Economic and jobs news thread

[wjfox]

[caltrek]

U.S. Employers Add 311,000 Jobs as Hiring Hot Streak Rolls On
by Kevin Lessmiller
March 10 , 2023

Introduction:

(Courthouse News) — The U.S. economy gained 311,000 jobs in February, a sign the labor market has been unfazed by the government’s attempt to slow economic growth through higher interest rates.

While the increase is a drop from the revised 504,000 jobs added in January, payroll growth is continuing to beat expectations. Economists surveyed by Dow Jones had predicted about 225,000 new jobs last month.

The unemployment rate, meanwhile, ticked up from a half-century low of 3.4% to 3.6%, according to a Labor Department report released Friday morning.

“The labor market continues to defy expectations as employers add jobs at a rapid pace and unemployment remains low,” wrote Nick Bunker, economic research director for North America at career site Indeed. “Today’s report is chock full of data showing a labor market with high levels of demand for workers and historically low levels of joblessness.”

The jobs market has remained strong over the past year despite the Federal Reserve raising its benchmark interest rate eight times in a desperate bid to cool down the economy in the face of high inflation. The central bank is expected to hike rates again when it meets at the end of the month.

Read more here: https://www.courthousenews.com/us-empl ... rolls-on/

caltrek’s comment: If technologically created unemployment is a real problem, it sure seems to be taking a long ting to actually manifest itself. Perhaps it is more an issue of individual jobs being replaced by robots and automation and not so much a problem that affects global numbers, at least not yet. Perhaps offsets are more than compensating. Examples include efforts to bring jobs back home to lessen dependency on foreign countries, not to mention to help in creating domestic jobs. Also, government stimulus programs, especially under a Democratic administration. Unfortunately, this also includes military spending in response to the attempted invasion of the Ukraine and to the ongoing conflict there.

[caltrek]

California Starts Year with Nearly 97,000 Jobs Added
by Natalie Hanson
March 10, 2023

Introduction:

SACRAMENTO, Calif. (Courthouse News) — California Governor Gavin Newsom revealed a powerful picture of the job market in January — California led the nation in new jobs created.

The Golden State added 96,700 new jobs in January, a gain that accounted for nearly 19% of the nation's 517,000 new jobs added.

Eight of California’s major industry sectors saw hiring gains in January. The state also outpaced the nation in year-over-year job growth, adding 559,500 jobs. That’s an increase by 3.5%, outpacing the nation’s year-over-year growth rate of 3.3%.

The governor also reported the state’s unemployment rate rose by 0.1% to 4.2%, slightly higher than the nationwide unemployment rate of 3.4%.

Read more here: https://www.courthousenews.com/califor ... bs-added/

caltrek’s comment: But hey, everybody knows that left coast liberals don’t know anything about running an economy with their excess in taxes and regulations and all. Right.

[caltrek]

More on that:

March 10, 2023

Introduction:

(Jake Johnson) Santa Clara-based Silicon Valley Bank, a major lender to technology startups, collapsed on Friday after its emergency attempts to raise money and find a potential buyer failed, forcing regulators to step in and take over the institution.

The speed of SVB's collapse, the largest since the fall of Washington Mutual in 2008, stunned observers and rattled Wall Street, with bank stocks selling off heavily since news broke Wednesday that the California bank was in serious financial trouble.

Earlier this week, the SVB announced that it sold $21 billion worth of investments and moved to sell its stock in a last-ditch effort to raise funds. Those financial maneuvers sparked a bank run as panicked depositors rushed to pull their money, compounding the firm's crisis.

As late as Thursday afternoon, SVB Financial Group CEO Greg Becker was telling clients to "stay calm" and continue to support the bank, which was the 16th largest in the U.S. at the end of last year and had branches in California and Massachusetts.

The Financial Times reported Friday that SVB's failure stemmed from "a decision made at the peak of the tech boom to park $91 billion of its deposits in long-dated securities such as mortgage bonds and U.S. Treasuries, which were deemed safe but are now worth $15 billion less than when SVB purchased them after the Federal Reserve aggressively raised interest rates."

Read more here: https://www.commondreams.org/news/sili ... collapses

[Yuli Ban]

[caltrek]

The Federal Deposit Insurance Corp. and the Federal Reserve Considering Creation of a Fund to Backstop Deposits If More Banks Fail
March 11, 2023

Introduction:

(Bloomberg) The Federal Deposit Insurance Corp. and the Federal Reserve are weighing creating a fund that would allow the regulators to backstop more deposits at banks that run into trouble following Silicon Valley Bank’s collapse.

Regulators discussed the new special vehicle in conversations with banking executives, according to people familiar with the matter. The hope is that setting up such a vehicle would reassure depositors and help contain any panic, said the people. They asked not to be identified because the talks weren’t public.

A representative for the Federal Reserve declined to comment. Representatives at the FDIC didn’t immediately respond to a request for comment.
The vehicle is part of the agency’s contingency planning as panic spreads about the health of banks focused on the venture capital and startup communities.

Read more here: https://www.bloomberg.com/news/article ... fy%20wall

[caltrek]

SVB’s Debacle Is Causing Panic In China’s Startup Industry
by Rita Liao
March 10, 2023

Introduction:

(TechCrunch) The panic sparked by the collapse of Silicon Valley Bank is spreading to China, the world’s second-largest venture capital market. Across social media platforms, investors and startups are rushing to share news articles on the fiasco and thoughts on how to prevent such a catastrophic moment. For some companies, however, the impact is tangible.

When China was still new to venture capital in the late 1990s, SVB was among the first financial institutions to start serving the country’s startups, while traditional, risk-averse banks avoided them. Over time, the bank has become a popular option for China-based startups fundraising in USD as well as some China-focused USD venture capital firms.

In the U.S., VCs have been urging their portfolio companies to withdraw money from SVB as soon as the bank announced that it intended to sell shares in pursuit of more capital. Investors are advising the same to Chinese startups exposed to the bank, according to three founders and two investors TechCrunch talked to.

“People realized that things weren’t right after seeing SVB’s shares were down 30% in premarket trading,” said one of the Chinese founders, whose app targets North American users. “I immediately told other Chinese peers after my American investors told me [to withdraw money from SVB].”

SVB’s localized effort in China appears unaffected, for now. According to its website, SVB first began operating in China in 1999. In 2012, it formed a joint venture with Shanghai Pudong Development Bank, the first Sino-U.S. joint venture bank to obtain a license since 1997.

Read more here: https://techcrunch.com/2023/03/10/sili ... industry/

[wjfox]

Billionaire investor Bill Ackman says feds 'screwed up' handling of Silicon Valley Bank collapse, warns they have '48 hours to fix a soon-to-be-irreversible mistake'

Aaron McDade
Mar 11, 2023, 8:28 PM

Billionaire investor Bill Ackman is calling on the federal government to intervene in the collapse of Silicon Valley Bank after the once-trusted bank of tech and startup founders was shutdown by regulators on Friday.

"The gov't has about 48 hours to fix a-soon-to-be-irreversible mistake," Ackman tweeted in a lengthy post Saturday morning.

SVB became the second-largest bank failure in the US, after its stock price cratered by about 86% this week, prompting the Federal Deposit Insurance Corporation to take over. Ackman warned that if the government or another large bank like J.P. Morgan or Bank of America fails to take over SVB, it may lead to similar bank runs at other small financial institutions, as anxious clients move to pull uninsured deposits.

In Ackman's view, this could lead to the collapse of several other smaller banks around the country.

The billionaire founder and CEO of hedge fund Pershing Square Capital Management argued that a lack of more immediate federal intervention earlier in SVB's collapse could have larger, disastrous effects for the banking industry and the economy at large.

https://www.businessinsider.com/billion ... pse-2023-3

[wjfox]

Oh look. How about we "roll back those burdensome regulations" (which are clearly socialist and unamerican).

https://www.theguardian.com/business/20 ... ations-svb

[wjfox]

Contagion.

-----

‘We can’t make payroll’: scores of London tech firms in cash crisis amid Silicon Valley Bank collapse

14 hours ago

The UK startup ecosystem is under immense strain today after the collapse of Silicon Valley Bank has prevented scores of startups from accessing the cash to pay staff.

The Bank of England today announced the UK arm of Silicon Valley Bank was set to enter insolvency after the demise of its US parent yesterday afternoon.

The Bank said eligible depositors would only be paid out up to the protected limit of £85,000 or up to £170,000 for joint accounts, under the Financial Services Compensation Scheme, with the rest of the assets owned by SVB to be distributed by liquidators in due course. The move means many tech firms with large deposits with SVB may be frozen out of their accounts, leaving them without access to the cash needed to fund employee payrolls.

Matt Clifford, co-founder of venture capital business Entrepreneur First, said: “[The] most common phrase in my inbox right now is ‘we can’t make payroll with the insured amount’.”

He told the Standard: ”The core question is just what happens to those who cant’t access to money they need. A bunch of them will not make payroll and a bunch of them will go under.”

https://www.standard.co.uk/business/we- ... 66554.html

[Time_Traveller]

Elon Musk says he is ‘open to the idea’ of Twitter buying SVB to become a digital bank

Mar. 12, 2023 at 2:12 pm UTC

On Friday, March 10, Elon Musk expressed his openness to buying Silicon Valley Bank following its collapse. Min-Liang Tan, CEO of Razer, suggested on Twitter that Twitter should purchase SVB and transform it into a digital bank. Musk responded briefly, stating, “I’m open to the idea,” without providing additional information.

On March 11, SVB Financial Group, a lender that catered to startups, suffered a sudden collapse, causing turmoil in global markets and leaving potentially billions of dollars worth of capital owned by companies and investors trapped.

Just before the weekend, California banking regulators shut down the bank by assigning it to a receivership under the Federal Deposit Insurance Corporation (FDIC).

In a video message to employees, SVB’s chief Greg Becker stated that he is collaborating with banking regulators to search for a partner for the bank. However, he emphasized that there is no assurance that a deal will be finalized. Currently, the lender is under the control of the Federal Deposit Insurance Corporation (FDIC).

https://cryptoslate.com/elon-musk-says- ... ital-bank/

[caltrek]

Nine Questions About Silicon Valley Bank’s Collapse Answered
by Emily Stewart
March 10 , 2023

Introduction:

(Vox) If you work in tech, you had probably heard of Silicon Valley Bank before now. If you’re not familiar with this seemingly regional bank, nobody’s blaming you. It had billions of dollars in deposits, but fewer than two dozen branches, and generally catered to a very specific crowd of startups, venture capitalists, and tech firms. Anyway, you’re here now — Silicon Valley Bank isn’t.

Further Extract:

Beyond tech, this has caused some shakiness across the banking industry amid concerns that other banks could be in trouble or that contagion could set in. (It’s important to note for consumers here that, really, the money you have in the bank right now is almost definitely fine.) SVB’s blowup is a big deal and a symptom of bigger forces in motion in tech, finance, and the economy.

Still confused about what’s going on? Here are the answers to nine questions you might just have.

1) What is SVB, and how big is it?

Silicon Valley Bank was founded in 1983 in Santa Clara, California, and quickly became the bank for the burgeoning tech sector there and the people who financed it (as was its intention). The bank itself claimed to bank for nearly half of all US venture-backed startups as of 2021. It’s also a banking partner for a lot of the venture capital firms that fund those startups. SVB calls itself the “financial partner of the innovation economy.” All that basically means it’s tightly woven into the financial infrastructure of the tech industry, especially startups.

Read more here: https://www.vox.com/technology/2363443 ... blic-fdic

caltrek’s comment: The article also strikes an optimistic note about the damage being confined to the “tech industry.” We will see.

[caltrek]

What to Know About Silicon Valley Bank and Bank Runs
by Bryan McBournie
March 10, 2023

Introduction:

(Axios) President Biden is in danger of a catastrophic banking crisis, unless the U.S. government can orchestrate a deal to rescue Silicon Valley Bank depositors before branches open tomorrow.

Why it matters: Bank runs (see also hyperlink provided in article) kill banks, no matter how good or bad their risk management. (For a quick primer, see the famous financial-crisis documentary Mary Poppins [see post below].)

How it works: Banks don't keep deposits in a vault — they lend them out to businesses and individuals. So if depositors ask for all their money back at once, as they did at SVB, the bank is likely to fail.

• Corporate America just got a stark reminder that none of their deposits are insured above $250,000 by the Federal Deposit Insurance Corporation (FDIC).

• If SVB's depositors aren't made whole by Monday morning, hundreds of billions of dollars of corporate deposits are likely to flow out of regional banks. Most would flow into a handful of so-called systemically important banks — if they're too big to fail, they won't fail. Some might go into other ultra-safe havens like Treasury bills.

Read more here: https://www.axios.com/2023/03/12/silic ... g-crisis

[caltrek]

[caltrek]

Why Did Silicon Valley Bank Collapse So Suddenly?
by William Chittenden
March 10, 2023

Introduction:

(The Conversation) The short answer is that SVB did not have enough cash to pay depositors so the regulators closed the bank.
The longer answer begins during in the pandemic, when SVB and many other banks were raking in more deposits than they could lend out to borrowers. In 2021, deposits at SVB doubled.

But they had to do something with all that money. So, what they could not lend out, they invested in ultra-safe U.S. Treasury securities. The problem is the rapid increase in interest rates in 2022 and 2023 caused the value of these securities to plunge. A characteristic of bonds and similar securities is that when yields or interest rates go up, prices go down, and vice versa.

The bank recently said it took a US$1.8 billion hit on the sale of some of those securities and they were unable to raise capital to offset the loss as their stock began dropping. That prompted prominent venture capital firms to advise the companies they invest in to pull their business from Silicon Valley Bank. This had a snowball effect that led a growing number of SVB depositors to withdraw their money too.

The investment losses, coupled with the withdrawals, were so large that regulators had no choice but to step in to shut the bank down to protect depositors.

Read more here: https://theconversation.com/silicon-va ... t-201626

[caltrek]

FDIC Creates a Deposit Insurance National Bank of Santa Clara to Protect Insured Depositors of Silicon Valley Bank, Santa Clara, California
Last Updated March 12, 2023

Entire Press Release:

(FDIC) WASHINGTON – Silicon Valley Bank, Santa Clara, California, was closed today by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect insured depositors, the FDIC created the Deposit Insurance National Bank of Santa Clara (DINB). At the time of closing, the FDIC as receiver immediately transferred to the DINB all insured deposits of Silicon Valley Bank.

All insured depositors will have full access to their insured deposits no later than Monday morning, March 13, 2023. The FDIC will pay uninsured depositors an advance dividend within the next week. Uninsured depositors will receive a receivership certificate for the remaining amount of their uninsured funds. As the FDIC sells the assets of Silicon Valley Bank, future dividend payments may be made to uninsured depositors.

Silicon Valley Bank had 17 branches in California and Massachusetts. The main office and all branches of Silicon Valley Bank will reopen on Monday, March 13, 2023. The DINB will maintain Silicon Valley Bank’s normal business hours. Banking activities will resume no later than Monday, March 13, including on-line banking and other services. Silicon Valley Bank’s official checks will continue to clear. Under the Federal Deposit Insurance Act, the FDIC may create a DINB to ensure that customers have continued access to their insured funds.

As of December 31, 2022, Silicon Valley Bank had approximately $209.0 billion in total assets and about $175.4 billion in total deposits. At the time of closing, the amount of deposits in excess of the insurance limits was undetermined. The amount of uninsured deposits will be determined once the FDIC obtains additional information from the bank and customers.

Customers with accounts in excess of $250,000 should contact the FDIC toll–free at 1-866-799-0959.

The FDIC as receiver will retain all the assets from Silicon Valley Bank for later disposition. Loan customers should continue to make their payments as usual.

Silicon Valley Bank is the first FDIC–insured institution to fail this year. The last FDIC–insured institution to close was Almena State Bank, Almena, Kansas, on October 23, 2020.

Source: https://www.fdic.gov/news/press-releas ... 016.html

[caltrek]

One Percent Move Report for March 10, 2023

Extract:

(Morgan Stanley)

• The S&P 500 Index decreased 1.4% Friday to 3,861.73, continuing the descent below its 200-day moving average.

• All 11 S&P 500 sectors declined as Consumer Staples (-0.5%) and Health Care (-0.7%) outperformed while Materials (-2.1%) and Real Estate (-3.3%) lagged the index.

...

• US equities and US Treasury yields fell today following the Federal Deposit Insurance Corp.'s possession of a US regional bank in order to protect insured depositors. As a result, futures markets anticipated tightening financial conditions and considered a 25bp rate hike as more likely than a 50bp hike following the Federal Open Market Committee (FOMC) March 21-22 meeting.

Read more here: https://www.morganstanley.com/content/ ... -20230310

caltrek’s comment: While treating the SVB collapse as bad news, it does not look like the markets are getting dramatically upset about the situation. Will, see if that holds up this coming week.

[weatheriscool]

Regulators close New York's Signature Bank, citing systemic risk

Source: CNBC

U.S. regulators said Sunday it shut down New York-based Signature Bank, a second financial institution they shuttered after Silicon Valley Bank’s collapse.

“We are also announcing a similar systemic risk exception for Signature Bank, New York, New York, which was closed today by its state chartering authority,” Treasury, Federal Reserve, and FDIC said in a joined statement Sunday evening. The banking regulators said depositors at Signature Bank will have full access to their deposits.

“All depositors of this institution will be made whole. As with the resolution of Silicon Valley Bank, no losses will be borne by the taxpayer,” the regulators said.

Signature is one of the main banks to the cryptocurrency industry. As of Dec. 31, Signature had $110.4 billion in total assets and $88.6 billion in total deposits, according to a securities filing.


This is breaking news. Please check back for updates.

Read more: https://www.cnbc.com/2023/03/12/regulat ... -risk.html

[caltrek]

Long Before Silicon Valley Bank’s Collapse, Its CEO Helped Kill Tougher Oversight of Banks Like His
by Hannah Levintova
March 11, 2023

Conclusion:

(Mother Jones) At the 2015 Senate hearing, Becker had his sights set on chipping away at a portion of the Dodd-Frank Act, the sweeping Wall Street reform bill passed in the wake of the 2008 financial crisis. A key rule in the law required that “Too Big To Fail” banks—which Dodd-Frank defined as those with more than $50 billion in assets—undergo stricter oversight, including higher capital ratio requirements designed to shore up the big banks’ ability to withstand financial shocks.

Becker, along with several other banking executives, asked senators to raise the threshold for banks that should be subject to this expanded level of supervision from $50 billion in assets—a milestone his bank was quickly approaching—to $250 billion. His testimony explained that the stricter risk checks would needlessly cost his banks millions, diverting resources from their ability to lend to “small and growing businesses” that are “job creation engines.”

He argued that there was no need for these expensive, federal-government-mandated checks because SVB’s activities had a “low risk profile”—and because the bank was perfectly capable of keeping itself in check with its “strong risk management practices.”

Following the hearing and three years of SVB lobbying lawmakers, Becker got his wish: In 2018, Trump signed a bill into law raising the threshold for stricter bank oversight to $250 billion in assets.

Fast forward to 2023. With about $209 billion in assets, SVB has continued to operate below the bar where they’d be subject to stricter risk checks. For years, they’ve invested the bulk of their clients’ deposits in hopes of earning returns. But in recent months, many of their startup clients have come to the bank to withdraw money, faced with a new landscape where taking on debt to operate their businesses is a lot more expensive, thanks to the Fed’s recent aggressive hikes in interest rates. But SVB didn’t have enough liquid cash to pay all of those requests at once. The result: major losses at the bank and, on Friday, a full-on collapse—the exact sort of bank failure that the original regulations that Becker fought against had set out to prevent.

Read more here: https://www.motherjones.com/politics/2 ... dd-frank/

[weatheriscool]

Credit Suisse Default Swaps Hit Record as SVB Failure Hits Banks

Source: Bloomberg

The cost of insuring the bonds of Credit Suisse Group AG against default climbed to the highest on record as the collapse of Silicon Valley Bank sparked concern about broader contagion in the banking industry.

Five-year credit default swaps for the Zurich-based lender jumped as much as 36 basis points on Monday to 453 basis points, according to pricing source CMAQ. They widened the most in a Bloomberg index that tracks the CDS of 125 European high-grade companies.



Shares of European banks and insurers slumped on Monday and Credit Suisse’s stock tumbled as much as 15% to a fresh record low. Even before the turbulence caused by SVB’s demise, investors were worried about Credit Suisse’s ability to put in a place a restructuring plan that will pivot it further to private lending, hive off large parts of the investment banking business, and reduce costs by cutting 9,000 jobs.

Earlier this month, Credit Suisse said it was delaying publication of its annual report following a last-minute query by US regulators over previous financial statements.

Read more: https://www.bloomberg.com/news/articles ... hits-banks