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A week in business: The banking crisis

by SuperiorInvest

After the Federal Deposit Insurance Corporation stepped in last weekend to take over Silicon Valley Bank and Signature Bank, panic spread throughout the banking sector, thereby starting government intervention to support other suffering banking institutions. On Thursday, the country’s 11 largest banks pooled resources for the injection 30 billion dollars to the First Republic Bank, the 14th largest US bank to be on the brink of collapse. The infusion was the result of a deal between Treasury Secretary Janet L. Yellen and Jamie Dimon, the chief executive of JPMorgan Chase, whose bank bailed out several rivals during the 2008 financial crisis. But while some are hearing echoes of 2008 in this banking crisis, the White House would like to avoid comparing. Despite extensive actions by the Federal Reserve, the Treasury Department and the FDIC to protect customer deposits and assets and strengthen confidence in the nation’s banks, President Biden is loathe to use the term “rescue, help.”

Meta announced last week that it did lay off another 10,000 employees, or 13 percent of its workforce, as it downsizes after a hiring boom that accelerated during the pandemic. The mass layoff is already the second that has shaken Meta in recent months: In November, the company laid off workers 11,000 workers across departments and regions. Meanwhile, Meta announced that it was taking a $4.2 billion restructuring charge in the fourth quarter and expects another $1 billion in restructuring costs in 2023 to offset its plans to terminate leases on some office space, rework some data center projects and pay severance to laid-off employees. Similar efforts as reduce costs are underway at Amazon, Alphabet, Microsoft and Salesforce as the tech industry’s boom times come to an end.

Data released on Tuesday showed that year-on-year inflation cooled slightly, with the consumer price index rising 6 percent in the year to February – from 6.4 percent in January. But there were other troubling signs beneath the surface of the report: Core inflation, which strips out volatile food and fuel prices, rose 0.5 percent from a month earlier, beating analysts’ expectations and posting the fastest monthly rise since September. Federal Reserve officials have been waiting for those data to announce their decision to raise interest rates at their next meeting this week.

Shou Zi Chew, the chief executive of TikTok, will testify before Congress again on Thursday as the app comes under increasing scrutiny from President Biden and other politicians in Washington. Last week, TikTok said the Biden administration wanted its Chinese owner, ByteDance, to sell the application, facing a ban in the United States if he can’t complete the deal. At the heart of Washington lawmakers’ concerns is the fear that Beijing could demand the data of 100 million Americans who use the app. But the sale could be difficult to pull out: A price tag of $50 billion or more for TikTok would be too steep for anyone but a tech giant like Meta or Google — but those companies would likely want to avoid an antitrust battle that could arise from trying to acquire the social media juggernaut.

As the Federal Reserve prepares to meet on Tuesday and Wednesday, central bankers face a more complicated calculation than they might have anticipated a few weeks ago. There is new economic data, including jobs and inflation reports, to factor into decisions about how much to raise interest rates — or whether to raise them at all. But officials are also looking at the collapse of three banks that were caught flat-footed by the previous jump in rates, which significantly affected the market value of their holdings. So while a relatively hot labor market and persistent inflation give Fed officials reason to continue on an aggressive rate-hike path, the turmoil in the banking sector has analysts uncertain about the Fed’s next move.

On Tuesday, lawyers for Dominion Voting Systems and Fox News will present their oral arguments for summary judgment in Dominion’s lawsuit that accuses Fox of defamation by calling the company a villain because the network amplified false claims about the 2020 presidential election. Dominion asked summary judgment, which is the process of deciding a case without a trial. The company argued that Fox had not provided any new evidence to support its election conspiracies and that the news network had already admitted it knew the on-air statements were false. His court filing includes many of the recently released private messages exchanged between Fox News anchors and other employees expressing skepticism about the story the network was promoting on its broadcast.

Emmett Shear, chief executive of livestreaming site Twitch, said on Thursday that it does resign after 16 years. A federal regulator last week approved a A $31 billion merger of railroad companies, paves the way for the creation of a railroad that connects Canada, the United States, and Mexico. And CNN’s prime-time audience he fell as the network revamped programming at 9 p.m.

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