues and thus serve as a deterrent to raising rates. The last public report on that data will come Thursday, though the Fed will be able to monitor the program right up until its two-day meeting starts Tuesday.
    The wagers on which way the Fed ultimately will go followed a rocky morning on Wall Street. Stocks were sharply lower in early trading, with the Dow Jones Industrial Average down more than 500 points.

    Just as concerns started to diminish concerning banking sector health, news came that Credit Suisse may need a lifeline. Switzerland’s second-largest bank slumped after a major Saudi investor said it would not provide more capital due to regulatory issues.
    The slump came even as economic data seemed to lessen the urgency around controlling inflation.
    The producer price index, a measure of wholesale pipeline prices, unexpectedly dropped 0.1% in February, according to the Labor Department. While markets don’t often pay much attention to the PPI, the Fed considers it a leading indicator on inflation pressures.
    On an annual basis, the PPI gain dropped to 4.6%, a big slide from the 5.7% reading in January that itself was revised lower. The PPI peaked at a rate of 11.6% in March 2022; the February reading was the lowest going back to March 2021. Excluding food and energy, the core PPI was flat on the month and up 4.4% year over year, down from 5% in January.
    “The strong likelihood of continued rapid core PPI disinflation is at the heart of our relatively optimistic take on core [personal consumption expenditures] inflation and, ultimately, Fed policy,” wrote Ian Shepherdson, chief economist at Pantheon Macroeconomics. “Markets don’t pay much attention to the PPI, but the Fed does.”
    The PPI data coupled with a relatively tame consumer price index report Tuesday. Markets last week were pricing in a potential half-point rate hike this month, but quickly pulled back.

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    Wholesale prices post unexpected decline of 0.1% in February; retail sales fall

    The producer price index fell 0.1% for February, below the estimate for a 0.3% increase.
    Retail sales declined 0.4% for the month, in line with expectations and pulled lower by drops in auto sales as well as bar and restaurant receipts.
    Finally, the Empire State Manufacturing survey for March, a gauge of activity in the New York region, posted a -24.6 reading, down 19 points from a month ago.

    A customer looks over merchandise at a store on March 14, 2023 in Miami, Florida.
    Joe Raedle | Getty Images

    Wholesale prices posted an unexpected decline in February, providing some encouraging news on inflation as the Federal Reserve weighs its next move on interest rates.
    The producer price index fell 0.1% for the month, against the Dow Jones estimate for a 0.3% increase and compared with a 0.3% gain in January, the Labor Department reported Wednesday. On a 12-month basis, the index increased 4.6%, well below the downwardly revised 5.7% level from the previous month.

    Excluding food, energy and trade, the index rose 0.2%, down from the 0.5% gain in January. On an annual basis, that reading was up 4.4%, the same as in January.
    A 0.2% drop in goods prices helped fuel the headline decrease, representing a sharp pullback from the 1.2% surge in January. Final demand foods tumbled 2.2%, while energy declined 0.2%.
    Most of the drop in goods stemmed from a 36.1% plunge in chicken egg prices, which had soared over the past year.
    In a separate important data point Wednesday, the Commerce Department reported that retail sales fell 0.4% in February, according to data that is not adjusted for inflation. The total was in line with expectations and dragged down by a 1.8% slide in auto sales.
    Food services and drinking establishments, which had seen strong receipts over the past year, fell 2.2% for the month, though they were still up 15.3% on an annual basis. Furniture and home furnishing stores were off 2.5%, while miscellaneous retailers saw a 1.8% decline.

    Also, the Empire State Manufacturing survey for March, a gauge of activity in the New York region, posted a -24.6 reading, down 19 points from a month ago. The reading represents the percentage difference between companies reporting expansion versus contraction. The Dow Jones estimate was for a -7.8 level.
    The big drop came from precipitous decreases in new orders and shipments as well as inventories. Hiring edged lower as did the prices index.
    The news comes the day after the Labor Department said that consumer prices rose another 0.4% in February, bringing the annual inflation rate to 6%.
    Though that’s well above the 2% level the Fed considers ideal, the 12-month CPI rate was the lowest since September 2021.
    Despite the downward drift in the annual inflation rate, and recent banking industry turmoil, financial markets still expect the Federal Reserve to increase interest rate when it meets next week.
    Market pricing is pointing to a 0.25 percentage point increase in the federal funds rate, taking the benchmark borrowing level to a target range of 4.75%-5%.
    However, futures contracts Wednesday morning also implied a peak, or terminal, rate of about 4.77%, indicating that the March increase would be the last before the Fed pivots away from a tightening remine that began a year ago.

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    How Washington Decided to Rescue Silicon Valley Bank

    Officials were initially unsure about the need for the measures they eventually announced to shore up the financial system, but changed their minds quickly.WASHINGTON — On Friday afternoon, the deputy Treasury secretary, Wally Adeyemo, met with Jamie Dimon, the chief executive of JPMorgan Chase & Company, at Mr. Dimon’s office in New York.The Biden administration and the Federal Reserve were considering what would be the most aggressive emergency intervention in the banking system since the 2008 financial crisis, and the question the two men debated was at the heart of that decision.Could the failure of Silicon Valley Bank, the mega start-up lender that had just collapsed, spread to other banks and create a systemic risk to the financial system?“There’s potential,” Mr. Dimon said, according to people familiar with the conversation.Mr. Adeyemo was one of many administration officials who entered last weekend unsure of whether the federal government needed to explicitly rescue Silicon Valley Bank’s depositors before markets opened on Monday morning.In the White House and the Treasury, some officials initially saw the bank’s swift plunge to insolvency as unlikely to spark an economic crisis — particularly if the government could facilitate a sale of the bank to another financial institution.They quickly changed their minds after signs of nascent bank runs across the country — and direct appeals from small businesses and lawmakers from both parties — convinced them the bank’s problems could imperil the entire financial system, not just rich investors in Silicon Valley.On Friday morning, aides met with President Biden in the Oval Office, where they warned that the panic engulfing Silicon Valley Bank could spread to other financial institutions, according to a White House official. Mr. Biden told them to keep him updated on developments.By Friday afternoon, before financial markets had even closed, the Federal Deposit Insurance Corporation had stepped in and shut down the bank.Still, the kind of rescue that the United States ultimately engineered would not materialize publicly until Sunday, after intense deliberations across the government.This account is based on interviews with current and former officials in the White House, Treasury and the Fed; financial services executives; members of Congress; and others. All were involved or close to the discussions that dominated Washington over a frenzied process that began Thursday evening and ended 72 hours later with an extraordinary announcement timed to beat the opening of financial markets in Asia.The episode was a test for the president — who risked criticism from the left and the right by greenlighting what critics called a bailout for banks. It also confronted Treasury Secretary Janet L. Yellen with the prospect of a banking crisis at a moment when she had become more optimistic that a recession could be avoided. And it was the starkest demonstration to date of the impact that the Fed’s aggressive interest rate increases were having on the economy.Wally Adeyemo, deputy Treasury secretary, was initially unsure whether the government would need to intervene to rescue Silicon Valley Bank’s depositors. Andrew Harnik/Associated PressSilicon Valley Bank failed because it had put a large share of customer deposits into long-dated Treasury bonds and mortgage bonds that promised modest, steady returns when interest rates were low. As inflation jumped and the Fed lifted interest rates from near zero to above 4.5 percent to fight it over the last year, the value of those assets eroded. The bank essentially ran out of money to make good on what it owed to its depositors.By Thursday, concern was growing at the Federal Reserve. The bank had turned to the Fed to borrow money through the central bank’s “discount window” that day, but it soon became clear that was not going to be enough to forestall a collapse.Officials including Jerome H. Powell, chairman of the Fed, and Michael S. Barr, its vice chair for supervision, worked through Thursday night and into Friday morning to try to find a solution to the bank’s unraveling. By Friday, Fed officials feared the bank’s failure could pose sweeping risks to the financial system.Compounding the worry: The prospects of arranging a quick sale to another bank in order to keep depositors whole dimmed through the weekend. A range of firms nibbled around the idea of purchasing it — including some of the largest and most systemically important.One large regional bank, PNC, tiptoed toward making an acceptable offer. But that deal fell through as the bank scrambled to scrub Silicon Valley Bank’s books and failed to get enough assurances from the government that it would be protected from risks, according to a person briefed on the matter.A dramatic government intervention seemed unlikely on Thursday evening, when Peter Orszag, former President Barack Obama’s first budget director and now chief executive of financial advisory at the bank Lazard, hosted a previously scheduled dinner at the bank’s offices in New York City’s Rockefeller Center..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.Among those in attendance were Mr. Adeyemo and a pair of influential senators: Michael D. Crapo, Republican of Idaho, and Mark Warner, Democrat of Virginia. Both were sponsors of a 2018 law that rolled back regulation on smaller banks that critics now say left Silicon Valley Bank vulnerable.Blair Effron, a large Democratic donor who had just been hired by Silicon Valley Bank to advise it on its liquidity crunch, was also there. Earlier that day, the bank had attempted to raise money to stave off collapse with the help of Goldman Sachs — an effort that, by Thursday evening, had clearly failed.The Federal Reserve ultimately opened a lending program to help keep money flowing through the banking system.Al Drago for The New York TimesMr. Effron and Mr. Adeyemo spoke as it became evident that Silicon Valley Bank was running out of options and that a sale — or some bigger intervention — might be necessary. Jeffrey Zients, Mr. Biden’s new chief of staff, and Lael Brainard, the new director of his National Economic Council, were also being pelted by warnings about the bank’s threat to the economy. As Silicon Valley Bank’s depositors raced to withdraw their money on Thursday, sending its stock into free fall, both Ms. Brainard and Mr. Zients began receiving a flurry of calls and texts from worried leaders in the start-up community that the bank heavily served.Ms. Brainard, who had experienced financial crises in other countries while serving in Mr. Obama’s Treasury Department and as a Federal Reserve Board member, had begun to worry about a new crisis emanating from SVB’s failure. She and Mr. Zients raised that possibility with Mr. Biden when they briefed him in the Oval Office on Friday morning.Other officials across the administration were more skeptical, worrying that the lobbying blitz Ms. Brainard and others were receiving was purely a sign of wealthy investors trying to force the government to backstop their losses. And there were concerns that any kind of government action could be seen as bailing out a bank that had mismanaged its risk, potentially encouraging risky behavior by other banks in the future.Ms. Brainard started fielding anxious calls again on Saturday morning and did not stop until late in the evening. She and Mr. Zients briefed Mr. Biden that afternoon — virtually this time, because the president was spending the weekend in his home state of Delaware.Mr. Biden also spoke Saturday with Gov. Gavin Newsom of California, who was pushing aggressively for government intervention in fear that a wide range of companies in his state would otherwise not be able to pay employees or other operational costs on Monday morning.Concerns mounted that day as regulators reviewed data that showed deposit outflows increasing at regional banks nationwide — a likely sign of systemic risk. They began pursuing two possible sets of policy actions, ideally a buyer for the bank. Without that option, they would need to seek a “systemic risk exception” to allow the F.D.I.C. to insure all of the bank’s deposits. To calm jittery investors, they surmised that a Fed lending facility would also be needed to buttress regional banks more broadly.“Because of the actions that our regulators have already taken, every American should feel confident that their deposits will be there if and when they need them,” President Biden said on Monday.Doug Mills/The New York TimesMs. Yellen on Saturday convened top officials — Mr. Powell, Mr. Barr and Martin J. Gruenberg, the chairman of the F.D.I.C.’s board of directors — to figure out what to do. The Treasury secretary was fielding back-to-back calls on Zoom from officials and executives and at one point described what she was hearing about the banking sector as hair-raising.F.D.I.C. officials initially conveyed reservations about their authority to back deposits that were not insured, raising concerns among those who were briefed by the F.D.I.C. that a rescue could come too late.By Saturday night, anxiety that the Biden administration was dragging its feet was bubbling over among California lawmakers.At the glitzy Gridiron Club Dinner in Washington, Representative Ro Khanna, a California Democrat, cornered Steve Ricchetti, a top White House aide and close adviser to the president, and urged Mr. Biden and his team to be decisive. He warned that many of Mr. Biden’s major achievements would be washed away if the banking system melted down.“I said, Steve, this is a massive issue not just for Silicon Valley, but for regional banks around America,” Mr. Khanna said, adding that Mr. Ricchetti replied: “I get it.”Privately, it was becoming clear to Mr. Biden’s economic team that banking customers were getting spooked. On Saturday evening, officials from the Treasury, the White House and the Fed tentatively agreed to two bold moves they finalized and announced late on Sunday afternoon: The government would ensure that all depositors would be repaid in full, and the Fed would offer a program providing attractive loans to other financial institutions in hopes of avoid a cascading series of bank failures.But administration officials wanted to ensure the rescue had limits. The focus, according to a person familiar with the conversation, was ensuring that businesses around the country would be able to pay their employees on Monday and that no taxpayer money would be used by tapping the F.D.I.C.’s Deposit Insurance Fund.It was a priority that the rescue not be viewed as a bailout, which had become a toxic word in the wake of the 2008 financial crisis. The depositors would be protected, but the bank’s management and its investors would not.By Sunday morning, regulators were putting the finishing touches on the rescue package and preparing to brief Congress. Ms. Yellen, in consultation with the president, approved the “systemic risk exception” that would protect all of the bank’s deposits. The bipartisan members of the Federal Reserve and the F.D.I.C. voted unanimously to approve the decision.That evening, they announced a plan to make sure all depositors at Silicon Valley Bank and another large failed financial institution, Signature Bank, were repaid in full. The Fed also said it would offer banks loans against their Treasury and many other asset holdings, whose values had eroded.“Because of the actions that our regulators have already taken, every American should feel confident that their deposits will be there if and when they need them,” Mr. Biden said during brief remarks at the White House.By Tuesday afternoon the intervention was showing signs of working. Regional bank stocks, which had fallen on Monday, had partially rebounded. The outflow of deposits from regional banks had slowed. And banks were pledging collateral at the Fed’s new loan program, which would put them in a position to use it if they decided that doing so was necessary.The financial system appeared to have stabilized, at least for the moment. More