The Federal Reserve looks into SVBâs collapse, Bank of America mops up billions in deposits and China reports an economic rebound with a cav [View in browser](
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The Federal Reserve looks into SVBâs collapse, Bank of America mops up billions in deposits and China reports an economic rebound with a caveat. â [Kristine Aquino]( Bank probes [Silicon Valley Bankâs lack of a chief risk officer](for much of last year is being examined by the Federal Reserve as part of its probe of the lenderâs failure, two people familiar with the matter said. The Fed has [said]( that it will conduct an internal investigation of its oversight and publicly release the results on May 1. The bankâs collapse is also being investigated by the Securities and Exchange Commission and the Justice Department. Meanwhile, US prosecutors were [investigating Signature Bankâs work with crypto clients](before regulators suddenly seized the lender last weekend. Separately, [the Fed is weighing tougher rules]( in its oversight of midsized banks, which could bring capital and liquidity thresholds closer to those for the largest Wall Street firms. BofA deposits Bank of America mopped up more than $15 billion in new deposits in a matter of days, as customers fearful of a spreading crisis from the failure of three smaller lenders sought refuge in the firms seen as [too big to fail](. Thatâs a sharp contrast from the end of last year, when deposits at the second-largest US bank were down [$8 billion]( compared with the end of the third quarter. Other banks like [JPMorgan Chase & Co.](, [Citigroup Inc.]( and [Wells Fargo & Co.]( also raked in billions in new deposits, though the figures have not been disclosed yet. China rebound [China reported a rebound in consumer spending](, industrial output and investment this year after coronavirus restrictions were dropped. But it also warned of risks to the recovery as unemployment rose and real estate investment continued to slump. The data are âpointing to a steady rather than accelerating momentum, which also indicates strong policy support is needed to unleash the growth potential,â said Zhou Hao, chief economist at Guotai Junan International Holdings. Separately,[ Chinaâs bond trading was disrupted on Wednesday]( morning after the regulator reportedly told money brokers to suspend their data feeds due to security concerns. Risk off S&P 500 futures and Nasdaq 100 contracts both slid around 0.6% as of 5:40 a.m. in New York. The Bloomberg Dollar Index climbed to its highest levels of the day, pressuring most Group-of-10 currencies. Treasury yields fell across the curve, mirroring moves in European bond markets. Oil and gold fell, while Bitcoin advanced for a fifth-straight day. Coming up⦠At 8:30 a.m., weâll get retail sales and PPI data, as well as the latest reading of the Fedâs gauge of manufacturing in New York state. Figures on business inventories as well as the NAHB housing market gauge will be released at 10 a.m. The US will sell $36 billion of 17-week bills at 11:30 a.m. What weâve been reading Hereâs what caught our eye over the past 24 hours: - Apple will limit hiring, [delay bonuses for some employees](
- Metaâs Zuckerberg encourages [employees back into the office](
- [TikTok considers splitting from ByteDance](to address security risks
- [Donald Trumpâs Truth Social cuts staff]( while waiting for SPAC approval
- HSBC is starting to dig into [what it actually bought from SVB](
- UK kicks off budget day with a plan to [extend energy subsidies](
- [What the loss of SVB means]( for Silicon Valley And finally, hereâs what Joeâs interested in this morning Whenever a bailout happens, people start to yell about "moral hazard" and how the rescue will only encourage more risky behavior. It's a little odd, though, in the case of Silicon Valley Bank. You could say that because depositors are being made whole, that they no longer have any reason to do due diligence on their bank's balance sheet, but... nobody does this anyway. And there's probably a good reason to think nobody should spend much time doing this. It's true that Silicon Valley Bank made some error on the asset side, having taken a big position in long-duration assets. But what they bought was stuff generally considered to be "safe," not some wild gamble. Obviously bank regulators and supervisors should consider this situation to be a bad blunder. But still it's unclear what persistent risk a bailout here is encouraging. So what is the "risky" behavior that's being subsidized? Yesterday on the podcast we had [Dan Davies](, Managing Director at Frontline Analysts, explain the Silicon Valley Bank situation. He homed in on the set of circumstances that make this situation so distinct. [From the transcript](: One of the most difficult things to manage your banking is rapid growth. And in particular you had rapid growth in deposits at a time when interest rates were very low. So, you know, the actual equilibrium covering their cost of business spread on these deposits, you know, they might have had to pay negative 50 basis points of interest rates. And the company doesn't want to do that because it's going to damage the franchise in the long term. The company certainly doesn't want to turn business away. So what they end up doing is putting the money in higher yielding securities. And to do that, you've got to move out on the maturity curve. And this is the sort of thing that a switched on bank supervisor ought to be stopping you from doing. Tech and Silicon Valley is all about the boom times. Move fast. Grow fast. Pour money into winners. Scale up. But growing fast is actually not unambiguously great for a bank. If you acquire too many costly customers, and have no capacity to profit from them except by taking some significant risk, then you're in trouble. A couple of years ago on [Odd Lots]( we talked to John Hempton about Greensill, and he made a similar comment about how the most dangerous companies in the world were any rapidly-growing financials. Tech investing is all about maximizing upside, while banking is (or at least should be) all about avoiding downside. So to the extent that there's some risk out there that's been encouraged it's in facilitating this nexus of hot, boom-bust, fast-moving tech money with with banking, which should be kind of boring. Anyway, SVB is gone. Surely there are a number of VC-backed fintechs eager to take its place. Follow Bloomberg's Joe Weisenthal on Twitter [@TheStalwart](. Follow Us Like getting this newsletter? [Subscribe to Bloomberg.com]( for unlimited access to trusted, data-driven journalism and subscriber-only insights. Before itâs here, itâs on the Bloomberg Terminal. Find out more about how the Terminal delivers information and analysis that financial professionals canât find anywhere else. [Learn more](. Want to sponsor this newsletter? [Get in touch here](. You received this message because you are subscribed to Bloomberg's Five Things to Start Your Day: Americas Edition newsletter. If a friend forwarded you this message, [sign up here]( to get it in your inbox.
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