The Week in Business: A Bank Takeover
What’s Up? (March 26-April 1)
Silicon Valley Bank Changes Hands
First Citizens BancShares, a family-run bank in North Carolina, announced last Sunday that it was acquiring Silicon Valley Bank, capping off a tumultuous month for the California lender whose collapse touched off a wider banking crisis. The Federal Deposit Insurance Corporation seized control of SVB and its assets on March 10, after a run on deposits left it insolvent, and SVB filed for bankruptcy a week later. First Citizens’ deal with the F.D.I.C. to take over the bank involved the purchase of about $72 billion in loans at a $16.5 billion discount. First Citizens also took control of all of the bank’s roughly $56 billion in deposits. But an additional $90 billion in SVB’s securities remain under the purview of the F.D.I.C. The collapse of SVB was followed in short succession by two other bank failures. Credit Suisse, which was bought by its rival UBS, Switzerland’s largest bank, and Signature Bank. New York Community Bancorp later acquired substantially all of the remaining deposits at Signature Bank.
And in Other SVB News
At a Senate Banking Committee hearing last week on the failures of Silicon Valley Bank and Signature Bank, federal regulators blamed the banks’ executives for poor management and risk assessment, which, they argued, led to the collapses. They also suggested bank managers could face penalties if they did anything improper. But the regulators themselves were not off the hook: They were the ones in the hot seat on Tuesday, answering questions from lawmakers about why certain red flags went unheeded and how to avoid future bank failures. The Federal Reserve, in particular, is under scrutiny for not doing enough to prevent the banks’ implosions. Michael S. Barr, the Fed’s vice chair for supervision, said he learned about SVB’s problems only in February. These lines of questioning are expected to continue this week, when the House Financial Services Committee holds its own hearing on Wednesday.
Not the Usual Treatment
Howard Schultz, the former chief executive of Starbucks, did not get the treatment he was used to receiving in Washington on Wednesday when he appeared before a committee, led by Senator Bernie Sanders of Vermont, scrutinizing him for what lawmakers termed “illegal union busting.” In the past, Democrats praised Mr. Schultz for his business practices, but last week liberal members of the Senate Committee on Health, Education, Labor and Pensions pressed the longtime chief executive with questions about whether he had participated in decisions to fire or discipline workers involved in the union drive at Starbucks. Lawmakers said they had heard of “widespread anti-union efforts” at the company, but Mr. Schultz called those accusations “propaganda” and instead highlighted Starbucks’s pay and benefits for workers.
What’s Next? (April 2-8)
Taking the Labor Market’s Temperature
Recent job reports took many analysts by surprise, blowing past expectations and breaking a trend line that had suggested the jobs market was gradually cooling off. Forecasters were going into Friday’s jobs report with similar expectations — the consensus was that employers added 240,000 jobs in March. But it’s unclear how closely the new data will conform to those predictions. Even amid high-profile layoff announcements at companies like Amazon and NPR, jobless claims remain low. And though the banking crisis has fomented concerns about the economic outlook — and darkened the forecast for later this year — its hasn’t yet had an effect on jobs figures.
The I.R.S.’s Cash Infusion
The Internal Revenue Service is expected to release its plan this week for how to manage the $80 billion the Biden administration has allocated to overhaul the agency, which has struggled in recent years with an enormous tax return backlog, staffing shortages, outdated technology and a lack of funding. But shoring up the I.R.S. has become a partisan issue, with Republicans fervently opposed to aiding the agency, which they argue would give it too much power over taxpayers. Of new concern to conservatives in Congress, as well as lobbyists for the tax preparation industry, is a potential plan for the I.R.S. to create its own tax-filing system that would allow taxpayers to submit their returns directly to the federal government at no cost.
Trump’s Arraignment
Former President Donald J. Trump is likely to be arraigned on Tuesday after a grand jury in Manhattan voted last week to indict him for his role in paying hush money to an adult film star during the final weeks of the 2016 presidential campaign. In the immediate aftermath of the indictment, users on social media channels associated with right-wing extremists and conspiracy theorists searched for an explanation for why Mr. Trump met this fate. But the responses did not coalesce around any one narrative or call to action: Although some urged their fellow Trump supporters to rise to the former president’s defense, others suggested it would be best to wait until more was known about the indictment and argued an indictment would help him win re-election in 2024.
What Else?
The Federal Reserve’s preferred inflation gauge cooled to 5 percent on an annual basis in February. New rules released on Friday by the Treasury Department significantly limit the electric vehicles that qualify for federal tax credits. Detroit automakers report their March sales figures this week, which will show how the Fed’s interest rate increases have affected demand for vehicles.
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