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Should uninsured deposits be given a warning label?

    How do we prevent the next run on a bank?

    If there’s one lesson to be learned from the recent spate of bank failures, it’s that deposit flight can now happen quickly. It no longer requires a bank clerk to hand over money to customers waiting in long lines around the block. Tens of billions of dollars could disappear in hours or minutes.

    That’s why guaranteeing deposits has become so crucial. The Federal Deposit Insurance Corporation explicitly insures the first $250,000 in each account, but nothing more. The Biden administration has so far implicitly guaranteed all deposits by invoking a “systemic risk exception” – but such an implicit guarantee has not really been tested against a run on multiple banks at the same time.

    There are good arguments for the FDIC to guarantee all deposits, but there may be a more strategic, surgical, and free-market solution.

    Consider this: What if the banking system coalesced around a separate insurance program — we’ll call it FDIC+ — for deposits over $250,000?

    Banks can decide whether they want to use the insurance program. If they did, they could market and advertise that all deposits were insured. If they decide not to, the Federal Reserve could require them to have higher capital requirements and other restrictions to reduce the possibility of a run.

    The Consumer Financial Protection Bureau could then require banks to use the equivalent of the warning label on cigarettes to indicate which accounts were uninsured. This warning would appear on customer apps and statements, making it clear to customers when their funds were uninsured and they would not be bailed out.

    Such restrictions would be a strong incentive for banks to participate in the FDIC+ program. Because banks would pay to insure their large deposits, the program would also be an incentive for better business models.

    Silicon Valley Bank, which went bankrupt last month, targeted the wealthy. The same goes for First Republic Bank, whose share price fell more than 43 percent on Friday as its fate remained uncertain. Bloomberg reported Saturday that the FDIC has asked JPMorgan Chase and PNC to make a final offer for the ailing lender this weekend in an effort to broker an orderly sale.

    Silicon Valley Bank offered tech executives good deals on mortgages and more. Many of these executives, in turn, encouraged the companies they invested in to park their money in the banks. First Republic had a similar business tactic: It distinguished itself by offering high-net-worth customers jumbo mortgages and offering spectacular white-glove customer service.

    That meant the banks had a huge amount of deposits in excess of $250,000 that were not covered by the government’s deposit insurance fund. Nearly 90 percent of SVB’s approximately $88 billion was uninsured. And at the end of last year, about two-thirds of First Republic’s deposits were uninsured.

    That made the banks vulnerable to flight. Not only did they have large amounts of uninsured deposits, which companies often hold in their accounts, they also had a large number of customers with strong networks that could sense problems and flee faster than a company. The bank run at SVB “appears to have been fueled by social media and SVB’s concentrated network of venture capital investors and technology firms,” ​​a Federal Reserve report concluded.

    Maybe FDIC+ prevented it. — Andrew Sorkin and Lauren Hirsch

    Fox News has dropped Tucker Carlson. The Fox Corporation board made the decision after discovering offensive private messages from Carlson that had been redacted into legal documents for Dominion Voting Systems’ defamation suit against Fox. After Carlson’s firing, Russian state media reportedly offered him a job, and viewership of the conservative news channel Newsmax boomed. CNN also fired an anchor this week: Don Lemon, who in February made comments about women and aging that were widely perceived as sexist.

    UK regulators blocked Microsoft’s $69 billion Actvision deal. The surprise decision bolstered the growing assertiveness of global antitrust regulators. Microsoft’s deadline to complete the acquisition is July 18. If the appeal fails, it will most likely have to walk away and pay Activision a $3 billion termination fee.

    Price control. The latest economic indicators showed that inflation is slowing but persistent as Federal Reserve officials prepare to make an interest rate decision next week. The Fed’s preferred measure of inflation rose 4.2 percent during the year through March, up from 5.1 percent in February, while wages rose 5.1 percent in March from a year earlier and rose by 1.2 percent compared to December. Data released Thursday showed that gross domestic product, adjusted for inflation, rose just 1.1 percent year-on-year in the first quarter.

    The November release of ChatGPT seems to have gotten companies talking about artificial intelligence. Mentions of “AI” or “artificial intelligence” in business conversations, which have increased over the past decade, have increased 50 percent from the fourth quarter of last year to the first quarter of this year. That’s according to market intelligence platform AlphaSense, which tracks data from more than 9,000 public companies that host calls in English.

    Of the 2,007 companies that have had business conversations since April 1, 334 mentioned the technology. And it’s not just technology companies.

    • Roger S. Penske, the CEO of the Penske transportation company, said the company used artificial intelligence to answer basic customer questions and make sales arrangements. “We plan better. We are more efficient and it allows us to use different time periods in our planning to better manage our technology,” he told investors.

    • James Quincey, the CEO of Coca-Cola, told investors that “you don’t have to go far to think about all the design work that goes into some of our point of sale material and how that can be achieved.” AI to the future.”

    • Arthur Sadoun, the CEO of Publicis Groupe, the public relations and advertising conglomerate, sees AI accelerating the creative process, but said he thought any loss of revenue from working faster “will be largely offset by the need to increase the number of creative assets thanks to personalization at scale.”

    Tucker Carlson and Don Lemon, the TV news anchors who made big news themselves this week when they were fired and taken off the air, have hired the same attorney: Bryan Freedman. While neither host has announced a lawsuit against his former employer, Freedman’s hiring could be a sign of legal battles to come.

    The prominent Hollywood attorney has a reputation for being an aggressive courtroom warrior. In 1997, he co-founded his Los Angeles office, Freedman + Taitelman, with Michael Taitelman. In its list of “power attorneys,” The Hollywood Reporter described Freedman as “an expert in crisis litigation, the type common in late-night phone calls and corporate drama.”

    One of his specialties: securing big payouts for controversial TV stars. His clients include former CNN anchor Chris Cuomo, who was ousted after evidence emerged that he counseled his brother, Andrew Cuomo, during a sexual harassment scandal (he is seeking $125 million for wrongful termination); Megyn Kelly, who secured a full payout on her contract when she left NBC after questioning on-air whether dressing in blackface for Halloween was inappropriate; Mike Richards, a former host and executive producer of “Jeopardy!”, who left after a report revealed offensive comments he made on a podcast several years earlier; and Chris Harrison of “The Bachelor”, who resigned after making comments that he later acknowledged decrying racism.

    Freedman also represented Quentin Tarantino, Julia Roberts, Mariah Carey, Seth Rogen and Gabrielle Union.

    After the top-seeded Milwaukee Bucks suffered a season loss in the NBA playoffs on Wednesday, a reporter asked Giannis Antetokounmpo, the Bucks’ star player, if he considered the season “a bust.” Antetokounmpos passionate response has since passed on for his wisdom about moving forward after a loss: “Do you get a promotion in your job every year?” he asked. “Not right? So every year you work is a failure – yes or no? No. Every year you work, you work towards something, towards a goal, and that is getting promoted, being able to provide for your family, a house for they can provide or take care of your parents. You are working towards a goal – it is not a failure. They are steps towards success.”

    Thank you for reading! We’ll see you Monday.

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