Finance

In April a New York fried-chicken shop went viral. It was not the food at Sansan Chicken East Village that captured the world’s imagination, but the service. Diners found an assistant from the Philippines running the till via video link.The service is provided by Happy Cashier, which connects American firms with Filipino workers. Chi Zhang set up the business after his restaurant failed during the covid-19 pandemic. He says that overseas workers also answer phone calls and monitor security-camera footage—doing so at a fraction of the cost of locals. More

Ledgers of the failed fintech middleman Synapse show that nearly all the deposits held for customers of the banking app Yotta went missing weeks ago, according to one of the lenders involved.
A network of eight banks held $109 million in deposits for Yotta customers as of April 11, Evolve Bank & Trust said in a bankruptcy court letter filed late Thursday.
About one month later, the ledger showed just $1.4 million in Yotta funds held at one of the banks, Evolve said.
In a letter sent Thursday, bankruptcy trustee Jelena McWilliams pleaded with five U.S. regulators to get more involved in the Synapse collapse.

Tsingha25 | Istock | Getty Images

Ledgers of the failed fintech middleman Synapse show that nearly all the deposits held for customers of the banking app Yotta went missing weeks ago, according to one of the lenders involved.
A network of eight banks held $109 million in deposits for Yotta customers as of April 11, Evolve Bank & Trust said in a bankruptcy court letter filed late Thursday.

About one month later, the ledger showed just $1.4 million in Yotta funds held at one of the banks, Evolve said. It added that neither customers nor Evolve received funds in that time period.
“These irregularities in Synapse’s ledgering of Yotta end user funds are just one example of the many discrepancies that Evolve has observed,” the bank said. “A detailed investigation of what happened to these funds, or alternatively, why the Synapse-provided ledger reflected money movement that did not actually occur, must be undertaken.”
Evolve, one of the key players in a deepening predicament that has left more than 100,000 fintech customers locked out of their bank accounts since May 11, has been attempting to piece together with other banks a record of who is owed what. Its former partner Synapse, which connected customer-facing fintech apps to FDIC-backed banks, filed for bankruptcy in April amid disputes about customer balances.
But Evolve itself was reprimanded by the Federal Reserve last week for failing to properly manage its fintech partnerships. The regulator noted that Evolve “engaged in unsafe and unsound banking practices” and forced the bank to improve oversight of its fintech program. The Fed said the enforcement action was separate from the Synapse bankruptcy.
Yotta CEO and co-founder Adam Moelis said in response to this article that Synapse has said in court filings that Evolve held nearly all Yotta customers deposits. Evolve and Synapse disagree over who holds the funds and who is responsible for the frozen accounts.

“According to the Synapse trial balance report provided on May 17, there are $112 million of customer funds held at Evolve,” Moelis said.
Evolve, which is headquartered in Memphis, Tennessee-based, had this statement late Friday:
“We believe that a meticulous forensic accounting investigation will reveal that these purported funds are not, and were not, in Evolve’s possession, contrary to Synapse’s claims,” a spokesman told CNBC. “Evolve will continue cooperating with the Trustee and other banks to perform reconciliation and determine the most appropriate path forward for any funds actually held at Evolve.”
The bank has been trying to separate itself from Synapse since late 2022 because of ledger problems it has found, the Evolve spokesman said.

Unclear timeline

Despite mounting pressure on the banks involved to unfreeze all the locked accounts, the messy records and a dearth of funds to pay for an outside forensic analysis has created uncertainty over when that will happen.
Evolve maintains that because of discrepancies in the ledgers, it is hesitant to allow payments to be made to many customers until a full reconciliation of the mismatched ledgers is complete, in particular related to a group of banks used in the Synapse brokerage program.
Synapse moved most of the fintech customer funds held at Evolve to a group of banks affiliated with its brokerage program in late 2023, Evolve has said in court filings.
Last week, the court-appointed trustee, former FDIC Chairman Jelena McWilliams, noted that a “full reconciliation to the last dollar with the Synapse ledger” may not be possible.
Even the total shortfall in funds owed to all impacted depositors isn’t known. Earlier this month, McWilliams pegged the amount at $85 million; but in subsequent reports stated that it was between $65 million and $96 million.

Pleading with regulators

Meanwhile, the disruption to thousands of fintech customers has stretched into its sixth week. Many Yotta customers contacted by CNBC said they used the service as their primary checking account, and have had their lives turned upside down by the situation.
In a letter sent Thursday, McWilliams pleaded with five U.S. regulators to get more involved in the Synapse collapse, asking for resources to help impacted customers understand where their funds are held and to aid communication with banks.
“The impact of Synapse’s bankruptcy on end-users has been devastating,” McWilliams wrote to the regulators. “Many end-users are unable to pay for basic living expenses and food. I appreciate your prompt attention to this request and respectfully request that your agencies act on it as quickly as possible.”
McWilliams is scheduled to present her latest status report in the bankruptcy case during a hearing starting 1 p.m. E.T. Friday. More

Banking regulators on Friday disclosed that they found weaknesses in the resolution plans of four of the eight largest American lenders.
The Federal Reserve and the Federal Deposit Insurance Corp. said the so-called living wills of Citigroup, JPMorgan Chase, Goldman Sachs and Bank of America filed in 2023 were inadequate.
Regulators found fault with the way each of the banks planned to unwind their massive derivatives portfolios. Derivatives are Wall Street contracts tied to stocks, bonds, currencies or interest rates.

Jane Fraser, CEO of Citigroup, testifies during the Senate Banking, Housing, and Urban Affairs Committee hearing titled Annual Oversight of the Nations Largest Banks, in Hart Building on Thursday, September 22, 2022. 
Tom Williams | CQ-Roll Call, Inc. | Getty Images

Banking regulators on Friday disclosed that they found weaknesses in the resolution plans of four of the eight largest American lenders.
The Federal Reserve and the Federal Deposit Insurance Corp. said the so-called living wills — plans for unwinding huge institutions in the event of distress or failure — of Citigroup, JPMorgan Chase, Goldman Sachs and Bank of America filed in 2023 were inadequate.

Regulators found fault with the way each of the banks planned to unwind their massive derivatives portfolios. Derivatives are Wall Street contracts tied to stocks, bonds, currencies or interest rates.
For example, when asked to quickly test Citigroup’s ability to unwind its contracts using different inputs than those chosen by the bank, the firm came up short, according to the regulators. That part of the exercise appears to have snared all the banks that struggled with the exam.
“An assessment of the covered company’s capability to unwind its derivatives portfolio under conditions that differ from those specified in the 2023 plan revealed that the firm’s capabilities have material limitations,” regulators said of Citigroup.
The living wills are a key regulatory exercise mandated in the aftermath of the 2008 global financial crisis. Every other year, the largest US. banks must submit their plans to credibly unwind themselves in the event of catastrophe. Banks with weaknesses have to address them in the next wave of living will submissions due in 2025.
While JPMorgan, Goldman and Bank of America’s plans were each deemed to have a “shortcoming” by both regulators, Citigroup was considered by the FDIC to have a more serious “deficiency,” meaning the plan wouldn’t allow for an orderly resolution under U.S. bankruptcy code.

Since the Fed didn’t concur with the FDIC on its assessment of Citigroup, the bank did receive the less-serious “shortcoming” grade.
“We are fully committed to addressing the issues identified by our regulators,” New York-based Citigroup said in a statement.
“While we’ve made substantial progress on our transformation, we’ve acknowledged that we have had to accelerate our work in certain areas,” the bank said. “More broadly, we continue to have confidence that Citi could be resolved without an adverse systemic impact or the need for taxpayer funds.”
JPMorgan, Goldman and Bank of America declined a request to comment from CNBC.

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The S&P 500 has gone 377 days without a 2.05% sell-off.
That’s the longest stretch for the benchmark since the great financial crisis, according to FactSet data compiled by CNBC.
This market lull comes as investors pile into megacap tech stocks, such as Nvidia, amid bets that artificial intelligence will boost profits.

Traders work on the floor of the New York Stock Exchange during morning trading on Jan. 11, 2024.
Angela Weiss | Afp | Getty Images

Wall Street’s climb to record highs has come with conspicuously little volatility.
The S&P 500 has gone 377 days without a 2.05% sell-off. That’s the longest stretch for the benchmark since the great financial crisis, according to FactSet data compiled by CNBC. The index hasn’t experienced a gain of at least 2.15% in that time either.

Arrows pointing outwards

The S&P 500 has gone 377 days without a selloff of 2.05% or more, which is the longest period since the Great Financial Crisis.

This market lull comes as investors pile into megacap tech stocks, such as Nvidia, amid bets that artificial intelligence will boost profits. Year to date, the S&P 500 is up more than 14%. Expectations of Federal Reserve rate cuts have also buoyed the broad market index in 2024 as new data shows inflation moving closer to the central bank’s 2% goal.
“At a high level, the clouds of macro uncertainty have parted over the last 12 months as receding inflation provided much-needed clarity into the future path of monetary policy,” said Adam Turnquist, chief technical strategist at LPL Financial. “The changing narrative from rate hikes to rate cuts and recessions to economic resilience helped drag the VIX down to multiyear lows, ultimately shifting the backdrop for stocks to a low volatility from high volatility regime.”

Arrows pointing outwards

The S&P 500 has notched the longest stretch without a 2.15% or more gain since the Great Financial Crisis.

Many investors consider the CBOE Volatility Index (VIX) the de facto fear gauge on the Street. Last month, it hit its lowest level going back to November 2020. On Friday, it traded around 13, near historically low levels.
“[T]he low VIX reflects the options market’s complacency, with VIX at a three-year low,” said Joseph Cusick, senior vice president and portfolio specialist at Calamos Investments. “This makes sense since institutions have been actively hedging; there is no urgency to sell underlying with these insurance products in place.”
It’s unclear how long this low-volatility period will last.
In 2017, the S&P 500 recorded just eight daily moves of more than 1%, while the VIX fell to historic lows below 9. The following year, however, volatility came back into the market, and the VIX surged above 50 before easing.

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China spent $230.8 billion over more than a decade to develop its electric car industry, according to the Center for Strategic and International Studies.
The scale of government support represents 18.8% of total electric car sales between 2009 and 2023, said Scott Kennedy, trustee chair in Chinese Business and Economics at CSIS.
“There are some exceptions, but in general Western automakers and governments have dilly dallied and not been aggressive enough,” he said.

Workers assemble a Wuling Hongguang Mini EV, an all-electric microcar manufactured by SAIC-GM-Wuling, at a plant of the joint automaker in Qingdao in east Chinas Shandong province Tuesday, Nov. 30, 2021.
Future Publishing | Future Publishing | Getty Images

BEIJING — China spent $230.8 billion over more than a decade to develop its electric car industry, according to analysis published Thursday by the U.S.-based Center for Strategic and International Studies.
The scale of government support represents 18.8% of total electric car sales between 2009 and 2023, said Scott Kennedy, trustee chair in Chinese Business and Economics at CSIS. He noted the ratio of such spending to EV sales has declined from more than 40% in the years prior to 2017, to just above 11% in 2023.

The findings come as the EU plans to impose tariffs on imports of Chinese electric cars over the use of subsidies in their production.
Last month, the U.S. announced it was raising duties on imports of Chinese electric vehicles to 100%.

There are some exceptions, but in general Western automakers and governments have dilly dallied and not been aggressive enough.

Scott Kennedy
trustee chair in Chinese business and economics, CSIS

Kennedy pointed out that Beijing’s support for electric cars has included non-monetary policies that favored domestic automakers over foreign ones. But he also noted that the U.S. has not created conditions that are as attractive as China’s for developing its own electric car industry.
“There are some exceptions, but in general Western automakers and governments have dilly dallied and not been aggressive enough,” he said. Kennedy had laid out seven policy initiatives in a report four years ago about potential trade tensions from Chinese electric cars.

Government subsidies did not necessarily go straight into car development. In the early years of China’s EV development, the Ministry of Finance said it found at least five companies cheated the government of over 1 billion yuan ($140 million).

China-made vehicles have also benefitted from growing penetration of electric cars in the country, cutting into a once-lucrative fuel-powered market for foreign automakers. The competition is so fierce that Bank of America analysts said this week that major U.S. automakers should leave China and focus their resources elsewhere.
“Independent auto analysts and Western automakers with whom I’ve spoken all agree that Chinese EV makers and battery producers have made tremendous progress and must be taken seriously,” Kennedy said.

But he pointed out that extensive government support and market growth for Chinese EV companies have yet to boost profits significantly.
“In a well-functioning market economy,” he said, “firms would more carefully gauge their investment in new capacity, and the emergence of such a sharp gap between supply and demand would likely result in industry consolidation.”
BYD’s net profit per car has declined over the last 12 months to the equivalent of $739, according to analysis from CLSA as of the first quarter. Tesla’s has dropped to $2,919, the data showed.
The EV industry in the last year has faced an intense price war, with car companies either slashing prices or launching lower-priced product lines.

Chinese electric car startup Nio, which is still operating at a loss, said last month it expects about 10 automakers will lose out on the China market, leaving 20 to 30 players.
The U.S. has been increasing its efforts to support electric cars. The Inflation Reduction Act, signed into law in August 2022, allocated $370 billion for promoting clean technologies.
Kennedy pointed out the legislation provides a $7,500 credit for qualifying electric car purchases. That’s in contrast to the average Chinese support per electric car purchase of $4,600 in 2023 — which is down from $13,860 in 2018.
— CNBC’s Dylan Butts contributed to this report. More

China’s top executive body, the State Council, late on Wednesday published high-level measures for “promoting the high-quality development of venture capital.”
“Everything is going to depend on the implementing regulations,” said Marcia Ellis, global co-chair of private equity practice at Morrison Foerster.
“Venture capital investors are not going to make investments unless they can see a reasonably clear path to an exit,” she said, noting that has not been case for the past year or so.

A man walks a dog in the shade away from the midday sun past the New York Stock Exchange (NYSE) building in Manhattan, during hot weather in New York City, New York, U.S., August 11, 2020.
Mike Segar | Reuters

BEIJING — Chinese authorities this week announced new policy for supporting venture capital, raising hopes for faster approvals of initial public offerings in the near future.
A once-burgeoning ecosystem of investment capital and startups in China has slowed drastically in the last three years amid increased regulatory scrutiny.

In one of the latest efforts to shore up the industry, China’s top executive body, the State Council, late on Wednesday published high-level measures for “promoting the high-quality development of venture capital.”
“Everything is going to depend on the implementing regulations,” said Marcia Ellis, global co-chair of private equity practice at Morrison Foerster.
“It’s positive the government at the central level has realized there is a problem,” Ellis said. “At least with respect to investments in technology, venture capital can be a positive force in the market in China that frankly can help China compete with the U.S. in the tech race.”

In terms of actions to watch, Ellis said that “really what we’re looking for as far as IPOs, is if the approvals start coming out at a quicker pace.”
“Venture capital investors are not going to make investments unless they can see a reasonably clear path to an exit,” she said, noting that has not been case for the past year or so.

The new policy included a section on expanding exit channels for venture capital, with an emphasis on supporting companies with technological breakthroughs. The measures also called for implementing a management system for overseas listings and smoothing the exit channels for venture capital funds not denominated in yuan.
“The real bottleneck for overseas listings is the overseas IPO process and foreign exchange rules,” said Winston Ma, adjunct professor at NYU School of Law.
The pace of both onshore and overseas public offerings has slowed. Investors, especially those who put U.S. dollars into China-based venture capital funds, have preferred IPOs in the U.S. as the largest and most liquid market.
Looking ahead, “the market is watching the speed of U.S. IPO approvals,” Ming Liao, founding partner of Prospect Avenue Capital, said in Chinese translated by CNBC.

Challenges for overseas IPOs

Chinese authorities tightened their scrutiny and introduced new rules for overseas IPOs after ride-hailing company Didi went ahead with a U.S. listing in 2021 despite reportedly being under government investigation. Separately, the U.S. has increased its scrutiny of U.S. capital going into China, especially military-related entities.

Previously, lack of regulation also resulted in a number of high-profile cases of fraud involving China-based IPOs in the U.S.
Morrison Foerster’s Ellis cautioned how the new policy encouraged businesses and research institutions broadly to participate in venture capital.
“Unfortunately I think if companies that are not professional investors start doing this and are doing this because they are encouraged by the government, it may just be more damaging to the market in the long run because they’re going to lose money and it’s going to stain the venture capital market in China,” Ellis said. “You need professionals doing this.”
The China Securities Regulatory Commission has increased fines for misleading investors and clarified requirements for overseas IPOs. Last year it announced updated rules, effective March 31, 2023, that said domestic companies need to comply with national security measures and the personal data protection law before going public overseas.
Since then, 73 companies have listed in the U.S. and 85 in Hong Kong, Fang Xinghai, vice chair of the commission, said during a conference Wednesday, according to state media.
The IPO processing speed hasn’t been fast enough and will be accelerated, Fang said in the report, adding the commission supports mainland Chinese companies to list overseas, especially in Hong Kong.

Fast-fashion giant Shein, which has tried to distance itself from its Chinese roots, has reportedly shifted its plans for a U.S. listing to one in London amid regulatory scrutiny.

VCs in China for China

China has also sought to develop its domestic stock markets, which are only about 30 years old.
Morgan Stanley equity analysts noted separate comments Wednesday from Wu Qing, head of China’s securities regulator, that capital markets should increase their targeted support for businesses in line with the country’s efforts to develop new technologies.
“We think it implies capital markets could welcome more diverse IPO candidates as long as they can demonstrate innovation and drive productivity growth, although IPO volume might remain low near term given higher standards are also in place,” the Morgan Stanley report said.
Wu took over as CSRC head in February after a volatile downturn in mainland stocks. Markets have since recouped losses for the year so far.
The new policy also called for supporting international investment institutions to establish yuan-denominated funds.
“If foreign funds were able to set up RMB funds more easily, then there is money that wants to do that,” Ellis said.
“There are a lot of China-focused funds that are headquartered in Asia,” she said. “They are USD funds but their management companies also want to manage onshore RMB funds because they feel like they can actually raise money in China for China investments, whereas raising USD from the U.S. and potentially Europe for China-focused funds is now very difficult.” More

Investors may want to consider hedging their emerging market plays, according to one exchange-traded fund expert.
Ben Slavin, global head of ETFs and managing director at BNY, said that while there have been notable inflows into Indian, European and Japanese ETFs, investors should account for the strength of the U.S. dollar.

“You have to look at the impact of the dollar on those returns, depending on whether you want to be hedged or unhedged because it’s a very important driver of where things will go looking forward,” Slavin told CNBC’s “ETF Edge” on Monday.
One area he pointed to is the levels between the U.S. dollar vs. the Japanese yen.
The iShares MSCI Japan ETF (EWJ) gives investors exposure to Japanese equities but does not account for fluctuations between the Japanese yen and the U.S. dollar. It’s grown less than four percent this year.
The WisdomTree Japan Hedged Equity Fund (DXJ), which gives exposure and accounts for fluctuations, has grown more than 20% in that same time frame.
“It’s very important to make that decision about how to allocate, especially as it comes to your views on the dollar. And ETFs have those different options available for investors to allocate one way or the other,” Slavin said. More

New York was the first state to launch a rebate program for consumers tied to home energy efficiency upgrades.
Many more states are expected to roll out similar Inflation Reduction Act programs this summer.
Low-income New Yorkers can get up to $24,000 in combined state and federal funding.

New York Gov. Kathy Hochul.
Lev Radin/Anadolu Agency via Getty Images

New York is launching a program offering homeowners up to $14,000 in total rebates for energy-efficiency upgrades to their property, and more states are expected to follow suit by summer’s end.
The rebate programs are part of the federal Inflation Reduction Act, the largest piece of climate legislation in U.S. history, which President Joe Biden signed in 2022.

The law earmarked $8.8 billion for consumers via two Home Energy Rebates programs.
The financial incentives help consumers reduce or fully offset the cost of upgrades to make their homes more energy-efficient, thereby reducing carbon emissions and cutting homeowners’ future energy bills, state and federal officials said.
Such projects might include installing air sealing, insulation, electric heat pumps and electric stoves, for example.
More from Personal Finance:Here’s how to buy renewable energy from your electric utilityWhat the SEC vote on climate disclosures means for investorsHere’s why FEMA has spent about $4 billion to help destroy flood-prone homes
New York launched part of its rebate program on May 30, making up to $14,000 of federal funds available to low-income households.

When combined with a fledgling state program called EmPower+ — which offers up to $10,000 per low-income household — consumers can access up to $24,000 in total rebates for making energy-efficiency upgrades, according to Doreen Harris, president and CEO of the New York State Energy Research and Development Authority.

‘Several’ states will roll out rebates by September

States, territories and tribes — which administer the programs — must apply for the federal funds.
Seventeen states had applied for Home Energy Rebates funding as of June 14, according to the U.S. Energy Department. New York was the first to roll out funding to consumers.
The Energy Department expects “several more states” to make the rebates available “between now and September,” it said. The agency has approved applications submitted by California and Hawaii, the final stage before rollout.
New York’s launch “is a milestone,” said Kara Saul Rinaldi, CEO and founder of AnnDyl Policy Group, a consulting firm focused on climate and energy policy. “Over the next year we’ll be seeing these programs roll out across America.”

How the rebate program works

The Inflation Reduction Act created two Home Energy Rebates programs: the Home Efficiency Rebates program and the Home Electrification and Appliance Rebates, or HEAR, program.
New York’s launch in May was just for part of the HEAR program. It will apply for the second at a later date.
Per federal law, the HEAR program is only available to low and middle-income homeowners.
New York was initially approved for federal funding to low-income, single-family (one- to four-unit) households. They must have an income of 80% or below their area’s median income to qualify.

The HEAR program carries a maximum dollar amount per project. For example, New York is paying the following maximum federal rebates:

Air sealing, insulation and ventilation: $1,600
Electrical service upgrade (panel box): $4,000
Electrical wiring upgrade: $2,500
Heat pump water heaters: $1,750
Heat pumps: $8,000

Low-income households are eligible to offset 100% of their project costs, up to $24,000 of combined federal and state funds.
These rebates are delivered via contractors, who will quote a project’s cost to consumers with rebates applied, according to Harris, of the New York State Energy Research and Development Authority. NYSERDA has a directory of qualified contractors who can make such upgrades.

New York aims to launch the second phase of the HEAR program in the fourth quarter of 2024, Harris said.
If approved by the Energy Department, the state would expand the rebate program in a few ways, she said: It would be available to moderate income residents, defined as being between 80% and 150% of area median income; to multifamily buildings; and to the purchase of electric appliances like ENERGY STAR-rated electric stoves and electric heat pump clothes dryers, which would be available at the point of sale from retailers.

Home Efficiency Rebates program

By contrast, the Home Efficiency Rebates program is technology-neutral. No state has yet launched such a program, though applications are pending with the Energy Department.
The value of the rebates are tied to how much overall energy a household saves via efficiency upgrades. The deeper the energy cuts, the larger the rebates, up to $8,000.
The program is available to all households, regardless of income More