Raphael Stevens

People wait outside the Silicon Valley Bank headquarters in Santa Clara, CA, to withdraw funds after the federal government intervened upon the bank’s collapse, on March 13, 2023.
Nikolas Liepins | Anadolu Agency | Getty Images

Private equity firms Apollo Global Management and KKR are among the parties reviewing a book of loans held by Silicon Valley Bank, people familiar with the discussions told CNBC.
Two of those people said Apollo may be interested in acquiring a piece of the business at par. However, one of the people said it is unclear how the Federal Deposit Insurance Corporation plans to proceed since the regulator may prefer a single buyer for the assets.

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The people CNBC spoke with requested anonymity since they weren’t authorized to share confidential details about the discussions. The people also confirmed Blackstone and Carlyle Group are among those participating in the process, which is still at an early stage.
Previously, Bloomberg reported that several private equity firms have been conducting due diligence on the loan assets. That report, which cited several people with knowledge of the talks, said Apollo, Ares Management, Blackstone, Carlyle Group and KKR were among those reviewing a potential deal.
The companies declined to comment on the report.
The FDIC seized control of tech-focused SVB on Friday. Over the weekend, the agency held an auction, which failed to find a buyer. That prompted the regulator to create a bridge bank, which now houses the California-based bank’s deposits. A plan was then devised Sunday to backstop SVB’s depositors in order to prevent further panic in the financial system.
— CNBC’s Christina Cheddar-Berk contributed to this report.

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Newly constructed houses built by Lennar Corp are pictured in Leucadia, California March 18, 2015.
Mike Blake | Reuters

Check out the companies making headlines after the bell: 
Lennar — The homebuilding stock gained about 2% in extended trading. Lennar beat analysts’ earnings and revenue expectations for the recent quarter, according to Refinitiv. The company posted earnings of $2.06 a share on revenue of $6.49 billion.

First Republic — Shares of the regional bank stock were on the move once again after the bell, last up 12%. Other bank names Western Alliance and KeyCorp also rose, gaining about 10% and 3.5%, respectively.
Guess? — The retail stock lost more than 7% after posting disappointing guidance for the first quarter and full year, according to FactSet.
Freshpet — Freshpet shares shed 11% after the bell as the pet food company announced a $350 million offering of convertible senior notes.
Atlas Air Worldwide — The air shipping stock added 3% on news that it has met regulatory requirements to close its acquisition by Rand Parent, a company that’s affiliated with funds that are managed by affiliates of Apollo Global Management and other parties.

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Silicon Valley Bank CEO Greg Becker sold nearly $30 million of stock over the past two years.
His sales, as well as those of other executives, are raising new questions over insider stock trading.
Altogether, SVB executives and directors cashed out of $84 million worth of stock over the past two years, according to Smart Insider.

Silicon Valley Bank CEO Greg Becker sold nearly $30 million of stock over the past two years, raising new questions over insider stock sales.
Becker sold $3.6 million worth of shares on Feb. 27, just days before the bank disclosed a large loss that triggered its stock slide and collapse. The sale capped two years of stock sales by Becker that totaled $29.5 million, according to data from Smart Insider. He sold at prices ranging from $287 a share to $598 a share.

Becker also purchased options, at lower exercise prices, as part of many of the sales and maintained his equity ownership stake.
Other executives at SVB, including Chief Marketing Officer Michelle Draper, Chief Financial Officer Daniel Beck and Chief Operating Officer Philip Cox, also sold millions of dollars worth of shares since 2021.
Altogether, SVB executives and directors cashed out of $84 million worth of stock over the past two years, according to Smart Insider.
The sales have sparked criticism of SVB’s management — as well as the broader phenomenon of insider stock sales before major declines. Rep. Ro Khanna — a Democrat from California, where the tech-focused bank was based — said Becker should return the money to depositors.
“I have said that there should be a clawback of that money,” Khanna tweeted Monday. “Whatever his motives, and we should find out, that $3.6 million should go to depositors.”

Greg Becker, chief executive officer of Silicon Valley Bank, participates in a panel discussion during the Milken Institute Global Conference in Beverly Hills, California, on Tuesday, May 3, 2022.
Lauren Justice | Bloomberg | Getty Images

Becker’s share sales were part of a scheduled program, known as a 10b5-1 plan, that was filed on Jan. 26, according to SEC filings. The 10b5-1 plans allow insiders to schedule stock sales ahead of time to reduce concerns over trading on insider information. Yet SEC Chairman Gary Gensler has said the plans are rife with abuse, with insiders selling right after filing the plans, creating overlapping or multiple plans and/or by creating one-off scheduled sales.
The SEC created new rules, which took effect Feb. 27 and apply to plans filed April 1. The rules include more disclosure, transparency and timelines for scheduled sales. It imposes a 90-day “cooling off period” between the filing date and the first sale.
Under the new rules, Becker’s sales, which came just one month after he filed, would not be allowed.
The SEC sent a strong message to inside sellers last month when it charged Terren Peizer, executive chairman of Ontrak, with insider trading for selling more than $20 million of the company’s stock before it plunged 44%.
The SEC complaint alleges that Peizer knew about the potential loss of the company’s largest customer when he established the selling plan in May 2021.
Becker and other executives at SVB have also come under criticism for receiving their annual bonuses on Friday, a few hours before regulators shuttered the bank. On Sunday, the U.S. government struck a deal to backstop depositors at SVB and crypto-friendly Signature Bank.

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To quell inflation, goes the adage, central bankers must tighten monetary policy until something breaks. For much of the past year this cliché has been easy to dismiss. Starting in March 2022, America’s Federal Reserve has raised rates at the fastest clip since the 1980s. Even as markets plunged, the world’s financial system stayed wreckage-free. When British pension funds wobbled in September, the Bank of England swiftly helped right them. The most notable collapse—that of ftx, a disgraced former crypto exchange—was well outside the mainstream and, regulators say, caused by fraud rather than the Fed.Now something has broken. The failure of Silicon Valley Bank (svb), a mid-tier American lender that went bust on March 10th, has sent shockwaves through financial markets. Most noticeable are convulsions in the stocks of other banks, which investors worried may have similar vulnerabilities. nasdaq’s index of bank shares dropped by a quarter in the course of a week, erasing all its gains over the preceding 25 years. Shares in regional lenders were bludgeoned much harder. As this article was published, a rebound had begun. Financial markets have nevertheless entered a new phase: in which the Fed’s tightening cycle starts to bite.One feature of this phase is that markets are suddenly working with the Fed rather than against it. For more than a year, the central bank’s officials have been repeating the same message: that inflation is proving more stubborn than anticipated, meaning interest rates will need to rise higher than previously expected. This message was reinforced by data released on March 14th showing that underlying consumer prices had once again risen faster than expected. Policymakers want to tighten financial conditions—such as lending standards, interest costs or money-market liquidity—reducing aggregate demand and thereby cooling price rises. Since October, markets have been pulling in the other direction. A gauge of financial conditions compiled by Bloomberg, a data provider, has shown them steadily loosening. Over the past week, all this loosening has been reversed, even accounting for the rebound in bank stocks. svb’s collapse has shocked markets into doing the Fed’s job. That does not mean investors have given up fighting the Fed. They are still betting it will soon start cutting rates, even though officials have given no such indication. The battleground, though, has moved. Earlier this year, expectations of rate cuts sprang from hopes inflation would fall faster than the Fed expected. Now they reflect fear. On March 13th the two-year Treasury yield fell by 0.61 percentage points, the biggest one-day drop in more than 40 years. Given that some banks have failed, investors are betting that the Fed will cut rates not because the inflation monster is tamed, but in order to avoid breaking anything else.Taken in conjunction with the reaction in other markets, this suggests a degree of cognitive dissonance. After an initial dive, broader stockmarket indices recovered strongly. The s&p 500 index of large American firms is level with its position at the start of the year. The dollar, which tends to strengthen in crises as investors flock to safety, weakened a little. On the one hand, investors think the Fed should fear the failure of other institutions enough to start cutting rates. On the other, they do not themselves fear the fallout of such a failure enough to reflect it in asset prices.Lying behind this contradiction is supposed tension between the Fed’s inflation target and its duty to protect financial stability. The failure of svb, which was rooted in losses from fixed-rate bonds (the value of which fell as rates rose), looks like evidence for this. Since even the fight against inflation pales in importance next to the stability of the banking system, goes the argument, the Fed cannot afford to raise rates any higher. This lowers the risk of recession, gives a boost to stocks and reduces the need for haven assets like the dollar.Do not be so sure. Following svb’s collapse, the Fed has promised to backstop other banks. Its support—lending against securities worth as little as two-thirds of the loan value—should prevent any remotely solvent institution from going under wherever interest rates end up. Alongside this generosity lies an uncomfortable truth. To squeeze inflation out of the economy, the Fed needs to make lenders nervous, loans expensive and businesses risk-averse. Allowing reckless banks such as svb to fail is not a tragic accident. It is part of the Fed’s job. ■ More

Silicon valley is a tough place to be a banker. Startup bosses call with references but no revenue. Loans can seldom be secured against physical assets. Many clients fail. Silicon Valley Bank (svb) netted nearly half of America’s venture-backed technology and life-science firms as clients by providing what a venture capitalist calls the “the white-glove, red-carpet treatment”. This was not just about the lunches and events put on by the bank: svb established itself as a reliable cog in Silicon Valley’s dream machine. In the Financial Times, Michael Moritz of Sequoia Capital, a grand venture-capital outfit, lamented the loss as akin to a “death in the family”. Thanks to regulators, svb’s demise has not meant a Silicon Valley cash crunch. Tech workers need only worry about their jobs as much as they did before last week. For some, relief at a bullet dodged has turned into anger at the firms quickest to pull deposits, helping to bring down their beloved bank. The next stage of grief ought to be sober risk management. According to the venture capitalist, the chance to replace svb as banker to Silicon Valley is a “tremendous opportunity”. There will be no shortage of institutions with eyes on the $300bn of venture-capital dry powder waiting to be ploughed into startups. But svb’s collapse will scale back Silicon Valley’s ambitions in other ways.Exactly where the dust and deposits settle is uncertain. Reports suggest regulators are attempting another auction of svb, having been unable to find a buyer at the weekend. Banks and private-equity funds are circling. Startups are finding new homes for their cash. In the chaos of last week, companies with accounts elsewhere transferred their funds. Others tripped on red tape as they frantically opened new ones. Some even wired money to personal accounts. Fintechs had a busy weekend, too. Brex, one such firm, opened 3,000 new accounts. Yet relationships between fintechs and regional banks, which have suffered in the wake of svb’s collapse, may scare off potential long-term clients. The big banks are likely to be the main custodians of Silicon Valley’s cash in future. Bank of America, Citigroup and JPMorgan Chase can scarcely open accounts fast enough. Once there, startups can expect a safer, if less intimate, service. Call it the grey-carpet treatment. On March 13th svb’s British operations were acquired for £1 ($1.22) by hsbc, a multinational behemoth. The new business will account for less than 1% of loans, deposits and profits at the firm. Whether the largest banks reassess the way they bank the smallest tech firms remains to be seen, but such firms will never be their core concern.Another question is what will happen to the venture debt market. svb was a major player, with $6.7bn of such loans outstanding when it went under. Startups used this low-cost lending to top up balance-sheets between equity funding rounds. Most now expect such loans to become more expensive, especially for the youngest firms. Venture-capital outfits are unlikely to lower themselves en masse to the comparatively small returns offered by this sort of lending. Other wheels on the venture-capital machine will need oiling, too. For example, svb often provided bridge financing to venture-capital firms, allowing them to strike deals while awaiting cash from investors.All this means that the loss of svb is likely to have a chilling effect on an industry already suffering from higher interest rates. Bankers may have to wait some time to see venture capital’s dry powder hit their deposit accounts—after all, in the last quarter, the amount of money flowing into startups globally fell by two-thirds. Limits on financing and difficulties banking baby firms will make the industry’s adjustment to higher rates more painful still. After such an adjustment, trips to the bank will remind dealmakers of their own mortality. That is not necessarily a bad thing. ■ More

Morgan Stanley is rolling out an advanced chatbot powered by OpenAI’s latest technology to help the bank’s army of financial advisors, CNBC has learned.
The bank has been testing the artificial intelligence tool with 300 advisors and plans to roll it out widely in the coming months, according to Jeff McMillan, head of analytics and data at the firm’s wealth management division.
The idea behind the tool, which has been in development for the past year, is to help the bank’s 16,000 or so advisors tap the bank’s enormous repository of research and data, said McMillan.

OpenAI logo seen on screen with ChatGPT website displayed on mobile seen in this illustration in Brussels, Belgium, on December 12, 2022.
Jonathan Raa | Nurphoto | Getty Images

Morgan Stanley is rolling out an advanced chatbot powered by OpenAI’s latest technology to help the bank’s army of financial advisors, CNBC has learned.
The bank has been testing the artificial intelligence tool with 300 advisors and plans to roll it out widely in the coming months, according to Jeff McMillan, head of analytics, data and innovation at the firm’s wealth management division.

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Morgan Stanley’s move is one of the first announcements by a financial incumbent after the success of OpenAI’s ChatGPT, which went viral late last year by generating human-sounding responses to questions. The bank is a juggernaut in wealth management with more than $4.2 trillion in client assets. The promise and perils of artificial intelligence have been written about for years, but seemingly only after ChatGPT did mainstream users understand the ramifications of the technology.
The idea behind the tool, which has been in development for the past year, is to help the bank’s 16,000 or so advisors tap the bank’s enormous repository of research and data, said McMillan.
“People want to be as knowledgeable as the smartest person” in our firm, McMillan said. “This is like having our chief strategy officer sitting next to you when you’re on the phone with a client.”
While generative AI has dazzled users and sparked a race among technology giants to develop products, it has also led some users down strange paths. Last month, Morgan Stanley analysts wrote that ChatGPT occasionally “hallucinates and can generate answers that are seemingly convincing, but are actually wrong.”

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Similar to ChatGPT, the tool will instantly answer questions for advisors. But it is based on GPT 4, which is a more advanced form of the technology underpinning ChatGPT.

And instead of the entire contents of the internet, this tool generates responses only on the 100,000 or so pieces of research that Morgan Stanley has vetted for this use, which should cut down on errors. To further reduce mishaps, the bank has humans checking the accuracy of responses, he said.  
“We’re trying to actually break the platform” through human testing, he said. “With high-quality information, the better models and an ongoing monitoring process” the bank is confident in its new tool, he said.

The logo of Morgan Stanley is seen in New York 
Shannon Stapleton | Reuters

The move builds on earlier efforts by McMillan, including the 2018 introduction of machine-learning algorithms that prompt advisors to reach out to clients or take other steps. With each new development, concern rises among knowledge workers that technology will be able to cut people out entirely one day.
“I think every industry is going to be in some way disrupted for what I’ll describe as routine, basic tasks,” McMillan said.
But machines can’t replace people when it comes to catering to sophisticated clients, he said.
“These things don’t have any empathy; they’re just very clever math that is able to regurgitate knowledge,” he said.

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