Banking’s Synchronized Swimming

Plus: Get an iPad, ump, you’re blind! ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

March 17, 2023

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TOGETHER WITH

Good morning, and Happy Friday.

Amazon stores are getting the recognition they deserve in the Big Apple. A class-action lawsuit filed this week claims Jeff Bezos and company weren’t quick enough to tell customers they were using facial recognition in New York City’s Amazon Go locations – you know, those weird convenience stores where you always feel like you’re stealing stuff because there’s no checkout counter or cashier.

While the face-grabbing technology is not illegal, NYC is the only major American city where businesses need to tell people they are tracking them. So as long as they tell you, the retailer is free to steal your face — not in some groovy Grateful Dead way but more of a Big Brother-is-watching-you kinda way.

Morning Brief

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Everyone is helping First Republic Bank.

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Robinhood never learns.

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The ump is blind. Get ‘em an iPad.

Banking

First Republic Bank Gets Rescued by the US’ Biggest Banks

Behold, the most ambitious crossover event in banking history.

On Thursday, the country’s biggest banks banded together to prevent further contagion from the Silicon Valley Bank implosion, agreeing to collectively pour an unsecured credit loan of up to $30 billion into the next most likely victim of a bank run: First Republic Bank. In the process, they may just restore faith in America’s banking system… or create a financial Justice League that we never wanted to need.

Sharing the Load

How did First Republic Bank end up in such a pickle? Well, its executives might be asking themselves the same question. The bank, which caters to wealthy clientele, had a large share of deposits above the FDIC $250,000 insurance limit, but it was a mere 68%, compared to SVB’s 94%, according to S&P Global. In December, First Republic reported roughly $212 billion in assets, and on Sunday reassured depositors it had roughly $70 billion in liquidity.

But that was not enough to prevent a panic among its high-end clientele, who began maneuvering (presumably via various apps) to shift their money elsewhere. By Wednesday, both S&P Global Ratings and Fitch Ratings downgraded First Republic’s credit rating, exacerbating the company’s 70% share price dropoff since around Wednesday last week, creating more panic.

And so after reportedly meeting with officials at The Fed and Treasury Department, a group of nearly a dozen banks announced Thursday that they were moving to perform something closer to a bailout than a buyout:

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The big players — JPMorgan, BofA, Wells Fargo, and Citigroup — each pitched in $5 billion, while Goldman Sachs and Morgan Stanley deposited $2.5 billion each, and State Street, PNC, Truist, US Bancorp, and Bank of New York Mellon each added around $1 billion.

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In theory, the banks effectively shifted the money that fleeing First Republic clients took out and are bringing it back into First Republic. The deposits will remain at First Republic for at least 120 days, sources told CNBC.

“This action by America’s largest banks reflects their confidence in First Republic and in banks of all sizes, and it demonstrates their overall commitment to helping banks serve their customers and communities,” the banks said in a group statement.

Fool Me Twice: The big banks have reason enough not to chop up First Republic and buy it in pieces — or for one bank to buy it outright. Jamie Dimon, we assume, still wakes up in the occasional cold sweat remembering the fallout from purchasing Bear Stearns and Washington Mutual in 2008. We’ll see if banking’s all-for-one-and-one-for-all moment is enough to keep the next batch of high-end clientele of an overleveraged bank from panicking if things head south again.

– Brian Boyle

Trading

Robinhood Beats Hasty Retreat After Blocking Signature Bank Shorts

Robinhood is in hot water again, but this time it’s because of someone else’s liquidity crisis.

The digital exchange backpedaled furiously Thursday on its decision to refuse traders cashing out their short bets against failed Signature Bank, after realizing that it would have to honor options contracts sold on its platform despite its rather hazy ban on short selling.

This? Again?

This is not the first time Robinhood has acted like a despot despite its claim to be “democratizing finance.” In January 2021, when a Reddit-fuelled frenzy super-charged the value of meme stocks, Robinhood — facing a sudden liquidity crisis — stopped users from buying stock in companies including Gamestop and AMC.

This time Robinhood was caught out by short selling, i.e. betting that a company’s shares will decrease in value, and profiting off the difference. When crypto-exposed Signature’s stock started to plunge as the inexorable domino that was Silicon Valley Bank hurtled towards it, some canny users bought put options. After Signature was shuttered by New York State regulators, Robinhood’s knee-jerk reaction was to tell users that they couldn’t exercise their options contracts, which were set to expire on Friday.

The customer uproar and public backlash that followed seem to have forced Robinhood into a U-turn:

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Robinhood told the Financial Times it would be willing to go to market to buy up shares so it can honor its contracts with users. Finding shares for a bank that’s already dead in the water could be tricky, so Robinhood might have to get creative.

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Users are sitting on some pretty hefty gains from foretelling Signature’s demise. One Robinhood user, a former bank trader called Shaun William Davies, told the FT his $3,445 trade should have turned into $25,000. “It’s crazy that you make the right bet but that it’s so right, you can’t get paid,” he said.

Cryptoo-de-lally: Signature’s disintegration isn’t the only crypto-themed headache Robinhood is experiencing. The company announced at the end of last month it had received an investigative subpoena from the SEC over its crypto listings following the seismic collapse of FTX. Robinhood allows users to trade crypto tokens including Bitcoin, Ethereum, and the super-serious Dogecoin. Digital brokers make plans and God laughs… or maybe they don’t make plans, and he laughs even harder.

– Isobel Asher Hamilton

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Sports

MLB Taps Zoom for New Instant Replay Procedures

(Photo Credit: Mrs. Flax/Flickr)

Put me in, coach. I’m ready to replay.

Video conference company Zoom hit a clutch home run with MLB this season as on-field umpires will use the software to review disputed plays. As Yogi Berra put it, “you can observe a lot just by watching.”

Hey, Batta Batta

MLB introduced instant replays for certain calls in 2008, and it’s become an occasionally frustrating part of America’s pastime. According to the Associated Press, there were 1,434 video reviews last season that included 1,261 team challenges with 50.2% leading to overturned calls. The umpires on the field, however, never reviewed the tape, but would huddle awkwardly as they waited for a replay umpire elsewhere to radio in their decision. For this upcoming season, field umpires will be given iPads – sorry, Android fans, but Apple secured an $85 million annual streaming rights deal with MLB last year – to review plays and discuss with the replay umpire, who still makes the final decision.

Despite the league’s best effort to speed things up, baseball remains a slow, methodical sport with games typically lasting about three hours. In that same amount of time you could’ve watched The Godfather, or cooked a Thanksgiving turkey, or taken a high-speed train from London to Paris. That isn’t stopping Zoom from root, root, rooting for the home team:

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Zoom became ingrained in our lives during the pandemic as school, business meetings, and doctor’s appointments all transitioned to video chat. In October 2020, its stock saw a noteworthy height of $560 a share.

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But it didn’t last. Zoom fatigue is real, the world is open again, and despite revenue increasing 7% year-over-year, the company’s stock has since plummeted 87% since its pandemic peaks to about $70. It’s another tech company that flew too close to the COVID sun.

All in one place: Looking ahead, Zoom will have to diversify beyond just video calls if it wants to compete with the likes of Google and Slack. At last year’s Zoomtopia conference, the company announced it will introduce email integration, a calendar system, and a team chat function. These days, every app needs to be an everything app.

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Griffin Kelly

Extra Upside

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Let me take you down: Storms flood hundreds of acres of California strawberry fields.

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Game over, man: Twitch CEO Emmett Shear to step down after more than ten years.

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Just For Fun

Paging Isaac Newton.

One perfect shot.

Have a great weekend!

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