How the SVB Collapse Explains the Economy

With additional report from Ari Hawkins

interconnection — Two articles dominated the economic headlines today. The Epic Collapse of Silicon Valley Bank (SVB) and February job report It still showed a hot job market. These stories may seem almost unrelated. isn’t it.

Taken together, these provide a nifty microcosm of what is happening in a highly complex and virtually unpredictable post-pandemic economy. And either event could have a significant impact on the decisions the Federal Reserve makes on interest rate policy at its meeting later this month.

Start with Silicon Valley It was the biggest bank failure since the 2009 financial crisis. SVB has been one of the go-to banks for startups and biotech companies. The sector, which has devoured cheap money for years, is now one of the few to cut workers as the Fed hikes rates to combat persistent inflation ( not very many).

Fed officials are generally happy to see some bubbles coming out of the tech industry, but they certainly didn’t want banks with over $200 billion in assets to go bankrupt. And that certainly wasn’t the result of everything the Fed did.

SVB was a weird bank (yes, now officially dead). Nearly all of its depositors had his $250,000 in the account, his FDIC limit with insurance. That insurance was created to end the parade of bank runs that dominated the Great Depression era.

But it was of little use for SVB Realizing that they could actually lose their money, wealthy depositors raced to withdraw it. the place had to be closed daytimea very rare and very dramatic move.

The question now is whether the Fed is looking at the SVB and wondering if all that tightening could destabilize other industries and the financial institutions that serve them.

One big bank failure may not induce the Fed to opt for a 1/4 point rate hike this month instead of 0.5 points. However, Margin allows you to tweak towards quarter points.

Now let’s move on to the February employment report. — This shows that, outside of technology, the job market is still hot and the economy is doing pretty well.The figure of 311,000 jobs was better than expected. And the rise in the unemployment rate from his 3.4% to 3.6% is due to the very welcome return of nearly half a million people to the workforce.

The pace of wage growth has also slowed somewhatwhile overall wage growth has proven to be fairly robust, the Fed believes (although not everyone agrees) that it is causing overall consumer price inflation. increase.

January’s huge job increase of 517,000 seemed far off at the time, but was only corrected to 504,000. Even industries expected to suffer under the weight of rising interest rates have mostly fared well.

Construction jobs added 24,000 That’s despite rising interest rates hitting home prices and fears of a recession curtailing corporate investment plans. And increases in both wages and employment continue to be concentrated in low-wage retail and hospitality jobs.

To sum up the big picture, some very wealthy Silicon Valley types have been hit hard. And the fact that SVB can disappear so quickly raises some regulatory issues. But by itself, a bank failure is no reason to panic. Declining economic equality since the pandemic is a feature, not a bug.

bigger problem The question is whether the Federal Reserve’s actions will have a similar, but later impact on other industries. If the Fed sees this as the only way to bring annual inflation back to its target of about 6% to about 2%, it will be open to it. However, this would be a forced landing rather than a soft landing.

get another huge data The latest figures for the consumer price index will be released on Tuesday. A very gradual decline is expected. If they don’t come to fruition, or if prices surprisingly rise again, the Fed will blow off the SVB’s concerns and withdraw an extra half-point rate hike for the economy.

If the numbers go in the Fed’s favour, the central bank will have a little more room to consider whether to ease the economic brakes. Because no one wants to see SVB anymore.Or to see millions of Americans no Tech folks who drive Teslas will be hit hard.

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— Judge allows Access Hollywood tapes to be used in Trump defamation trial. A longtime magazine columnist who accused former President Donald Trump of raping her in the 1990s, ‘Access Hollywood’ tapes as evidence in her defamation case trial, a federal judge ruled this afternoon. The Manhattan judge also said Trump’s efforts to stop columnist E. Gene and Carroll from using the testimony of two other women who previously accused him of sexual assault. refused.

— George Santos denies involvement in 2017 credit card fraud. Congressman George Santos (RN.Y.) Earlier this afternoon, he said he was “innocent” when asked about his alleged involvement in a 2017 credit card skimming operation.Santos’ comments came after POLITICO reported that his former roommate claimed Santos oversaw credit card operations. Gustavo Ribeiro Trelha, who was convicted of a 2017 crime and deported to Brazil, sent an affidavit to federal officials on Wednesday detailing Santos’ alleged role.

— Liberal groups have expressed “grave concerns” about Biden’s judicial nomination. Some liberal advocacy groups Express serious doubts about President Joe Biden’s nomination to the First Circuit Court of Appeals, Michael Delaney, highlighting the handling of school sexual assault cases. In a memo sent to the Judiciary Committee, the National Center for Women’s Law, the Leaders Conference on Civil and Human Rights, and the Democrats of the People of the American Way, Delaney’s attorney career was marked by “a serious commitment to privacy, safety, and security.” defined by a lack of respect.” , the rights of survivors. ”

desantis rising — Republican grassroots leaders Interest in former President Donald Trump is waning — and eyeing Florida Governor Ron DeSantis for the 2024 presidential nomination. Seth MusketDirector of the Center for American Politics, University of Denver.

The survey, sent to nearly 3,000 Republican chairmen, asked which candidates participants considered supporting and which candidates they didn’t want to win the nomination. The results suggest that DeSantis has emerged as the undisputed frontrunner in the race to replace Trump.

aim — The Stop Trump campaign has already begun among the Republican elite. But as DeSantis heads to Iowa on Friday, effectively marking the start of the presidential race, his first edge over Republican contributors and voters will be to split, or at least combine, attacks on other candidates. urging DeSantis to be kicked out of his initial position. best alternative to trump Jonathan Martin of POLITICO reports..

3 questions… i talked to nightly margie omeroa veteran Democratic pollster and strategist at GBAO Strategies, a progressive firm specializing in polling and strategic consulting.

What are the most important factors, issues, or forces that will determine the fate of Biden’s 2024 re-election campaign?

Women voters, across educational backgrounds and racial/ethnic lines, will be vital to the success of the Democratic Party. Many female voters have focused on how political parties differ on issues as diverse as abortion, Social Security and Medicare, childcare and college affordability. But beyond the issue, women tell me in focus groups that they’re looking for a party that’s trying to bring us together rather than offering angry “own library” rants.

Do you think crime and police funding will play a central role in the 2024 presidential election? What other issues will be most important?

Voters will be just as outraged as they were in 2022 over Republican-proposed Social Security/Medicare cuts or outright bans on abortion. One of their frontrunners, he faces multiple criminal investigations.

Which Republican candidate would be easiest and most difficult for Biden to run for in 2024?

Our environment is very polarized and there are no “easy” matchups. That said, neither announced nor likely Republican nominees appear to have learned a lesson from how their party performed poorly in 2022.

repression in Tunisia — The Tunisian president’s crackdown on political opponents and sub-Saharan immigrants complicates the country’s ability to secure external economic support even as the country’s financial crisis continues to worsen. Ali Hawkins Nightly report.

The International Monetary Fund, which previously delayed final approval of a $1.9 billion loan deal with Tunisia, expressed concern this week about the country’s democratic decline.

“The IMF is concerned about recent developments in Tunisia and is watching the steps taken by the authorities to address the situation.” Said An IMF spokesman in response to reports of rising violence against black sub-Saharan migrants in Tunisia.

President Kais Said, who has ruled by decree since 2021, has in recent weeks escalated efforts to suppress dissent by arresting politicians, activists and businessmen. The crackdown has led to protests in the Tunis capital.

A preliminary deal with the IMF was reached in October but has faced delays since, as the Tunisian government has failed to pursue major democratic reforms. Meanwhile, the country is in further economic crisis.

Soaring food and fuel prices have sparked even more protests this week, resulting in a record number of migrants. The credit rating agency said the overseas loan repayments scheduled for the second half of this year could Tunisia at risk of default.

A spate of violent attacks from police and civilians further alienated potential donors after Said made comments last month urging police to crack down on migrants from sub-Saharan Africa.

“Immigration is a ruse to change Tunisia’s dynamics,” the president said at a national security council last month, arguing that he is seeking to replace the country’s Arab majority.

He added that “hordes of illegal immigrants from sub-Saharan Africa” ​​had arrived in Tunisia “with all manner of violence, crime and unacceptable practices”.comment is accused of being racist By the African Union, which is made up of 55 member states across the continent.

The World Bank president told staff on Sunday that he would suspend work with Tunisia, citing the president’s role in fomenting “racially motivated harassment and violence.”

Shortly after coming to power following the 2021 democratic elections, Saeed suspended the country’s parliament and the constitution created after the 2011 uprising against the former dictatorship. Since then, the region has become increasingly economically isolated.

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