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Deposit insurance is addiction not medication
  + stars: | 2023-03-16 | by ( John Foley | ) www.reuters.com   time to read: +7 min
NEW YORK, March 16 (Reuters Breakingviews) - Deposit insurance is as American as apple pie, and twice as unhealthy. Bank deposits in the United States are guaranteed up to $250,000, and over 90% of SVB’s accounts held more than that sum. Alternatively, regulators could invite the market to provide a solution – say, with privately funded insurance for deposits over the guaranteed limit. The trouble is that deposit insurance is like Novocaine – the higher the dose, the more the patient becomes numb. For that reason the best option is probably to do nothing – or better still, lower the deposit insurance limit.
Larry Fink finds way to dodge ESG crosshairs
  + stars: | 2023-03-15 | by ( ) www.reuters.com   time to read: +2 min
LONDON, March 15 (Reuters Breakingviews) - Seismic events elsewhere are making it easier for BlackRock (BLK.N) to inch away from the environmental, social and governance crosshairs. The $8 trillion asset manager’s chair Larry Fink used his annual investor letter to theorise that inflation might stay around 4%, predict stricter bank capital requirements, and namecheck his favourite 80’s band, Talk Talk. BlackRock still backs these objectives, but Fink’s 2023 letter doesn’t even mention ESG. The good news for Fink is that U.S. banking collapses and spiralling inflation mean his detractors’ attention is, at least for now, elsewhere. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
Goldman’s new strategy gets baptism of fire
  + stars: | 2023-03-15 | by ( Jeffrey Goldfarb | ) www.reuters.com   time to read: +4 min
NEW YORK, March 15 (Reuters Breakingviews) - The collapse of Silicon Valley Bank is providing a slightly awkward showcase for Goldman Sachs’ (GS.N) manifold talents. It’s true to the new unified “One Goldman Sachs” strategy expounded by Chief Executive David Solomon, dampened by the client not living to tell the tale. The investment bank Solomon now leads scrambled throughout the financial crisis to help panicked clients shore up their finances. SVB’s financial models had to be revised on the fly and approved by its board as the situation deteriorated. There also was no soothing imprimatur from Buffett, or a rich Silicon Valley grandee such as Larry Ellison, Steve Ballmer or Larry Page.
Bank runs don’t change Fed’s focus on high prices
  + stars: | 2023-03-14 | by ( Ben Winck | ) www.reuters.com   time to read: +3 min
The federal government took emergency action to stave off other implosions, but SVB’s collapse cast a shadow over the Fed’s next rate decision. Economists at Goldman Sachs and Barclays scrapped their forecasts for a rate hike and now expect the central bank to hold rates steady when it meets on March 22. That is three times the central bank’s inflation target. Inflation remains much too hot for the Fed’s liking, and the central bank has more reason to repeat February’s 25-basis-point hike than to deviate from it. Its last policy meeting concluded with the central bank lifting the federal funds rate by 25 basis points to a range of 4.5% to 4.75%.
Gig workers still pose roadblock for Uber and Lyft
  + stars: | 2023-03-14 | by ( ) www.reuters.com   time to read: +2 min
NEW YORK, March 14 (Reuters Breakingviews) - Uber Technologies (UBER.N) and Lyft (LYFT.O) dodged a pothole, but bigger roadblocks may be on the horizon. Jefferies estimates Uber, Lyft and food delivery service DoorDash (DASH.N) will avoid a $20 million to $170 million knock on next year’s earnings thanks to the ruling. A group of Uber and Lyft drivers in New York City staged a strike in February over demands for higher wages. And with a tight job market, competition for workers from employers in other sectors – like retailers, which are hiking minimum wages – is stiff. The Biden administration could still step in, too, having proposed new guidelines for classifying independent workers as employees.
Bank-rule pendulum swings back to 'safety first'
  + stars: | 2023-03-13 | by ( John Foley | ) www.reuters.com   time to read: +5 min
NEW YORK, March 13 (Reuters Breakingviews) - The crisis that struck the U.S. banking system over the weekend had many causes. After the 2008 crisis, Congress bound up the financial system with rules to prevent bank death spirals. The major financial authorities – the Fed, the Federal Deposit Insurance Corp and the Office of the Comptroller of the Currency – applied the lighter touch. The Fed was permitted to retain tough rules for banks with assets over $100 billion, but decided not to. There are, after all, only 17 banks with assets between $100 billion and $250 billion – two fewer than last week.
Ritchie founder perfects disappointed dad routine
  + stars: | 2023-03-13 | by ( ) www.reuters.com   time to read: +2 min
The company stretching for its acquisition has done something worse: It disappointed dad. Ritchie investors are expected to approve the fiercely contested deal on Tuesday, a surprising outcome, especially to company co-founder David Ritchie. The pair didn’t speak out before because they assumed, given the weight of opposition to the deal, it was dead. If she succeeds, shareholders better hope her optimistic deal math holds up. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
Mark Zuckerberg takes on Elon Musk
  + stars: | 2023-03-13 | by ( ) www.reuters.com   time to read: +2 min
NEW YORK, March 13 (Reuters Breakingviews) - Mark Zuckerberg is eyeing Elon Musk’s turf. Meta Platforms (META.O) is exploring a stand-alone social network for sharing text updates, according to a statement from the social media network to Breakingviews on Monday. The move makes sense since Facebook and Instagram have done a better job wringing money from their users than Twitter has. Since Musk bought Twitter in October 2022, the network has been plagued by technical difficulties and fleeing advertisers. Zuckerberg has a business model that knows how to monetize users, whereas Twitter is still figuring that out.
NEW YORK, March 10 (Reuters Breakingviews) - Nearly three years with no U.S. bank failures just came to an unseemly end. The bank owned by SVB Financial (SIVB.O) relied more heavily on large, and therefore, uninsured, deposits than other banks. A buyer – say, a bank that covets SVB’s relationship with upwardly mobile entrepreneurs – might swoop in and buy the whole thing. Other depositors would receive certificates of receivership, which entitle them to dividends payable from the proceeds of selling the bank’s assets. SVB had around $165 billion in deposits as of Feb. 28, it said in a presentation on March 8.
SVB found old concentration risk
  + stars: | 2023-03-10 | by ( ) www.reuters.com   time to read: +2 min
NEW YORK, March 10 (Reuters Breakingviews) - Silicon Valley Bank’s closure on Friday by California authorities is a reminder of an old lesson: Don’t put too many eggs in one basket. The bank, owned by SVB Financial (SIVB.O), counted half of all U.S. venture capital-backed startups as clients. When tech took a disproportionate hit from the recent inflationary downturn, clients burned through savings, pulling out their deposits. SVB focused on tech, but its downfall is an old story of concentration risk. The eggs in the basket cracked, and in 1988 alone, 175 Texan banks, accounting for 25% of the state’s banking assets, failed.
In praise of American finance’s regulatory mess
  + stars: | 2023-03-09 | by ( John Foley | ) www.reuters.com   time to read: +8 min
NEW YORK, March 9 (Reuters Breakingviews) - There are many issues on which China and the United States are far apart. The People’s Republic this week proposed combining financial regulatory functions into a new super watchdog to govern its financial sector more effectively. China’s proposed new National Financial Regulatory Administration is roughly in this mold. Since 2008, officials in Beijing have criticized the United States’ financial excesses and its “warped conception” of financial discipline. The new National Financial Regulatory Administration would sit directly under the State Council, which serves as China’s cabinet.
Elizabeth Warren leads cavalry into deal battles
  + stars: | 2023-03-07 | by ( Jonathan Guilford | ) www.reuters.com   time to read: +3 min
It would be the third curious regulatory intervention in recent weeks, each encouraged by Democratic Senator Elizabeth Warren. In a September letter to Transportation Secretary Pete Buttigieg, Warren argued that the DOT should use its own tools, specifically in the Spirit situation. UnitedHealth (UNH.N) beat back a federal lawsuit against its plan to buy Change Healthcare; Facebook owner Meta Platforms (META.O) shrugged off an FTC attempt to stop its purchase of fitness app developer Within. JetBlue says it built time for a lawsuit into the Spirit merger agreement. As the senator charges up the competition cavalry, dealmakers may have to redraw their battle plans.
Fed’s reluctance to go green will cost the Earth
  + stars: | 2023-03-07 | by ( Ben Winck | ) www.reuters.com   time to read: +8 min
WASHINGTON, March 7 (Reuters Breakingviews) - Central banks don’t think they can do much about the environment. The U.S. Federal Reserve has done even less, arguing it should not tackle climate change without an explicit order from Congress. In a 2021 survey by Invesco, 63% of responding central banks said addressing climate change fell within their mandate. Central banks aren’t best equipped to lead the green transition, anyway. There’s also a valid concern that focusing on climate change could water down the Fed’s mission to fight inflation.
Amazon expansion collides with contraction
  + stars: | 2023-03-06 | by ( Jennifer Saba | ) www.reuters.com   time to read: +3 min
NEW YORK, March 6 (Reuters Breakingviews) - Amazon.com’s (AMZN.O) rapid expansion is hitting a wall. When it comes to those trends, even Amazon can’t be too sure. But when it comes to the intersection of hiring and work-from-home trends, even Amazon doesn’t have a crystal ball. Follow @jennifersaba on TwitterCONTEXT NEWSAmazon.com is pausing the construction of its next phase of its second headquarters in Arlington, Virginia, the company said on March 3. In 2018, Amazon awarded the Washington suburb with the promise to invest $2.5 billion and hire 25,000 workers.
Buyout barons reach deep into their bags of tricks
  + stars: | 2023-02-15 | by ( Jonathan Guilford | ) www.reuters.com   time to read: +7 min
NEW YORK, Feb 15 (Reuters Breakingviews) - Debt necessity is proving to be the mother of private equity invention. With the cheap borrowing that fueled record-breaking years of leveraged buyouts gone, firms are digging deeper into their bags of tricks. Private equity firm Silver Lake, which bought a stake alongside the IPO, said it might take control. Besides putting private equity firms into weaker negotiating positions, the competing incentives also threaten conflicts of interest with limited partners. ...THERE’S A WAYIf the U.S. Federal Reserve avoids engineering a recession, private equity should be able to revert to its tried-and-true formula soon enough.
Fear of complacency costs Alphabet $150 billion
  + stars: | 2023-02-09 | by ( Robert Cyran | ) www.reuters.com   time to read: +4 min
The market wiped about $150 billion off the $1.2 trillion company’s market capitalization as a result. A day earlier, rival Microsoft (MSFT.O) unveiled and released a version of its search engine loaded with AI that can answer complex questions using multiple sources of information. Microsoft, no small competitor, hopes being better will result in a more competitive search market. On Feb. 7, Microsoft held an event that unveiled new versions of its search engine and web browser that incorporate artificial intelligence. The company has released a version of its Bing search engine using the technology.
Worker shortage gives U.S. reason to robotize
  + stars: | 2023-02-08 | by ( ) www.reuters.com   time to read: +2 min
WASHINGTON, Feb 8 (Reuters Breakingviews) - The U.S. labor shortage isn’t going anywhere, at least according to U.S. Federal Reserve Chair Jerome Powell. Worker productivity, measured as output per hour, fell last year and still sits below the late-2021 peak. If the shortage is, in fact, structural, robots offer businesses an alternative to increasingly expensive labor. A burrito-rolling bot might not replace workers quite yet, but planning for it could be prudent amid the hiring rat race. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
CVS pays exorbitant $10 bln price to diversify
  + stars: | 2023-02-08 | by ( Robert Cyran | ) www.reuters.com   time to read: +3 min
NEW YORK, Feb 8 (Reuters Breakingviews) - CVS Health (CVS.N) keeps marching ahead with its plan to create an American healthcare colossus. Its latest acquisition involves paying $10.6 billion, including debt, to buy Oak Street Health (OSH.N). CVS is buying home-healthcare assessment provider Signify Health (SGFY.N) for $8 billion, and now Oak Street, to beef up its capabilities. CVS is valuing each Oak Street healthcare provider at more than $17 million, and each patient at about $67,000. In September, CVS agreed to buy Signify Health, a home healthcare provider mostly for Medicare patients, for $8 billion.
Meme investors go to bed, take a bath
  + stars: | 2023-02-07 | by ( Lauren Silva Laughlin | ) www.reuters.com   time to read: +3 min
And that showed on Monday, when American sheets and curtains retailer Bed Bath & Beyond (BBBY.O) moved to bring in a new cash injection. Bed Bath & Beyond has been on the brink of collapse for a while, warning recently that a bankruptcy filing could be on the horizon. Recently, though, even as talk of bankruptcy has grown, shares in Bed Bath & Beyond have been on a tear again. That culminated in the announcement Tuesday morning that it had priced an offering of preferred stock and warrants, which comes on top of the rearrangement of some of its debt. CONTEXT NEWSRetailer Bed Bath & Beyond said on Feb. 7 that it had priced an offering of convertible preferred stock, as well as warrants to purchase further preferred shares and common stock.
Carlyle's new boss will be virtuoso second fiddle
  + stars: | 2023-02-06 | by ( Jonathan Guilford | ) www.reuters.com   time to read: +3 min
That’s the best way of interpreting the private equity firm’s appointment of former Goldman Sachs (GS.N) banker Harvey Schwartz on Monday. He never quite made it to the CEO job at Goldman, though served in a number of high-level roles like chief financial officer and chief operating officer. They felt that the ousted Lee, who pushed hard to diversify Carlyle’s business, hadn’t adequately consulted them on big moves, according to Reuters. The firm’s co-founder Bill Conway, also one of Carlyle’s two co-chairmen, has been filling the role on an interim basis. Schwartz previously held various senior roles including chief financial officer and chief operating officer at investment bank Goldman Sachs, which he left in 2018.
Real and fake meat share problems
  + stars: | 2023-02-06 | by ( ) www.reuters.com   time to read: +2 min
TORONTO, Feb 6 (Reuters Breakingviews) - Pain in the fake meat market is starting to spread to the real one. That’s still much better than Beyond Meat (BYND.O), which isn’t even booking an operating profit at this point. But the two companies share a few of the same problems that aren’t going away. With prices along the supply chain going up, including for transportation, consumers are making other choices. Forgoing meat – no matter the consistency – is a real problem.
Rapid hiring has bad and worse consequences
  + stars: | 2023-02-03 | by ( ) www.reuters.com   time to read: +1 min
WASHINGTON, Feb 3 (Reuters Breakingviews) - Exceptionally fast U.S. hiring has worrying consequences. With unemployment dipping to a 54-year low last month, the U.S. Federal Reserve will probably keep hiking interest rates well into 2023. The U.S. economy added 517,000 jobs in January, the Bureau of Labor Statistics said Friday. The sum nearly doubled the previous month’s gain and showed the economy on much stronger footing than anticipated. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
Data could help save crypto’s image
  + stars: | 2023-02-03 | by ( ) www.reuters.com   time to read: +2 min
NEW YORK, Feb 3 (Reuters Breakingviews) - Cryptocurrency could use a reputational boost right now. So it’s problematic that those who could help legitimize the business aren’t going gangbusters. But a string of bankruptcies in the business has clients cutting back on spending – and some disappearing completely. While Chainalysis, backed by GIC, says it plans to grow overall headcount in 2023, the cuts are the wrong sign for those who use its services. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
WASHINGTON, Feb 1 (Reuters Breakingviews) - The Federal Reserve is being relentless in its quest to bring inflation down to 2%, from its latest reading of 5%. Given the vagaries of inflation psychology, it’s not clear the Fed is justified in being so single-minded. By the officials’ own forecasts, the inflation fight will hurt hundreds of thousands of workers. And Americans routinely overestimate how high inflation will run in the next year, according to the New York Fed, typically expecting around 3%. Projections published by the central bank at the December meeting showed inflation returning to 2% in 2025.
John Malone prepares for a victory lap
  + stars: | 2023-02-01 | by ( Jeffrey Goldfarb | ) www.reuters.com   time to read: +7 min
Now the cable cowboy’s Liberty Media (FWONA.O) empire is trotting out its trademark financial razzle-dazzle to try and wring additional value out of its assets. Malone, Liberty Media’s chairman, is as renowned for his dizzying array of specialized equity issues, spinoffs and splits as he is for the telecom and entertainment companies that have been subjected to the intricate machinations. It excludes broadcaster Discovery, spun off from Liberty Media in 2005, and international broadband provider Liberty Global (LBTYA.O), hived off a year earlier. A more logical starting point would be 2001, when Malone carved Liberty Media out of telecom giant AT&T (T.N). Likewise, Liberty Media’s accompanying shakeup of its tracking stocks stands to further spotlight the value of Formula One.
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