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2023: First Republic Bank Seized, Sold In Fire Sale To JPMorgan

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NEW YORK (Reuters) – Regulators seized insolvent First Republic Bank early Monday, making it the second-largest bank failure in US history, and immediately sold all of its deposits and most of its assets to JPMorgan Chase to resolve the upheaval that has raised concerns about the soundness of the US banking system.

It is the third midsize bank to go under in less than two months. The only larger bank failure in US history was Washington Mutual, which went bankrupt at the height of the 2008 financial crisis and was taken over by JPMorgan in a similar government-managed deal.

“Our government invited us and others to step up, and we did,” JPMorgan Chase Chairman and CEO Jamie Dimon said.

JPMorgan Chase took over First Republic’s 84 locations on Monday, acquiring the bank’s $92 billion in deposits and $203 billion in loans and other instruments. The bank’s stockholders are expected to be wiped out as part of the sale.

In a conference call with reporters and investors, Dimon stated that “this part of this (banking) crisis is over.” Other midsize banks reported their results last week, and the vast majority of them showed that deposits had stabilized and profits remained healthy. The First Republic was an outlier.

Before this year, First Republic was the banking industry’s envy. Its opulent branches provided warm cookies to its clients, who were nearly entirely wealthy and powerful. Its bankers enticed wealthy clients with low-cost mortgages and appealing savings rates to sell them on higher-profit ventures such as wealth management and brokerage accounts. In exchange, the wealthy rarely defaulted on their loans and deposited large sums of money in banks that could be borrowed elsewhere.

However, with Silicon Valley Bank’s and Signature Bank’s failures, that business model of catering to the wealthy became a liability. These banks had many uninsured deposits or deposits that exceeded the FDIC’s $250,000 limit. Clients with big accounts at First Republic, like those at Silicon Valley Bank and Signature Bank, quickly withdrew their funds at the first sign of problems.

first republic

In a note to investors, Timothy Coffey, an analyst with Janney Montgomery Scott, stated, “Too many (First Republic) customers demonstrated their true loyalties were to their fears.”

Last month, a group of a dozen banks put together a $30 billion funding package for the First Republic, which appeared to stop the bleeding of deposits for a time. However, it became clear that the First Republic needed more time: it needed to find a buyer or find new sources of funding to replace the deposits that had left the bank.

The First Republic intended to liquidate underperforming assets, such as low-interest mortgages supplied to rich clients. It also disclosed plans to lay off up to a quarter of its workers, estimated to be over 7,200 in late 2022. Analysts, though, saw it as too little, too late. For weeks, the bank appeared to be on the verge of failing.

According to Jeremy Barnum, JPMorgan’s chief financial officer, the $30 billion deal “bought time when time was needed” for the First Republic.

Last Monday, First Republic reported its first-quarter results, shocking analysts and investors by revealing that $100 billion in deposits had flowed out of the bank, most of which occurred in mid-March, immediately following the failures of Silicon Valley Bank and Signature Bank. During an earnings conference call, its executives took no questions from analysts. The stock of First Republic dropped by more than 50% the next day.

By the middle of last week, it was evident that the government needed to intervene in the First Republic. Treasury officials requested that banks submit bids for the First Republic, and bankers and regulators worked all weekend to find a solution.

first republic

JPMorgan is so large that it would be illegal to buy the First Republic.

JPMorgan Chase, the nation’s largest bank and a dealmaker in times of crisis, was once again the government’s go-to bank. Last month, Treasury officials appointed JPMorgan to head the $30 billion rescue package. Dimon was Washington’s go-to banker 2008 to find private solutions to the banking crisis, and JPMorgan acquired both Bear Stearns and Washington Mutual.

The Federal Reserve and FDIC, which, together with the Office of the Comptroller of the Currency, govern the banking industry, may face greater scrutiny for their management of First Republic. Both admitted in separate studies on Friday that inadequate supervision contributed to Silicon Valley Bank’s and Signature Bank’s failures.

“When interest rates were low, these banks were allowed to grow too big too fast,” Coffey explained in an interview.

There may now be concerns about JPMorgan Chase’s size, which has more than $3 trillion in assets and is by far the largest of the “too big to fail” firms worldwide.

Regulators “allowed the country’s largest bank to grow even larger.” “We expect this to be a Democratic focus for months,” said TD Cowen banking analyst Jaret Seiberg.

JPMorgan is so large that it would be illegal to buy the First Republic since no bank in the United States can have more than a 10% market share of deposits. JPMorgan was only able to step in because the First Republic failed.

JPMorgan described the First Republic transaction as favorable to the financial system and the company statement. As part of the arrangement, the FDIC will share losses on First Republic’s loans with JPMorgan. The FDIC estimates that First Republic’s failure will cost the insurance fund approximately $13 billion, which bank assessments rather than taxpayers pay.

JPMorgan anticipates First Republic to increase its net income by $500 million yearly, but it expects to incur $2 billion in costs integrating First Republic into its operations over the next 18 months.

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SOURCE – (AP)

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Bitcoin Has Surpassed $41,000 For The First Time Since April 2022. What’s Behind The Price Surge?

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NEW YORK – Bitcoin is experiencing a renaissance. On Monday, the world’s largest cryptocurrency surpassed $41,000 for the first time in over a year and a half, marking a 150% increase this year.

According to FactSet, volatile bitcoin soared from just over $5,000 at the start of the epidemic to roughly $68,000 in November 2021, a period highlighted by a rise in demand for technology products. Prices dropped back to earth after an aggressive sequence of Federal Reserve rate hikes aimed at curbing inflation, followed by the collapse of FTX, one of the largest crypto businesses.

When 2023 began, a single bitcoin was worth less than $17,000, losing more than 75% of its value. However, once inflation began to fall, investors returned in huge numbers. Furthermore, the failure of large tech-focused banks prompted additional investors to resort to cryptocurrency as they exited holdings in Silicon Valley start-ups and other hazardous bets.

However, anticipation for the legalization of spot bitcoin exchange-traded funds – a pooled investment product that can be bought and sold like stocks — is propelling this recent rally.

bitcoin

Bitcoin Has Surpassed $41,000 For The First Time Since April 2022. What’s Behind The Price Surge?

According to industry supporters, this new manner of investing in bitcoin at spot prices rather than futures pricing could make it easy for anyone to enter the crypto verse while minimizing some of the well-documented hazards of cryptocurrency investing. Previously, regulators rejected bitcoin spot ETF applications, but recent victories for some crypto fund managers have increased the likelihood of a first approval as soon as next month.

“The longer-term catalyst (for bitcoin) is a lot of optimism related to the potential approval of a spot ETF,” said Riyad Carey, a Kaiko research analyst, on Monday. However, he pointed out that a regulatory green light does not guarantee sustained gains.

bitcoin

Bitcoin Has Surpassed $41,000 For The First Time Since April 2022. What’s Behind The Price Surge?

While analysts anticipate that the probable introduction of spot bitcoin ETFs will generate a much wider pool of crypto investors, Carey added that future volumes might go either way. This might either increase or decrease the value of Bitcoin.

Bitcoin’s recent rise comes at an extremely disruptive time for cryptocurrencies. Last month, the United States authorities fined Binance, the world’s largest crypto exchange, $4 billion after its founder, Changpeng Zhao, pleaded guilty to a felony charge.

However, according to Carey, Binance continues to operate and maintain its market share. In some respects, the company’s settlement “propelled the market forward more by removing one of the… more ominous overhangs that was a sort of big question mark,” he added, pointing to bitcoin’s advances two weeks after the announcement.

Despite Bitcoin’s recent euphoria, experts warn that it is a dangerous trade with highly unpredictable price movements. Investors might lose money as fast as they make it.

The bankruptcy of crypto exchange behemoth FTX last year also “left a big scar” on the public’s confidence in the crypto business and crushed ordinary investors, according to the report. According to Edward Moya, a former senior market analyst at Oanda, institutional money, such as hedge funds, drives most of the current crypto investment.

bitcoin

Bitcoin Has Surpassed $41,000 For The First Time Since April 2022. What’s Behind The Price Surge?

Carey also stated that liquidity in cryptocurrency markets has yet to restore to pre-FTX levels, and that lesser liquidity can exacerbate price volatility.

“In the past few months, that has normally been the price moving up — but people should always be aware it can go in the reverse and quickly,” he said.

The price was $41,709 as of 1:30 p.m. Eastern time Monday.

Other crypto players’ equities have risen in recent months at different rates or to the same heights as Bitcoin. For example, Ethereum was trading at $2,223 on Monday afternoon, up 85% from the beginning of 2023. Meanwhile, Binance Coin and Dash are down about 5.25% and 24.37% for the year, with Monday afternoon values of around $231 and $32, respectively.

SOURCE – (AP)

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Tesla’s Cybertruck Hits The Market With A Higher Price Tag And Plenty Of Challenges

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Tesla CEO Elon Musk presided over the company’s long-awaited Cybertruck delivery, which was first shown four years ago. While there was little new information since the original presentation, Tesla’s website was updated with a new price.

The event had the typical Musk flash, with lofty predictions about “the future” and visuals of Cybertrucks traveling across the ice, but it offered very little new information. Even the price on Tesla’s website, which required a $250 deposit to place an order, did not contain standard car-buying experiences, such as selecting options. There was no mention of practicalities like front trunk capacity or anything beyond the company’s current estimate of a 250-mile range.

However, the website did mention that the top-of-the-line model would be known as the “Cyberbeast.”

The Tesla Cybertruck starts at $60,990 before federal tax credits, over $20,000 more than the base model initially proposed at the vehicle’s introduction in 2019. The business originally stated that the Cybertruck would cost less than $40,000, but a pandemic and subsequent severe inflation prompted the corporation to change its mind.

Even then, it would only be “available in 2025,” according to the Tesla website.

If you want one in 2024, expect to pay about $80,000.

By itself, the Cybertruck enters an electric vehicle market packed with vehicles in the same price range. It’s not only pickups but also SUVs. It’s an issue that’s already dampening sales of some electric vehicles, particularly in the luxury market, as automakers struggle to establish their electric production processes.

He also bragged about the Cybertruck’s “sports-car-like” capability, showing a video of it hauling a Porsche 911 on a trailer while racing a Porsche 911 down a drag strip. Honestly, Porsche 911 sports cars aren’t sold on raw acceleration. Of course, neither is a pickup truck, so it’s unclear how big of a selling point that will be.

cybertruck

Tesla’s Cybertruck Hits The Market With A Higher Price Tag And Plenty Of Challenges

However, Tesla’s website only shows that acceleration figure for the Cyberbeast version of the truck, which costs over $100,000. The truck’s 11,000-pound towing capacity also noted in the presentation, is shown exclusively in the $80,000 or $100,000 all-wheel-drive variants.

According to Brian Moody, executive editor of Kelley Blue Book, the truck’s price range may be fine compared to other high-end trucks on the market. The pricing range that Tesla can provide is limited.

“Because Tesla has basically one version of the truck with some minor modifications, they don’t have the advantage of having a very low-price truck as well as a very high and heavy-duty, super-capable truck,” Moody wrote in an e-mail.

According to Wedbush Securities analyst Dan Ives, who is bullish on Tesla, the business has around 2 million bookings for the Cybertruck. He predicted that just 30% to 40% of those reservations would be turned into sales. The larger issue may be the production issues that Musk says the firm is experiencing as it attempts to ramp up vehicle manufacturing, especially with competition from electric pickups from Ford, GM, and Rivian.

“It’s a Herculean task to ramp production, but Tesla has been here before,” he said, referring to prior product launches such as the Model 3 sedan. However, he warned that “it’s a much more complex market for them to navigate.”

The Cybertruck, which resembled a high-end kitchen appliance when it was initially shown in 2019, looked like nothing else on the road, and it still does. The purpose of its strange, angular all-metal appearance was to stand out: Musk sought to make a statement with something that wasn’t just another large truck.

However, the Cybertruck’s qualities, such as power and range, do not stand out. The market has transformed during Tesla’s development and delays over the last four years. Even before the first one rolls into a customer’s driveway, Tesla’s flashy new pickup is significantly more ordinary beneath its gleaming veneer.

Electric motors can give a lot of towing and hauling power, and the truck’s basic size allows for many batteries and a long range. Tesla is one of many automakers to recognize this opportunity.

cybertruck

Even then, it would only be “available in 2025,” according to the Tesla website.

Ford began selling the F-150 Lightning electric pickup truck four years ago, and Rivian R1T pickups have become familiar sights on American roadways. General Motors just began manufacture of the Chevrolet Silverado EV electric truck. Stellantis’ Ram 1500 Rev electric vehicle will also be available in late 2024.

This isn’t the same setting as it was four years ago, and the Cybertruck’s capabilities don’t look as impressive as they did. Many of these other trucks have capabilities that rival, and in some cases even outperform, Tesla’s.

Musk has also frequently stated how tough it is to construct the Cybertruck due to its unconventional design.

The truck is built of unpainted stainless steel, a material not commonly utilized for cars since the durability of the material that Musk has touted makes it difficult to build with and fix. The massive stamping machines commonly employed in auto manufacturing to quickly bend metal into shape struggle with stainless steel.

It also features a unibody construction rather than a separate body and chassis like most large pickups. Unibody structure is common in crossover SUVs and compact, light pickups such as the Ford Maverick. Body-on-frame designs are commonly used for heavy-duty vehicles due to their strength and flexibility for towing huge loads.

“There will be enormous challenges in reaching volume production with the Cybertuck and making the Cybertruck cash flow positive,” Musk remarked recently during an investor call.

cybertruck

Musk has also frequently stated how tough it is to construct the Cybertruck due to its unconventional design.

The Cybertruck’s total size could be an advantage. According to Tesla, the Cybertruck is less than 19 feet long, slightly shorter than conventional full-size trucks. However, Tesla boasts that its cargo bed, at over six feet long, is slightly longer than typical.

However, the Cybertruck may forego front storage in exchange for its small body length. It lacks the extended hood of other pickups, notably electric pickups from Ford and GM. This could imply that the Tesla has less “frunk” – or front trunk – space. Ample functional front room, in particular, has been a major selling factor for the Ford truck.

The wedge shape of the vehicle, where the sides of the cargo bed meet the roof, may also make access to the bed from the sides difficult. Pickup drivers frequently reach over the sides to load and unload objects close to the cab.

The payload capacity of the Cybertruck, or the amount of weight it can carry in its cargo bed, is also slightly higher than competitors currently in production. The Ford F-150 Lightning can tow up to 2,200 pounds. However, the Ram 1500 Rev will be able to haul up to 2,700 pounds, which is more than the Cybertruck.

SOURCE – (BBC)

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Celebrity

Sam Altman: Ousted OpenAI Boss To Return Days After Being Sacked

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VOR News

The corporation has announced that OpenAI co-founder Sam Altman will return as CEO just days after being sacked by the board.

According to the IT company, the agreement “in principle” includes appointing new board members.

Mr Altman’s dismissal on Friday stunned industry observers, prompting colleagues to threaten mass resignations unless he was reinstated.

“I am looking forward to returning to OpenAI,” Mr Altman wrote in a post on X, formerly Twitter.

“I love OpenAI, and everything I’ve done in the last few days has been in service of keeping this team and its mission together,” he continued.

Last Monday, the board fired Mr. Altman, prompting co-founder Greg Brockman to leave and throwing the star artificial intelligence (AI) startup into disarray.

The three non-employee board members, Adam D’Angelo, Tasha McCauley, and Helen Toner, and a third co-founder and the firm’s head scientist, Ilya Sutskever, made the choice.

openai

The corporation has announced that OpenAI co-founder Sam Altman will return as CEO just days after being sacked by the board.

On Monday, however, Mr Sutskever apologized for X and signed the staff letter urging the board to reverse course.

Microsoft, which utilizes OpenAI technology in many of its products and is the company’s largest investor, subsequently offered Mr Altman a position managing “a new advanced AI research team” at the tech behemoth.

Then, on Wednesday, OpenAI announced that it had agreed in principle to Mr Altman’s return to the tech business and would partially reassemble the board of directors that had sacked him.

According to OpenAI, former Salesforce co-CEO Bret Taylor and former US Treasury Secretary Larry Summers will join current director Adam D’Angelo.

Mr Brockman also stated in a post on X that he would return to the firm.

Emmett Shear, named interim CEO of OpenAI, said he was “deeply pleased” by Mr Altman’s return after “72 very intense hours of work.”

openai

Microsoft CEO Satya Nadella stated that the company is “encouraged by the changes to the OpenAI board.”

“We believe this is a first essential step on a path to more stable, well-informed, and effective governance.”

Many employees have expressed excitement about the news, writing on social media: “We’re back – and we’ll be better than ever,” commented Cory Decareaux on Linkedin.

“These last few days have been the wildest I could have imagined. This is an example of a cohesive corporate culture.”

Others, however, believe the incident has harmed OpenAI, which became perhaps the most prominent AI startup in the world after developing the chatbot ChatGPT.

“OpenAI cannot be the same company that existed until Friday night.” “This has implications not only for potential investors but also for recruitment,” S&P Global Market Intelligence’s Nick Patience told the BBC.

openai

Many enterprises and projects now use OpenAI’s technology.

One project, Be My Eyes, collaborated with the firm to create an AI-powered assistant for the blind and partially sighted.

Its CEO, Michael Buckley, stated on LinkedIn that he had been “bombarded by sales calls from rival [AI] companies seeking some opportunistic business wins,” but that they would stick with OpenAI because “they prioritized accessibility,” even though it was “close to meaningless for them from a revenue perspective.”

Questions remain unanswered
The dispute at the top of OpenAI began when the then-board declared it was ousting Mr Altman, citing “lost confidence” in his leadership.

It accused him of not being “consistently candid in his communications” – and, following all the twists and turns since Friday, it’s still unclear what they thought he wasn’t candid about.

Whatever the reason, it was evident that OpenAI employees were dissatisfied; over 700 signed an open letter threatening to leave unless the board resigned.

According to the letter, Microsoft told them there was employment for all OpenAI employees if they chose to join the company. Microsoft later stated that it would match their current compensation.

Mr Altman’s stunning return has neutralized that threat.

However, the recent upheaval has sparked concerns about how only four individuals could make decisions that have rocked a multibillion-dollar technological company.

This is due in part to OpenAI’s unconventional structure and aim.

It launched in 2015 as a non-profit – many charities do – to develop “safe artificial general intelligence that benefits all of humanity.” Its goals did not include protecting shareholders’ interests or increasing income.

In 2019, it established a for-profit subsidiary, but its mission remained unaltered, and the non-profit’s board of directors retained control.

It needs to be clarified whether disagreements about OpenAI’s future path led to the crisis or what guarantees, if any, Mr Altman made to ensure his return.

Many observers, however, have asked for further transparency, with Tesla CEO Elon Musk among those urging the board members to “say something.”

However, this has yet to occur. Ms Toner said nothing more than “and now, we all get some sleep” on X in response to the news of her reinstatement and new board.

SOURCE – (BBC)

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