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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

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    Meta, Facebook’s Parent, to Lay Off Another 10,000 Workers

    It would be the tech company’s second round of cuts since November. Mark Zuckerberg, its chief executive, has declared 2023 the “year of efficiency.”Meta, the owner of Facebook and Instagram, said on Tuesday that it planned to lay off about 10,000 employees, or roughly 13 percent of its work force, the latest move to hew to what the company’s founder, Mark Zuckerberg, has called a “year of efficiency.”The layoffs will affect Meta’s recruiting team this week, with a restructuring of its tech and business groups to come in April and May, Mr. Zuckerberg said in a memo posted on the company’s website. The announcement is the company’s second round of cuts within the past half year. In November, Meta laid off more than 11,000 people, or about 13 percent of its work force at the time.Meta also plans to close about 5,000 job postings that have yet to be filled, Mr. Zuckerberg said in the memo. Other restructuring efforts include a plan to wrap up this summer an analysis of Meta’s hybrid return-to-office model, which it began testing last March.“This will be tough and there’s no way around that,” he wrote.Meta’s stock rose more than 7 percent by the close of trading on Tuesday.Mr. Zuckerberg is culling employees after years of hiring at a breakneck pace. His company gobbled up workers as its family of apps, which also includes WhatsApp, became popular worldwide. The coronavirus pandemic also supercharged the use of mobile apps, leading to more growth. At its peak last year, Meta had 87,000 full-time employees.But as the global economy soured, and digital advertising markets contracted last year, Mr. Zuckerberg began putting an end to unchecked growth. Meta trimmed employee perks. And after the layoffs in November, which largely affected the business divisions and recruiting teams, Mr. Zuckerberg hinted at further cuts.On an earnings call in February, the chief executive said he did not want the company to be overstuffed with a layer of middle management, or “managers managing managers.” He said he took responsibility for last year’s layoffs, blaming his zeal for staffing up on the surge of use early in the pandemic.Meta’s layoffs are part of a wave of job cuts from the biggest tech companies. In recent months, Amazon, Google, Microsoft, Salesforce and others have also said they are trimming their ranks, and some of the companies have increased the number of people they are letting go after initial announcements. Many of the companies have cited a challenging global economic environment for their actions.But even beyond the macroeconomic conditions, Meta is dealing with many challenges. It is grappling not only with a digital advertising slowdown but also with Apple’s privacy changes to its mobile operating system, which have restricted Meta’s ability to collect data on iPhone users to help target ads. It also faces steep competition from TikTok, which has soared in popularity over the past few years. And regulators have stepped up efforts to rein in the company by pushing for new laws that would limit Meta’s data collection abilities.Meta is also in the midst of a tricky transition to become a “metaverse” company, connecting people to an immersive digital world through virtual-reality headsets and applications. Mr. Zuckerberg sees the metaverse as the next-generation computing platform, so Meta has been spending billions of dollars on the effort and reallocating workers to its Reality Labs division, which is focused on products for the metaverse.Yet it’s unclear if people will want to use metaverse products. In recent months, the public has instead gravitated to chatbots, which are built on artificial intelligence. Meta has invested in A.I. for years but lately has not been at the center of the conversation about the technology.Employees have been bracing for more layoffs for months, watching with anxiety as Mr. Zuckerberg embarked on a quest to dial back what he felt was no longer necessary to run the company, according to current and former employees. But the expectation was that he would take a light touch to his favored project of the metaverse.Some Meta employees who were affected by Tuesday’s announcement of layoffs — especially in the recruiting division — felt “gut-punched,” according to current and former employees who have spoken with those in the organization.“People are entering a job market that is the worst I’ve ever seen,” said Erin Sumner, a global director of human resources at DeleteMe, who was laid off from Facebook in November. She said the staggered nature of Meta’s cuts over the next two months was adding to employee anxiety.“There’s a lot of uncertainty,” Ms. Sumner said. “There’s a lot of anger, and there’s the question many folks are asking: ‘How do you expect me to do work for the next two months while wondering if I will still have a job?’”In his announcement on Tuesday, Mr. Zuckerberg laid out a vision for streamlining the company by removing layers of management, ending lower-priority projects and rebalancing product teams with a focus on engineering.To that end, Mr. Zuckerberg wound down efforts on building NFTs, or nonfungible tokens, a cryptocurrency-based initiative that has dropped out of favor in recent months. Many of Mr. Zuckerberg’s crypto initiatives in general have fallen by the wayside over the past nine months as the public has grown more skeptical of the market after the implosion of FTX, the cryptocurrency exchange.In his note, Mr. Zuckerberg added that the moves were a response to global conditions, including increased regulation, geopolitical instability, higher interest rates and a cooling economy.“The world economy changed, competitive pressures grew and our growth slowed considerably,” he said. “We should prepare ourselves for the possibility that this new economic reality will continue for many years.”Gregory Schmidt More

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    Inflation gauge increased 0.4% in February, as expected and up 6% from a year ago

    The consumer price index rose 0.4% in February and 6% from a year ago, in line with market expectations.
    A drop in energy prices helped keep inflation in check, while shelter costs increased sharply.
    The probability that the Fed would raise benchmark interest rates a quarter percentage point next week increased following the report.

    Inflation rose in February but was in line with expectations, likely keeping the Federal Reserve on track for another interest rate hike next week despite recent banking industry turmoil.
    The consumer price index increased 0.4% for the month, putting the annual inflation rate at 6%, the Labor Department reported Tuesday. Both readings were exactly in line with Dow Jones estimates.

    Excluding volatile food and energy prices, core CPI increased 0.5% in February and 5.5% on a 12-month basis. The monthly reading was slightly ahead of the 0.4% estimate, but the annual level was in line.

    Markets were volatile following the release, with futures tied to the Dow Jones Industrial Average pointing to a positive open.
    Heading into the release, markets had widely expected the Fed to approve another 0.25 percentage point increase to its benchmark federal funds rate. That probability increased following the CPI report, with traders now pricing in about an 85% chance that the Fed will increase the rate by a quarter point.
    “Even amid current banking scares, the Fed will still prioritize price stability over growth and likely hike rates by 0.25% at the upcoming meeting,” said Jeffrey Roach, chief U.S. economist at LPL Financial.
    A decrease in energy costs helped keep the headline CPI reading in check. The sector fell 0.6% for the month, bringing the year-over-year increase down to 5.2%. A 7.9% decline in fuel oil prices was the biggest mover for energy.

    Food prices rose 0.4% and 9.5% respectively. Meat, poultry, fish and egg prices decreased 0.1% for the month, the first time that index has retreated since December 2021. Eggs in particular tumbled 6.7%, though they were still up 55.4% from a year ago.
    Shelter costs, which make up about one-third of the index’s weighting, jumped 0.8%, bringing the annual gain up to 8.1%. Fed officials largely expect housing and related costs such as rent to slow over the course of the year.
    “Housing costs are a key driver of the inflation figures, but they are also a lagging indicator,” said Lisa Sturtevant, chief economist at Bright MLS. “It typically takes six months for new rent data to be reflected in the CPI. The quirk in how housing cost data are collected contributes to overstating current inflation.”
    Because of the housing expectations, Fed officials have turned to “super-core” inflation as part of their toolkit. That entails core services inflation minus housing, cohort that increased 0.2% in February and 3.7% from a year ago, according to CNBC calculations. The Fed targets inflation at 2%.
    Used vehicle prices, a key component when inflation first began surging in 2021, fell 2.8% in February and are now down 13.6% on a 12-month basis. Apparel rose 0.8% while medical care services costs decreased 0.7% for the month.
    CPI measures a broad basket of goods and services and is one of several key measures the Fed uses when formulating monetary policy. The report along with Wednesday’s producer price index will be the last inflation-related data points policymakers will see before they meet March 21-22.
    Banking sector turmoil in recent days has kindled speculation that the central bank could signal that it soon will halt the rate hikes as officials observe the impact that a series of tightening measures have had over the past year.
    Markets Tuesday morning were pricing a peak, or terminal, rate of about 4.95%, which implies the upcoming increase would be the last. Futures pricing is volatile, though, and unexpectedly strong inflation reports this week likely would cause a repricing.
    Either way, market sentiment has shifted dramatically.
    Fed Chairman Jerome Powell last week told two congressional committees that the central bank is prepared to push rates higher than expected if inflation does not come down. That set off a wave of speculation that the Fed could be teeing up a 0.5 percentage point hike next week.
    However, the collapse of Silicon Valley Bank and Signature Bank over the past several days paved the way for a more restrained view for monetary policy.
    —CNBC’s Gina Francolla contributed to this report.

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    Don’t Call It a Bailout: Washington Is Haunted by the 2008 Financial Crisis

    The colossal bailouts after the 2008 collapse arguably saved the global economy, but they also provoked a ferocious popular backlash.WASHINGTON — On that summer day in 2010 when he signed new legislation regulating the banks after the worst financial crash in generations, President Barack Obama declared, “There will be no more tax-funded bailouts. Period.” Standing over his right shoulder just inches away and clapping was his vice president, Joseph R. Biden Jr.Nearly 13 years later, Mr. Biden, now himself a president facing a banking crisis, appeared before television cameras on Monday to make clear that he remembered that moment even as he guaranteed depositors at failing institutions. “This is an important point: No losses will be borne by the taxpayers,” he vowed. “Let me repeat that: No losses will be borne by the taxpayers.”He could not even bring himself to utter the word “bailout.”Washington remains haunted by the specter of government intervention after the banking sector collapse that triggered the Great Recession, leaving leaders of both parties determined to avoid any repeat of that painful period. The colossal bailouts initiated under President George W. Bush and continued under Mr. Obama arguably saved the global economy but also provoked such a ferocious popular backlash that they transformed American politics to this day.The notion that “fat-cat bankers,” as Mr. Obama once called them, should be rescued by the government even as everyday Americans lost their jobs, their homes and their life savings so rankled the public that it gave birth to the Tea Party and Occupy Wall Street movements and undermined the establishment across the political spectrum. In some ways, that popular revolt empowered populists like Donald J. Trump and Bernie Sanders, ultimately helping Mr. Trump to win the presidency.“Today’s populism is firmly rooted in 2008,” said Brendan Buck, a top adviser to two Republican House speakers, John A. Boehner and Paul D. Ryan, who were both eventually targeted by Tea Party rebels within their own party. “The bailouts not only fostered distrust of corporations, but cemented the notion that elites always do well while regular people pay the price. Bailouts were also followed by a large expansion of government, and while it all may have prevented much worse calamity, the recovery was slow.”Mr. Biden, of course, knows all that intimately. He saw it up close, watching the public uprising from his office in the West Wing while counseling Mr. Obama on how to respond. Even the separate economic stimulus package that Mr. Obama assigned Mr. Biden to manage came to be tainted because many Americans confused it with the bank bailouts.And so now, as he endeavors to head off a crisis of confidence after the failure of three financial institutions in recent days, Mr. Biden wants to avoid not just a run on the banks but a run on his credibility.“The term and the idea of bailouts are still highly toxic,” said Robert Gibbs, Mr. Obama’s first White House press secretary. He said Mr. Biden rightly focused on accountability for those responsible and sparing taxpayers the cost. “Those are two important lessons learned from 15 years ago. Emphasizing that the ones being helped are instead innocent bystanders who just had money in the bank is why a backlash on this action is less likely.”But Republicans were quick to pin both the crisis and potential resolution on Mr. Biden, accusing him of fostering economic troubles by stoking inflation with big spending and labeling government efforts to head off escalation of the crisis the Biden bailout.“Politically, if you ask me what’s the impact of bailing out rich techies in California — which is exactly how this will be played — then the answer is Donald Trump’s likelihood of re-election just went up three to four points,” said Mick Mulvaney, who came to Congress as a Tea Party champion and later served as Mr. Trump’s acting White House chief of staff.In repeating that taxpayers will not bear the cost of bailing out depositors at the failed banks, Mr. Biden noted that the cost will be financed by fees paid by other banks into the Federal Deposit Insurance Corporation, or F.D.I.C. What he did not mention was that a separate loan program that the Federal Reserve has opened to help keep money flowing through the banking system will be backed by taxpayer money. In a statement on Sunday, the Fed said it “does not anticipate that it will be necessary to draw on these backstop funds.”.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.The nuances did not matter to Mr. Biden’s critics. “Joe Biden is pretending this isn’t a bailout. It is,” Nikki Haley, the former ambassador to the United Nations now running for the Republican presidential nomination, said in a statement. “Now depositors at healthy banks are forced to subsidize Silicon Valley Bank’s mismanagement. When the Deposit Insurance Fund runs dry, all bank customers are on the hook. That’s a public bailout.”Other conservatives argued that a government rescue, however it is formulated, warps private markets and eliminates disincentives for financial institutions taking reckless risks because they can assume they too will eventually be saved, a concept called “moral hazard.”“Organizations that can’t manage risk should be allowed to fail, and taxpayers should not be forced to bailout the well-connected and wealthy because a bank prioritized woke causes above smart investing,” David M. McIntosh, a former Republican congressman from Indiana and president of the Club for Growth, a conservative advocacy organization, wrote on Twitter.But the White House adamantly rejected the comparison to the bailouts of the past, noting that the government is protecting depositors, not investors, while firing bank managers responsible for the trouble. “This is very different than what we saw in 2008,” Karine Jean-Pierre, the White House press secretary, told reporters.Michael Kikukawa, another White House spokesman, later said in a statement: “The president’s direction from the outset has been to respond in a way that protects hardworking Americans and small businesses, keeps our banking system strong and resilient, and ensures those responsible are held accountable. That’s exactly what his administration’s actions have done.”Mr. Biden, for his part, blamed Mr. Trump for the current crisis, saying “the last administration rolled back some of these requirements” in the Dodd-Frank law that Mr. Obama signed in 2010. Mr. Trump signed legislation passed by lawmakers in both parties in 2018 freeing thousands of small and medium-sized banks from some of the strict rules in the earlier law.The bailouts back then came in response to a banking crisis that seemed far more dangerous than what is currently evident. Some of the country’s most storied investment houses were collapsing in 2008 under the weight of risky mortgage-based securities, starting with Bear Stearns and later Lehman Brothers.Mr. Bush was warned that a cascade of failures could propel the country into another Great Depression. “If we’re really looking at another Great Depression,” he told aides, “you can be damn sure I’m going to be Roosevelt, not Hoover.”Casting aside his longstanding free-market philosophy, Mr. Bush asked Congress to authorize $700 billion for the Troubled Asset Relief Program, or TARP, to prop up the banks. Aghast at the request just weeks before an election, the House rejected the plan, led by Mr. Bush’s fellow Republicans, sending the Dow Jones industrial average down 777 points, the largest single-day point drop in history to that point. Alarmed by the reaction, the House soon reversed course and approved a barely revised version of the plan.Mr. Obama and his running mate, Mr. Biden, both voted for the program and went on to win the election. Taking office in January 2009, they then inherited the bailout. In the end, about $443 billion of the $700 billion authorized was actually used to bolster banks, automakers and a giant insurance firm. As unpopular as it was, the injection of funds helped stabilize the economy.The ultimate cost of the bailouts of that period remains in dispute. Mr. Obama and others who were involved often say that they were all ultimately paid back by the companies that benefited from the funds. ProPublica, the nonprofit investigative news organization, calculated in 2019 that after repayments the federal government actually made a profit of $109 billion.But it depends on how you count the costs. Deborah J. Lucas, a professor at the Massachusetts Institute of Technology, calculated that same year that the TARP program cost $90 billion in the end, a far cry from the original $700 billion. But other bailouts, most notably to Fannie Mae and Freddie Mac, the federally backed home mortgage companies, brought the total cost of various bailouts to $498 billion in her estimation.Either way, critics on the left and right felt aggrieved. As recently as 2020, Mr. Sanders cited the issue in running against Mr. Biden for the Democratic nomination. “Joe bailed out the crooks on Wall Street that nearly destroyed our economy 12 years ago,” he said at a town hall.Mr. Biden stood by the decisions, maintaining they worked. “Had those banks all gone under, all those people Bernie says he cares about would be in deep trouble,” he said during a debate, adding, “This was about saving an economy, and it did save the economy.”The issue was not enough to cost Mr. Biden the nomination, but that did not mean voters remember the bailouts of the past fondly. “To many, it didn’t feel like it ‘worked,’ and that made it very easy to demagogue,” said Mr. Buck. “A long period of economic malaise also leads to people looking for something or someone to blame, which is the basis for populism. I firmly believe we don’t get Trump without the devastation of 2008.” More