Finance

Starbucks workers union advocates wears union shirts at the Senate Health, Education, Labor and Pensions Committee hearing on No Company is Above the Law: The Need to End Illegal Union Busting at Starbucks in the Dirksen Senate Office Building on Wednesday, March 29, 2023.
Bill Clark | Cq-roll Call, Inc. | Getty Images

Check out the companies making headlines in premarket trading.
Starbucks — The coffee shop chain slid 1.1% after a union representing workers said some stores will strike beginning Friday following claims that the company has not allowed Pride month decor in its cafes. The union said workers at more than 150 stories have agreed to join the strikes taking place over the next week, with more working on authorizations.

CarMax — The used car retailer gained 6.8% after beating Wall Street expectations on first-quarter revenue. CarMax reported $7.69 billion, ahead of the $7.49 billion expected by analysts polled by StreetAccount.
Virgin Galactic — Shares tumbled 12.4% in premarket trading after the space tourism company said it raised $300 million through a common stock offer. Virgin Galactic said it wants to raise another $400 million as the company looks to expand and improve its spacecraft fleet.
Under Armour — Shares shed nearly 3% in premarket trading following a downgrade by Wells Fargo to equal weight from overweight. The Wall Street bank said the athletic clothing company had overexposure to North America, excess inventory and a CEO at the helm for just six months. On Thursday, Under Armour cut 50 jobs at its Baltimore headquarters, The Baltimore Sun and Footwear News reported.
Wayfair — Shares of the home furnishings retailer rose more than 1% after MoffettNathanson upgraded Wayfair to market perform from underperform. The investment firm said Wayfair appears to be benefitting from the bankruptcy of Bed Bath & Beyond.
C3.AI — Shares shed 0.8% premarket after Deutsche Bank said the company did not differentiate itself from other artificial intelligence names at its investor day. The firm reiterated its sell rating.

Accenture — The consulting company lost 1.5%, adding to its decline from the previous session, as investors continued to take profit following its earnings report. On Thursday, Accenture reported earnings per share and revenue that beat analyst expectations. Despite the post earnings losses, Accenture shares are up 15% year to date.
— CNBC’s Jesse Pound and Michelle Fox contributed reporting More

Built by Tech Zity, an infrastructure project in Lithuania, the campus will span 55,000 square meters and house 5,000 digital workers.
That would make it larger than Paris’ Station F, currently the largest startup campus in all of Europe.
Vilnius, the second-largest city in the Baltic states, is home to a burgeoning tech industry, including major unicorns such as used clothing retailer Vinted and cybersecurity firm Nord. 

The development, from Lithuanian infrastructure firm Tech Zity, is inspired by British renovation projects like the Battersea Power Station and Tate Modern art gallery.

Lithuania is building a huge tech campus — Europe’s largest — in the capital of Vilnius, as it looks to become the new tech capital of the Baltics.
Built by Tech Zity, an infrastructure project in Lithuania, the campus is a 100 million euro ($109.6 million) development that will span 55,000 square meters and house 5,000 digital workers, the firm said Friday.

That would make it larger than Paris’ Station F, currently the largest startup campus in all of Europe.
The development is inspired by British renovation projects such as the Battersea Power Station and Tate Modern art gallery.
Tech Zity developers will renovate a number of sewing factories in a disused industrial space in Vilnius’ New Town, maintaining factory-like office floors with ceiling heights of at least 7 meters.

The campus is aimed at encouraging Vilnius’ tech workers to come back to the office post-pandemic.

The project aims to encourage Vilnius’ tech workers to return to the office after the pandemic. Tech companies have increasingly been pushing for their employees to go back to the office, in a reversal from the pandemic-era trend of working from home.

Lithuania’s growing tech scene

Lithuania’s tech ecosystem has grown dramatically over the past decade, Darius Zakaitis, Tech Zity’s founder, told CNBC.

“When I started 30 years ago, there were 200 people in the Lithuanian tech ecosystem,” Zakaitis said. “Now it’s 18,000 people.”

The development project is a restoration of old disused industrial space in Vilnius’ New Town, which is known as the hipster part of town.

“It’s a result of 10 years of active young people building new companies every day. Some of them are very successful,” he said.
“Lithuanians are very productive, very results-oriented, highly-skilled guys, very aggressively building their own companies,” he added.
Vilnius, the second-largest city in the Baltic states, is home to a burgeoning tech industry, including major unicorns such as used clothing retailer Vinted and cybersecurity firm Nord. 
Nord has its own 300-square-meter campus in Vilnius about 300 meters away from Tech Zity’s, while Vinted’s headquarters is roughly 200 meters away.
Tech Zity’s new campus will include co-living spaces, restaurants and bars, and cultural and educational facilities.

Tech Zity wants the campus to foster a buzzing night life as well as other socializing opportunities, incorporating co-living spaces, restaurants, and bars.

“Vilnius is maintaining a firm position within the European tech scene thanks to rapid innovations and visionary businesses such as Tech Zity,” Valdas Benkunskas, the mayor of Vilnius, said in a statement Friday. 
“Bursting with innovative entrepreneurs, multinational talents, and ambitious investors, the capital has grown to a modern tech hub that evokes bold ideas, successful collaborations, and  people-focused solutions.”
Lithuanian tech companies make roughly 99% of their revenues abroad, he said. He added that the country’s tech scene models itself after Israel’s, which has produced numerous global tech successes, including self-driving tech firm Mobileye and the mapping app Waze.
Tech Zity manages three tech campuses in Vilnius, including Tech Park, Tech Loft, and Tech Spa, which are home to companies like Google, Bored Panda and Kilo Health.

The project is a huge undertaking — at 55,000 square meters, it is expected to be the largest tech startup campus in all of Europe.

U.S. streaming platform Netflix has used Tech Zity locations for filming, including the docu-series “The Playlist” which focuses  on Spotify founder Daniel Ek.
Currently occupying 20,000 square meters, Tech Zity plans to reach 80,000 square meters over time, considering new campuses, existing locations, and other projects.

Long way to go

Despite its recent successes, Lithuania is far from becoming a major tech hub that rivals the likes of the U.K., France or Germany.
The country attracted 222 million euros of venture capital funding in 2022, paling in comparison to its Western European peers. By contrast, U.K. tech startups raised $30 billion, while their French counterparts raised 13.5 billion euros.
But the country has been drawing more interest from venture capitalists, according to local founders.
“All the top VC firms are now coming to Lithuania and talking with startups, angel investors, and anyone else,” Tom, CEO and co-founder of Nord Security, told CNBC on the sidelines of the Web Summit tech conference in Lisbon, Portugal, last November.
“The last raise for a Lithuanian startup called Kevin was from Accel, Vineted has Insight Parnters, EQT, Accel, and many others.”
WATCH: Russia sanctions must go further, Lithuania’s president says More

When it comes to banking and financial services, the problem of artificial intelligence amplifying existing human biases can be severe.
Deloitte notes that AI systems are ultimately only as good as the data they’re given: Incomplete or unrepresentative datasets could limit AI’s objectivity, while biases in development teams that train such systems could perpetuate that cycle of bias.
Lending is a prime example of where the risk of an AI system being biased against marginalized communities can rear its head, according to former Twitter executive Rumman Chowdhury.

Artificial intelligence algorithms are increasingly being used in financial services — but they come with some serious risks around discrimination.
Sadik Demiroz | Photodisc | Getty Images

AMSTERDAM — Artificial intelligence has a racial bias problem.
From biometric identification systems that disproportionately misidentify the faces of Black people and minorities, to applications of voice recognition software that fail to distinguish voices with distinct regional accents, AI has a lot to work on when it comes to discrimination.

And the problem of amplifying existing biases can be even more severe when it comes to banking and financial services.
Deloitte notes that AI systems are ultimately only as good as the data they’re given: Incomplete or unrepresentative datasets could limit AI’s objectivity, while biases in development teams that train such systems could perpetuate that cycle of bias.

A.I. can be dumb

Nabil Manji, head of crypto and Web3 at Worldpay by FIS, said a key thing to understand about AI products is that the strength of the technology depends a lot on the source material used to train it.
“The thing about how good an AI product is, there’s kind of two variables,” Manji told CNBC in an interview. “One is the data it has access to, and second is how good the large language model is. That’s why the data side, you see companies like Reddit and others, they’ve come out publicly and said we’re not going to allow companies to scrape our data, you’re going to have to pay us for that.”
As for financial services, Manji said a lot of the backend data systems are fragmented in different languages and formats.

“None of it is consolidated or harmonized,” he added. “That is going to cause AI-driven products to be a lot less effective in financial services than it might be in other verticals or other companies where they have uniformity and more modern systems or access to data.”

Manji suggested that blockchain, or distributed ledger technology, could serve as a way to get a clearer view of the disparate data tucked away in the cluttered systems of traditional banks.
However, he added that banks — being the heavily regulated, slow-moving institutions that they are — are unlikely to move with the same speed as their more nimble tech counterparts in adopting new AI tools.
“You’ve got Microsoft and Google, who like over the last decade or two have been seen as driving innovation. They can’t keep up with that speed. And then you think about financial services. Banks are not known for being fast,” Manji said.

Banking’s A.I. problem

Rumman Chowdhury, Twitter’s former head of machine learning ethics, transparency and accountability, said that lending is a prime example of how an AI system’s bias against marginalized communities can rear its head.
“Algorithmic discrimination is actually very tangible in lending,” Chowdhury said on a panel at Money20/20 in Amsterdam. “Chicago had a history of literally denying those [loans] to primarily Black neighborhoods.”
In the 1930s, Chicago was known for the discriminatory practice of “redlining,” in which the creditworthiness of properties was heavily determined by the racial demographics of a given neighborhood.
“There would be a giant map on the wall of all the districts in Chicago, and they would draw red lines through all of the districts that were primarily African American, and not give them loans,” she added.
“Fast forward a few decades later, and you are developing algorithms to determine the riskiness of different districts and individuals. And while you may not include the data point of someone’s race, it is implicitly picked up.”
Indeed, Angle Bush, founder of Black Women in Artificial Intelligence, an organization aiming to empower Black women in the AI sector, tells CNBC that when AI systems are specifically used for loan approval decisions, she has found that there is a risk of replicating existing biases present in historical data used to train the algorithms.
“This can result in automatic loan denials for individuals from marginalized communities, reinforcing racial or gender disparities,” Bush added.
“It is crucial for banks to acknowledge that implementing AI as a solution may inadvertently perpetuate discrimination,” she said.
Frost Li, a developer who has been working in AI and machine learning for over a decade, told CNBC that the “personalization” dimension of AI integration can also be problematic.
“What’s interesting in AI is how we select the ‘core features’ for training,” said Li, who founded and runs Loup, a company that helps online retailers integrate AI into their platforms. “Sometimes, we select features unrelated to the results we want to predict.”
When AI is applied to banking, Li says, it’s harder to identify the “culprit” in biases when everything is convoluted in the calculation.
“A good example is how many fintech startups are especially for foreigners, because a Tokyo University graduate won’t be able to get any credit cards even if he works at Google; yet a person can easily get one from community college credit union because bankers know the local schools better,” Li added.
Generative AI is not usually used for creating credit scores or in the risk-scoring of consumers.
“That is not what the tool was built for,” said Niklas Guske, chief operating officer at Taktile, a startup that helps fintechs automate decision-making.
Instead, Guske said the most powerful applications are in pre-processing unstructured data such as text files — like classifying transactions.
“Those signals can then be fed into a more traditional underwriting model,” said Guske. “Therefore, Generative AI will improve the underlying data quality for such decisions rather than replace common scoring processes.”

But it’s also difficult to prove. Apple and Goldman Sachs, for example, were accused of giving women lower limits for the Apple Card. But these claims were dismissed by the New York Department of Financial Services after the regulator found no evidence of discrimination based on sex. 
The problem, according to Kim Smouter, director of anti-racism group European Network Against Racism, is that it can be challenging to substantiate whether AI-based discrimination has actually taken place.
“One of the difficulties in the mass deployment of AI,” he said, “is the opacity in how these decisions come about and what redress mechanisms exist were a racialized individual to even notice that there is discrimination.”
“Individuals have little knowledge of how AI systems work and that their individual case may, in fact, be the tip of a systems-wide iceberg. Accordingly, it’s also difficult to detect specific instances where things have gone wrong,” he added.
Smouter cited the example of the Dutch child welfare scandal, in which thousands of benefit claims were wrongfully accused of being fraudulent. The Dutch government was forced to resign after a 2020 report found that victims were “treated with an institutional bias.”
This, Smouter said, “demonstrates how quickly such disfunctions can spread and how difficult it is to prove them and get redress once they are discovered and in the meantime significant, often irreversible damage is done.”

Policing A.I.’s biases

Chowdhury says there is a need for a global regulatory body, like the United Nations, to address some of the risks surrounding AI.
Though AI has proven to be an innovative tool, some technologists and ethicists have expressed doubts about the technology’s moral and ethical soundness. Among the top worries industry insiders expressed are misinformation; racial and gender bias embedded in AI algorithms; and “hallucinations” generated by ChatGPT-like tools.
“I worry quite a bit that, due to generative AI, we are entering this post-truth world where nothing we see online is trustworthy — not any of the text, not any of the video, not any of the audio, but then how do we get our information? And how do we ensure that information has a high amount of integrity?” Chowdhury said.
Now is the time for meaningful regulation of AI to come into force — but knowing the amount of time it will take regulatory proposals like the European Union’s AI Act to take effect, some are concerned this won’t happen fast enough.
“We call upon more transparency and accountability of algorithms and how they operate and a layman’s declaration that allows individuals who are not AI experts to judge for themselves, proof of testing and publication of results, independent complaints process, periodic audits and reporting, involvement of racialized communities when tech is being designed and considered for deployment,” Smouter said.
The AI Act, the first regulatory framework of its kind, has incorporated a fundamental rights approach and concepts like redress, according to Smouter, adding that the regulation will be enforced in approximately two years.
“It would be great if this period can be shortened to make sure transparency and accountability are in the core of innovation,” he said. More

Federal Reserve Chairman Jerome Powell said Thursday that banks below $100 billion in assets won’t be impacted by any new capital requirements.
The questions, and the move to re-examine regulations, follow the March tumult in the industry.
In separate testimony, FDIC Chair Martin Gruenberg said the upcoming rules could apply so-called Basel III international standards to banks in the $100 billion to $250 billion asset range.

Federal Reserve Chairman Jerome Powell prepares to testify during the Senate Banking, Housing and Urban Affairs Committee hearing titled “The Semiannual Monetary Policy Report to the Congress,” in Dirksen Building on Thursday, June 22, 2023.
Tom Williams | Cq-roll Call, Inc. | Getty Images

New rules expected to require that banks keep more capital almost certainly won’t apply to smaller institutions, Federal Reserve Chair Jerome Powell said Thursday.
Addressing concerns over proposals to tighten the reins on bigger banks, Powell told members of the Senate Banking Committee that the rules are still in draft stage.

At the same time, he also raised concerns about what impact higher capital requirements would have on lending.
“More capital means more stable banks and stronger banks, but there’s also a trade-off there,” he said in the second day of his semiannual testimony on monetary policy. “You’ve got to make a judgment about where you draw that line.”
In Powell’s understanding, banks below $100 billion in assets won’t be affected by any new requirements. That provided some relief for Republican lawmakers who questioned whether the changes were necessary, as Powell faced multiple questions about the future of regulation and supervision. If that’s the case, the new rules would affect the top 25 or so banks in the U.S.
The questions, and the move to reexamine regulations, follow the March tumult in the industry, in which Silicon Valley Bank and two other large regionals were shuttered following deposit runs.
Lawmakers and Biden administration regulators have been pushing for a return to more stringent requirements after larger regionals were given a break in changes made in 2018.

In separate testimony Thursday, FDIC Chair Martin Gruenberg said the upcoming rules could apply so-called Basel III international standards to banks in the $100 billion to $250 billion asset range. The changes are not expected to be applied until sometime in 2024. Michael Barr, the Fed’s vice chair for supervision, has said they likely will take years to implement fully.
“The capital requirements will be very, very skewed to the eight largest banks,” Powell said. “There may be some capital increases for other banks. None of this should affect banks under $100 billion.”
Even with the exemption for smaller institutions, the looming changes represent an adjustment in thinking that Powell previously had supported, specifically that regulations should be tailored for both small and midsized banks. Gruenberg’s comments, for instance, “support our view that banking regulators are biased toward higher capital levels,” Raymond James’ Washington policy analyst Ed Mills said in a client note.
The American Bankers Association criticized the move toward increase requirements that have been reported to be 20% higher.
“We have long believed that regulation should be tailored to a bank’s risk and business model,” ABA President Rob Nichols said in a statement. “Arbitrary asset thresholds and changes not justified by rigorous data and evidence are a mistake that will only make it harder for banks of all sizes to meet the needs of their customers, clients and communities while driving financial activity to less-regulated nonbanks.”
Powell faced little in the way of hostile questioning despite concerns raised over the SVB failure.
He did face some grilling from Sen. Elizabeth Warren, D-Mass., a frequent critic who charged Thursday that Powell is “ultimately responsible for the team of supervisors who fell down on the job” when SVB failed.
Powell replied that the Fed “learned some lessons” from the episode.
“The main responsibility I take is to learn the right lessons from this and to undertake to address them so we don’t have a situation like this where we had unexpectedly a large bank fail and spread contagion into the banking system. That’s not supposed to happen, and we need to take appropriate steps to make sure it doesn’t happen again,” he said. More

An employee scans an order in the shipping area at the Overstock.com distribution center in Salt Lake City, Utah.
Ken James | Bloomberg | Getty Images

Check out the companies making headlines in midday trading.
Overstock.com — Shares jumped 17.3% on news the e-commerce company won the auction for Bed Bath & Beyond’s digital assets and intellectual property, which includes the brand name.

Spirit AeroSystems — Shares of the Boeing supplier dropped 9.4% after the company halted production in its Wichita, Kansas, factory following an announcement that workers will strike, starting Saturday. Boeing’s stock also fell 3.1%. Spirit AeroSystems makes fuselages for Boeing’s 737 Max, as well as the forward section of many of Boeing’s other aircrafts.
Accenture — The stock fell 1.9% after the consulting firm shaved the top end of its revenue expectations for the fiscal year. The firm said to expect between 8% and 9% in local currency after previously setting a range between 8% and 10%.
Darden Restaurants — The Olive Garden parent dropped 2.6%. Darden posted earnings of $2.58 per share on revenue of $2.77 billion in its latest quarter. The results beat analysts’ forecast of $2.54 in earnings per share, but met revenue expectations, according to Refinitiv. The company’s full-year earnings guidance range included the consensus estimate of analysts polled by FactSet. The company also increased its quarterly dividend and announced Chairman Eugene Lee would retire.
Anheuser-Busch InBev — Shares gained 2% after Deutsche Bank upgraded the beer giant to a buy from a hold rating, citing fading headwinds from the recent flight of customers amid its collaboration with transgender influencer Dylan Mulvaney.
NRG Energy — The stock advanced 3.1% a day after the Wall Street Journal reported Elliott Investment Management, an activist investor, wanted to remove the CEO and other executives.

Tesla — Tesla finished the choppy session 2% higher after Morgan Stanley downgraded the electric-vehicle giant to an equal weight rating from overweight, citing valuation concerns.
Root — The car insurance stock soared 34.1% following a Wednesday report from the Wall Street Journal that Embedded Insurance offered $19.34 per share in a takeover bid.
Sotera Health — Shares shot up 17.3% after the lab testing company said it settled a lawsuit over ethylene oxide in Illinois.
Alcoa — The aluminum company dropped 4.3% following a downgrade to underweight from equal weight by Morgan Stanley. The firm warned Alcoa could miss estimates on a key profit measure in upcoming quarters.
Amazon — The e-commerce giant added 4.3% after JPMorgan Chase reiterated the stock as overweight, noting the opportunity for further growth in Amazon Prime. Loop also reiterated its buy rating and raised its price target given what it sees as an opportunity for the stock to rally further.
Dow — The chemical company slipped 0.9% on the back of a downgrade to underperform from neutral by Bank of America. The firm said recovery in demand was “elusive” and hurt prices.
Expedia, TripAdvisor — Expedia and TripAdvisor gained 2.2% and 4.7%, respectively, after B. Riley initiated coverage on each stock as buy. The firm said Expedia has an appealing risk/reward ratio, while TripAdvisor could see its margins expand.
Eli Lilly — Shares rose 1% after Bank of America reiterated the stock as a buy, saying it was still the firm’s favorite in the biopharmaceutical space.
— CNBC’s Samantha Subin, Michelle Fox and Jesse Pound contributed reporting. More

Warren Buffett, chairman and CEO of Berkshire Hathaway, smiles as he plays bridge following the annual Berkshire Hathaway shareholders meeting in Omaha, Nebraska, May 5, 2019.
Nati Harnik | AP

Warren Buffett has made another annual donation to five foundations, boosting his total charitable giving to more than $50 billion — significantly higher than his entire net worth in 2006 when he first scheduled the grants.
The 92-year-old legendary investor said Thursday he has converted over 9,000 Berkshire Class A shares into B shares in order to donate 13.7 million B shares to five foundations. A total of 10.5 million shares were delivered to the Bill & Melinda Gates Foundation Trust, and 1.05 million shares were donated to the Susan Thompson Buffett Foundation, named for his first wife, who died in 2004.

Another 2.2 million shares were split evenly among the three foundations run by his children: the Sherwood Foundation, the Howard G. Buffett Foundation and the NoVo Foundation. As of 1:30 p.m. ET, the B shares were worth about $336 apiece.
The “Oracle of Omaha” said the schedule for annual grants was made on June 26, 2006, when he owned $43 billion of Berkshire A shares, which represented more than 98% of his net worth. Buffett pledged in a 2006 letter to make annual gifts of Berkshire B shares throughout his lifetime for the benefit of the Bill & Melinda Gates Foundation. 
“During the following 17 years, I have neither bought nor sold any A or B shares nor do I intend to do so. The five foundations have received Berkshire B shares that had a value when received of about $50 billion, substantially more than my entire net worth in 2006,” Buffett said. “I have no debts and my remaining A shares are worth about $112 billion, well over 99% of my net worth.”
Last year, Buffett donated more than $750 million to the four foundations associated with his family on Thanksgiving eve as the “ultimate endorsement” in his children.
Buffett plans to give away all of his Berkshire shares through annual gifts, which will be completed 10 years after his estate is settled. After this year’s donation, Buffett now owns 218,287 A shares and 344 B shares.

“Nothing extraordinary has occurred at Berkshire; a very long runway, simple and generally sound decisions, the American tailwind and compounding effects produced my current wealth,” Buffett said. “My will provides that more than 99% of my estate is destined for philanthropic usage.”
The Omaha, Nebraska-based conglomerate, a sprawling empire with businesses ranging from insurance to railroads, and utilities to energy and retail, is now worth more than $730 billion. More

The Securities and Exchange Commission fined the broker-dealer subsidiary of JPMorgan Chase $4 million for accidentally deleting about 47 million emails from early 2018.
Some of those emails were sought by subpoenas in at least a dozen regulatory investigations, the SEC order against J.P. Morgan Securities LLC noted.
The firm in late 2021 agreed to pay $125 million in penalties for failing to preserve text messages and other electronic communications sent between January 2018 and November 2020.

The JP Morgan Chase & Co. headquarters, The JP Morgan Chase Tower in Park Avenue, Midtown, Manhattan, New York.
Tim Clayton – Corbis | Corbis Sport | Getty Images

The Securities and Exchange Commission fined the broker-dealer subsidiary of JPMorgan Chase $4 million for accidentally deleting about 47 million emails from early 2018, according to an administrative order Thursday.
Some of those deleted emails were sought by subpoenas in at least a dozen regulatory investigations, but could no longer be retrieved, the SEC order against J.P. Morgan Securities LLC noted.

Others “could relate to potential future investigations, legal matters and regulatory inquiries,” the order said.
The emails, which were accidentally deleted in 2019, were from and to about 8,700 email boxes, which included those of up to 7,500 employees who had regular contact with Chase customers.
Many of the emails were “business records required to be retained pursuant” to federal securities law, the order said.
J.P. Morgan Securities consented to the SEC sanction, which also censured the firm.
The firm had submitted a settlement offer in anticipation of administrative proceedings related to the deletions, and the SEC accepted that offer.

The SEC also ordered the firm to “cease and desist from committing any future violations” of the securities law requiring broker-dealers to retain for at least three years the originals of all communications.
This is the third time the investment advisor has agreed to punishment for failing to preserve electronic records.
The firm in late 2021 agreed to pay $125 million in penalties for failing to preserve text messages and other electronic communications sent between January 2018 and November 2020.
In 2005, the firm paid $700,000 in penalties for not preserving electronic records from mid-1999 to mid-2002.
JPMorgan spokeswoman Patricia Wexler declined to comment on the latest sanction.
In its order Thursday, the SEC noted JPMorgan in 2016 began a project “to delete from its system older communications and documents no longer required to be retained.”
Those messages included old emails, instant messages and communications sent over the Bloomberg terminal service.
But there were “glitches” in the project, “with the identified documents not, in fact, being expunged,” the order said.
While troubleshooting that issue in June 2019, employees of the firm “executed deletion tasks on electronic communications from the first quarter of 2018,” the order said.
Those employees “erroneously” believed — based on claims by the firm’s archiving vendor — that all of those documents were coded in a way to prevent the permanent deletion of those records that were required by law to be kept for three years, the order said.
“In fact, however, the vendor did not apply the default retention settings in a particular email domain,” the order said.
“And those communications, including many required to be maintained pursuant to the broker-dealer recordkeeping rules, were permanently deleted.”
Those deletions were discovered in October 2019, when a JPMorgan team responsible for producing records related to legal cases detected that emails were missing from early 2018, the order said.
JPMorgan reported the deletions to the SEC in January 2020.
The order noted that, “In at least twelve civil securities-related regulatory investigations, eight of which were conducted by the [SEC] Commission staff, JPMorgan received subpoenas and document requests for communications which could not be retrieved or produced because they had been deleted permanently.”
And, the order added, “JPMorgan notified only one of the eight investigative teams at the Commission that its production in response to the subpoenas had been compromised by the 2019 deletion event.”
The order noted that because the deleted communications “are unrecoverable, it is unknown – and unknowable – how the lost records may have affected the regulatory investigations.”
In fact, a member of JPMorgan’s compliance department acknowledged in an internal email after the deletions came to light that “lost documents could relate to potential future investigations, legal matters and regulatory inquiries,” the order said. More

Annual real hourly earnings increased by 0.2%, on average, in May, according to the U.S. Bureau of Labor Statistics.
Real earnings are wages after accounting for inflation. It was the first time they rose since March 2021.
If the trend continues, it would mean the average household gets a consistent increase in its standard of living after two years of eroded buying power.

Images By Tang Ming Tung | Digitalvision | Getty Images

Workers saw their buying power grow in May for the first time in two years, as inflation continues to fall from its pandemic-era peak.
If the trend continues, it’d be welcome news for households, who could lean more on their paychecks instead of their savings or credit cards to support everyday spending, economists said.

“Real” hourly earnings increased by 0.2%, on average, this May versus May 2022, according to the U.S. Bureau of Labor Statistics.
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Real earnings represent an average worker’s annual wage growth after accounting for increased costs for household goods and services, as measured by the consumer price index, or CPI.
A positive number means the average worker experienced an increase in their standard of living. A negative number means the opposite: that salaries can’t buy as much as they did a year ago.
May’s figure was the first positive annual reading since March 2021, according to BLS data. Before the latest reading, workers had endured 25 consecutive months of eroding buying power, the longest stretch on record, said Aaron Terrazas, chief economist at Glassdoor, a career site.

“This is clearly a function of inflation starting to come down,” Terrazas said.
“Real wages turned positive, and that’s great,” he added. “But many [people] are just playing catch-up for what’s happened over the past two years.”

‘Unprecedented’ pay jumps during pandemic

Wage growth started to spike in 2021 as workers enjoyed the benefits of a hot job market. Businesses’ demand for workers jumped to record highs as the U.S. economy reopened broadly after its Covid pandemic-induced lull. Employers raised wages at the fastest pace in decades to compete for a limited pool of talent.
“Many companies did unprecedented pay increases during the pandemic,” said Julia Pollak, chief economist at ZipRecruiter.
In some cases, workers’ pay growth was strong enough to outrun inflation’s impact — especially for those who quit their jobs for higher-paying gigs elsewhere.

For the average person, however, inflation swamped those wage gains. Such households saw their bills for food, rent and filling up the gas tank rise faster than their paychecks.
The CPI, an inflation barometer, peaked at 9.1% in June 2022 — the highest level in four decades — but has since declined to 4% on an annual basis.
Meanwhile, wage growth has also declined but at a slower pace — translating to a net boost to Americans’ financial well-being in May relative to last year.
“The trend reversal is good news for consumers, who have remarkably weathered the decline well and are now set to become even stronger,” Pollak said.

Positive trajectory for household buying power

Other economic measures further suggest household well-being has improved.
For example, Americans’ “real” disposable personal income — both in the aggregate and per capita — has risen for 10 consecutive months since June 2022, according to the most recent U.S. Bureau of Economic Analysis data.
These data sets are more inclusive than that of wage growth. They include interest income, rental income and dividends, for example, all of which have been strong, said Mark Zandi, chief economist at Moody’s Analytics.

This is clearly a function of inflation starting to come down.

Aaron Terrazas
chief economist at Glassdoor

The trend is a “very encouraging” sign for consumers, who are less likely to need to supplement income with excess savings or with additional debt, Zandi said.
Americans owed nearly $1 trillion in credit card debt by the end of March, a record high, according to the Federal Reserve Bank of New York. Interest rates on credit cards are also at historic levels, at more than 20%.
Further, Moody’s estimates that excess savings amassed during the Covid-19 pandemic peaked in September 2021 at almost $2.5 trillion, roughly equal to 10% of U.S. economic output, Zandi said. By April, aggregate savings had fallen to $1.4 trillion, a “big drawdown,” he said.

While the contours of future inflation and wage growth are unclear, a continuation of positive real earnings and income would be good news for households and the economy, experts said.
“The key to avoiding [recession] is consumers continuing to spend at a consistent pace, and this is a reason to think that’s what we’re going to see here,” Zandi said of data on real income. “Consumers are the firewall between recession and a growing economy.
“The firewall is holding firm,” he added. More