Business Highlights: Bank runs, government investigations
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Bank runs used to be slow. The digital era sped them up
NEW YORK (AP) — What made the failure of Silicon Valley Bank unique compared to past failures of large banks was how quickly it collapsed. Last Wednesday afternoon, the $200 billion bank announced a plan to raise fresh capital; by Friday morning it was insolvent and under government control. Regulators, policymakers and bankers are looking at the role that digital messaging and social media may have played in the collapse, and whether banks are entering an age when the psychological behavior behind a bank run — mass fear from depositors of losing their savings — may be amplified and go viral quicker than bank officers and regulators can successfully respond.
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Justice Dept, SEC probing collapse of Silicon Valley Bank
WASHINGTON (AP) — The Justice Department and the Securities and Exchange Commission have launched investigations into the collapse of Silicon Valley Bank. That’s according to what two people familiar with the matter told The Associated Press. The people said the investigations – which are separate inquiries – are in the early stages and will also examine the actions of the bank’s senior executives. The Justice Department’s investigation involves federal prosecutors in California, along with prosecutors involved in fraud cases. The people were not authorized to publicly discuss the specific details of the ongoing investigations and spoke to the AP on condition of anonymity.
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Bank fears spread to Europe, drag down shares of big lenders
GENEVA (AP) — Fears about the world banking system spread to Europe as shares in the globally connected Swiss bank Credit Suisse plunged. The steep drop on Wednesday dragged down other major European lenders in the wake of bank failures in the United States. At one point, Credit Suisse shares lost more than a quarter of their value. The stock price hit a record low after the bank’s biggest shareholder — the Saudi National Bank — told news outlets that it would not invest more money into the Swiss lender. Credit Suisse was beset by problems long before the U.S. banks collapsed.
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Wall Street falls on new bank fears, bond yields plunge
NEW YORK (AP) — Stocks fell amid fresh worries about the banking sector, although Wall Street more than halved its losses by the closing bell. The S&P 500 closed with a decline of 0.7%. The Dow posted a slightly steeper drop, while the Nasdaq rose slightly thanks to late gains in tech shares. Treasury yields plunged following several reports on the economy that were weaker than expected. Switzerland’s Credit Suisse sparked a broad selloff early Wednesday after its shares fell to a new low. Markets pared some of their losses as the Swiss National Bank said it could provide some assistance to Credit Suisse if needed.
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US wholesale inflation fell last month on lower food costs
WASHINGTON (AP) — Wholesale price increases in the United States slowed sharply last month as food costs declined, a sign that inflationary pressures may be easing. From January to February, the government’s producer price index fell 0.1%, after a 0.3% rise from December to January, which was revised sharply lower. Compared with a year ago, wholesale prices rose 4.6%, a big drop from the 5.7% annual increase in January.
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What can ChatGPT maker’s new AI model GPT-4 do?
LONDON (AP) — The company behind the ChatGPT chatbot has rolled out its latest artificial intelligence model, called GPT-4, in the next step for a technology that’s caught the world’s attention. San Francisco-based OpenAI says GPT-4 is more reliable, creative and can handle “more nuanced instructions” than its predecessor, GPT-3.5, which is the system that ChatGPT was built on. GPT-4 can be fed both text and images that it uses to come up with answers. Unlike ChatGPT’s fixed tone, users can customize GPT-4 by asking for responses in the style of a Shakespearean pirate, for example. OpenAI have warned users to be careful, saying GPT-4 is “still not fully reliable” because it “hallucinates” facts and makes reasoning errors.
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NY bank’s demise: Contagion or a problem with the business?
NEW YORK (AP) — A New York-based bank’s demise was stunningly fast. The state regulators who shut down Signature Bank on Sunday said they were concerned about a frenzy of withdrawals after California’s Silicon Valley Bank failed two days earlier. But there may have been some underlying problems for the Signature Bank, too, including one of the highest ratios of uninsured deposits in the nation. Signature was big in the cryptocurrency world. It also made loans to New York City apartment building owners. And it was politically connected, with Ivanka Trump and two former members of Congress sitting on its board of directors over the years.
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Retail sales dip 0.4% in February after buying burst in Jan.
NEW YORK (AP) — America’s consumers trimmed their spending in February after a buying burst in January, underscoring the volatility of the economic environment. The government said Wednesday that retail sales slipped 0.4% after jumping a revised 3.2% in January, helped by an increase in auto sales. Retail sales were down in November and December, the critical holiday period. The February retail sales figure was dragged down by a 1.8% drop in auto sales as well as declines in restaurants and stores selling furniture and clothing. Excluding autos, sales slipped 0.1% from January, according to the Commerce Department. But shoppers spent more online and at electronics stores, health and beauty stores and food retailers, according to the report.
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First major US railroad merger in 2 decades will go forward
The first major railroad merger in more than two decades, one that would link the United States, Canada and Mexico, is being approved by federal regulators. Canadian Pacific’s $31 billion acquisition of Kansas City Southern will combine the two smallest of the nations seven major railroads after an arduous two-year review from the U.S. Surface Transportation Board, released Wednesday. The bar for railroad mergers in the U.S. was raised substantially at the start of the century after a couple problematic tie-ups that snarled rail traffic for weeks. Safety was also at the forefront after the fiery derailment in Ohio last month. Regulators say the new railroad has an excellent safety record.
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The S&P 500 dropped 27.36 points, or 0.7%, to 3,891.93. The Dow Jones Industrial Average shed 280.83 points, or 0.9%, to 31,874.57. The Nasdaq composite rose 5.90 points, or 0.1%, to 11,434.05. The Russell 2000 index of smaller companies dropped 30.95 points, or 1.7%, to 1,745.94.