Business Highlights: Fed’s missed red flags, Meta layoffs
Fed criticized for missing red flags before bank collapse
WASHINGTON (AP) — The Federal Reserve is facing stinging criticism for missing what observers say were clear signs that Silicon Valley Bank was at high risk of collapsing into what became the second-largest bank failure in U.S. history. The Fed was the primary federal supervisor of the bank, based in Santa Clara, California, though the bank was also overseen by the California Department of Financial Protection and Innovation. Critics point to many red flags that had surrounded Silicon Valley Bank, including its rapid growth since the pandemic, its unusually high level of uninsured deposits and its over-investment in long-term government bonds and mortgage-backed securities, which tumbled in value as interest rates rose.
Silicon Valley Bank’s demise disrupts the disruptors in tech
SAN FRANCISCO (AP) — Silicon Valley Bank’s collapse has rattled the technology industry that had been the bank’s backbone. It’s left shell-shocked entrepreneurs thankful for the government reprieve that saved their money, while they mourn the loss of a place that served as a chummy club of innovation. Tech startups are feeling relief for the deposit guarantees that will allow them to continue to pay their workers and other bills. But startup CEOs and the venture capitalists who back them worry that it may be more difficult to finance risky ideas in the future without the presence of an institution that had been a reliable partner for the past 40 years.
Class action suit filed against Silicon Valley Bank parent
SAN FRANCISCO (AP) — A class action lawsuit is being filed against the parent company of Silicon Valley Bank, its CEO and its chief financial officer, saying that company didn’t disclose the risks that future interest rate increases would have on its business. The lawsuit is looking for unspecified damages to be awarded to those who invested in SVB Financial Group between June 16, 2021 and March 10, 2023. The lawsuit says some quarterly and annual financial reports from SVB didn’t fully account for warnings from the Federal Reserve about interest rate hikes.
A 2nd wave of layoffs at Meta; 10,000 jobs are cut
SAN FRANCISCO (AP) — Facebook parent Meta will slash another 10,000 jobs and will not fill 5,000 open positions as the social media pioneer cuts costs. The company said Tuesday it will reduce the size of its recruiting team and then make further cuts in its tech groups in late April, and then its business groups in late May. The Menlo Park, California, company has been investing billions of dollars to realign its focus on the metaverse. In February it posted lower fourth-quarter profit and revenue, hurt by a downturn in the online advertising market and competition from rivals such as TikTok.
US inflation eases but stays high, putting Fed in tough spot
WASHINGTON (AP) — U.S. consumer price increases eased slightly from January to February but still pointed to an elevated inflation rate that is posing a challenge for the Federal Reserve at a delicate moment for the financial system. The government said Tuesday that prices increased 0.4% last month, just below January’s 0.5% rise. Yet excluding volatile food and energy costs, so-called core prices rose 0.5% in February, slightly above January’s 0.4% gain. The Fed pays particular attention to the core measure as a gauge of underlying inflation pressures.
Wall Street climbs as some beaten-down bank stocks recover
NEW YORK (AP) — Stocks closed higher on Wall Street as some of the most breathtaking moves from a manic Monday reversed course. The S&P 500 rose 1.7% Tuesday after a report showed inflation is still high, though no more than expected. The Nasdaq composite rose 2.1% and the Dow Jones Industrial Average added 1.1%. Several bank stocks bounced back, recovering some of their plunges from a day earlier caused by worries that customers could yank out their cash in the wake of two bank failures. Treasury yields rose sharply, trimming some of their historic drops from the previous day.
Is my money safe? What you need to know about bank failures
NEW YORK (AP) — The recent failures of Silicon Valley Bank and Signature Bank, which catered mostly to the tech industry, may have you worried about your money. They were the second- and third-biggest bank failures in U.S. history. There’s no need to worry if your money is in a bank insured by the Federal Deposit Insurance Corp. and you have less than $250,000 there. If the bank fails, you’ll get your money back. If you have over $250,000 in one bank, that amount is considered uninsured and experts recommend that you move the remainder of your money to a different financial institution.
SEC’s climate reporting draft rule draws huge public comment
WASHINGTON (AP) — Attorneys and industry experts say a closely watched rule from the Securities and Exchange Commission that would require public companies to say much more to shareholders about how their operations affect the climate has generated more public comment than many recent regulations from the nation’s top financial regulator. The SEC is expected to issue a final rule in the spring. The draft rule it put out last summer has drawn thousands of comments. The rule would make the U.S. the latest government to regulate what companies must report on their greenhouse gas emissions, energy consumption and above a certain level, the cost of climate change on their business.
California court rules for Uber, Lyft in ride-hailing case
SACRAMENTO, Calif. (AP) — A California appeals court has ruled companies like Uber and Lyft do not have to treat their drivers as employees. The ruling means app-based ride hailing and delivery companies do not have to provide certain worker protections and benefits. The state Legislature passed a law in 2019 requiring these companies to treat their drivers as employees. Companies like Uber and Lyft spent $200 million in 2020 on a campaign to convince voters to exempt them from that law. Voters agreed. In 2021 a state judge ruled the companies were not exempt from the law. Monday, a state appeals court overturned that decision.
The S&P 500 gained 64.80 points, or 1.7%, to 3,920.56. The Dow Jones Industrial Average advanced 336.26 points, or 1.1%, to 32,155.40. The Nasdaq composite rose 239.31 points, or 2.1%, to 11,428.15. The Russell 2000 index of smaller companies ended up 32.59 points, or 1.9%, to 1,776.89.