Business Highlights: Bank Bailout, TikTok Concerns
Big banks create $30 billion rescue package for First Republic
NEW YORK (AP) — Eleven of the nation’s largest banks on Thursday announced a $30 billion bailout for First Republic Bank to prevent the California-based bank from becoming the third bank to do so in less goes broke in a week. First Republic stock had fallen sharply this week, losing 60% on Monday alone. For the package, JPMorgan Chase, Bank of America, Citigroup and Wells Fargo would each invest $5 billion in uninsured deposits in First Republic. Meanwhile, Morgan Stanley and Goldman Sachs would each pledge $2.5 billion. The remaining $5 billion would come from five other banks.
Experts, banks are looking for ideas to stop the next bank failure
WASHINGTON (AP) – The warning signs were all there. Silicon Valley Bank expanded at breakneck speed, pursuing wildly risky investments in the bond market. The vast majority of its deposits were uninsured by the federal government, leaving its customers in crisis. None of this was a secret. But banking regulators at the Federal Reserve Bank of San Francisco and the state of California did nothing when the bank rolled over the cliff. The search for causes and culprits — and solutions — draws attention back to a 2018 federal law that reversed harsh banking regulations imposed after the 2008-2009 financial crisis and, perhaps even more so, to the ways in which how the regulators have written the relevant rules into law.
Why TikTok’s security risks keep raising fears
China has accused the US of spreading disinformation amid reports that the Biden administration is asking TikTok’s Chinese owners to sell their stakes in the company. The Chinese Foreign Ministry’s comments are another response to US efforts to limit the app’s influence. TikTok has long been criticized for sharing user data — such as browsing history, location and biometric identifiers — with the Chinese government or spreading propaganda and misinformation on its behalf. There is no evidence that TikTok shared such data, but there are many fears due to the massive amount of user data collected.
Yellen Tells Congress US Banking System ‘Stay Healthy’
WASHINGTON (AP) – Treasury Secretary Janet Yellen tells Congress and the nation that the US banking system remains sound. Yellen is the first Biden administration official to face lawmakers over what some are calling a “bank bailout” to protect uninsured funds at two failed regional banks in California and New York. Yellen testified before the Senate Treasury Committee on Thursday, a week after the second largest bank collapse in US history. Yellen said the government had taken “strong measures to boost public confidence” in the banking system. Yellen says she can assure committee members that the banking system is stable and Americans “can rest assured” that their deposits “will be there when they need them.”
Credit Suisse shares rise after central bank offers lifelines
GENEVA (AP) – Shares of Credit Suisse rose after Switzerland’s central bank agreed to lend the bank up to 50 billion francs ($54 billion) to boost confidence in the country’s second-largest lender after the collapse of two US – Strengthen banks. Credit Suisse announced the agreement ahead of the opening of the Swiss Stock Exchange, sending shares up as much as 33%. That was a massive reversal from the day before, when news that the bank’s largest shareholder would not inject any more money into Credit Suisse sent shares plummeting 30%. The slump dragged other European banks down with it, adding to concerns about the international financial system.
Europe’s central bank backs big rate hike despite bank chaos
FRANKFURT, Germany (AP) – The European Central Bank has carried out a large rate hike, brushing aside forecasts it could withdraw as the US bank collapses and problems at Credit Suisse fuel fears about the impact of higher interest rates on the global banking system. The ECB hiked interest rates by half a percentage point on Thursday, underscoring its determination to fight high inflation. In a statement, the bank described the banking sector in the 20 countries with the euro currency as “resilient”, with strong finances. It says it is “closely monitoring the current market tensions and stands ready to respond as necessary to safeguard price stability and financial stability in the euro area”.
Stocks rebound after battered First Republic gets a lifeline
NEW YORK (AP) — Shares rallied after a group of big banks offered the bank a lifeline, which investors had focused on in their hunt for the next victim in the industry’s struggles. The S&P 500 rose 1.8% on Thursday, erasing earlier losses after reports that First Republic Bank could get help or sell itself to another bank. This week has been a whirlwind market amid worries about banks weakening under the weight of the fastest rate hikes in decades. Treasury yields also rose as a sign of increased confidence in the bond market.
Microsoft is adding AI tools to Office apps like Outlook and Word
NEW YORK (AP) – Microsoft is adding artificial intelligence tools to its Office software, including Word, Excel and Outlook email. The company says the new feature, dubbed Copilot, is a processing engine that allows users to do things like summarize long emails, design stories in Word, and animate slides in PowerPoint. A chat feature called Business Chat will also be added, which will take commands from users. The announcement came two days after OpenAI launched its latest artificial intelligence model, GPT-4. OpenAI powers the generative AI technology that Microsoft relies on. Microsoft competitor Google has also integrated generative AI tools into its own workspace applications.
Average long-term US mortgage rates fall back to 6.6%
NEW YORK (AP) – The average US long-term mortgage is down this week after five straight weeks of hikes, good news for homebuyers as the all-important spring buying season in the housing market begins. Mortgage buyer Freddie Mac reported Thursday that the average 30-year benchmark rate fell to 6.60% from 6.73% last week. The average long-term interest rate hit 7.08% in the fall – a two-decade high – as the Federal Reserve continued to hike interest rates to cool the economy and quell sustained four-decade high inflation.
The S&P 500 rose 68.35 points, or 1.8%, to 3,960.28. The Dow Jones Industrial Average rose 371.98 points, or 1.2%, to 32,246.55. The Nasdaq Composite rose 283.22 points, or 2.5%, to 11,717.28. The Russell 2000 index of smaller companies rose 25.29 points, or 1.4%, to 1,771.24.