Fed Moves to Stem SVB Crisis; PBOC Chief to Stay On for a Few More Months

Federal Reserve Moves to Stem SVB Crisis; PBOC Chief to Stay On for a Few More Months By James Christie

Good day. U.S. regulators took control of a second bank Sunday and raced to roll out emergency measures to stem potential spillovers from Friday's swift collapse of Silicon Valley Bank, backstopping both firms' uninsured depositors and making more funding available to the banking system. Regulators announced Signature Bank, one of the main banks for cryptocurrency companies, was closed Sunday. The New York bank's depositors will be made whole, officials said. Regulators also said that depositors at SVB would have access to all of their money on Monday. Meanwhile, Fed officials could debate whether to raise rates by a quarter- or half-percentage-point at their next meeting following Friday's jobs report and SVB's crash. Elsewhere, China's legislature voted to keep Yi Gang at the helm of the People's Bank of China as Chinese leader Xi Jinping overhauls the country's financial bodies, taking away some functions from the central bank. Mr. Yi is expected to extend his leadership for a few months to provide continuity, according to people familiar with the matter.

Now on to today's news and analysis.

Top News Federal Reserve Moves to Stem SVB Crisis

Officials took the extraordinary step of designating Silicon Valley Bank and Signature Bank as a systemic risk to the financial system, which gives regulators flexibility to backstop uninsured deposits . The Federal Reserve and the Treasury Department also used emergency lending authorities to establish a new facility to help meet withdrawals. The government's bank-deposit insurance fund will cover all deposits at the two banks, rather than the standard $250,000. Federal regulators said that any losses to the government's fund would be recovered in a special assessment on banks and that the U.S. taxpayers wouldn't bear any losses.

Investors Rush to Safety of Bonds After Regulators Unveil Bank Support Silicon Valley Bank's U.K. Arm to Be Bought by HSBC Signature Bank Is Shut by Regulators After SVB Failure First Republic Gets Additional Funding From Fed, JPMorgan How Silicon Valley Turned on Silicon Valley Bank Where Were the Regulators as SVB Crashed? Jobs Report, Bank Failure Complicate Outlook on Interest Rates

The February employment report does little to sharply alter the economic outlook for Federal Reserve officials who are considering how much to raise interest rates at their coming meeting. But the failure of Silicon Valley Bank on Friday led Wall Street investors to pare their bets that the central bank would opt for a larger half-percentage-point increase, rather than a smaller quarter-point bump, amid broader concerns about financial stability risks .

China Retains Central Bank Governor During Regulatory Shake-Up

China's legislature voted Sunday to retain Yi Gang as governor of the People's Bank of China, delaying a move to hand over the post in the midst of a restructuring of the financial regulatory system.

Join Our Live Q&A on Silicon Valley Bank Meltdown

Silicon Valley Bank collapsed on Friday, becoming the largest bank to fail since the 2008 financial crisis. On Sunday, regulators rolled out emergency measures to prevent a banking crisis and guarantee depositors access to their money. Join the WSJ for a live discussion at 4 p.m. ET that will also feature Sheila Bair, former head of the FDIC, on the fallout from the bank failure.

U.S. Economy U.S. Employers Added a Solid 311,000 Jobs in February

Employers added a seasonally adjusted 311,000 jobs last month, a cooler but still strong increase following a revised 504,000 gain in January, the Labor Department reported Friday. The unemployment rate rose to 3.6% last month from January's 3.4%, the lowest rate in 53 years.

Tech, Finance Companies Continue to Cut Jobs

Student-Loan Bills Set to Add Pressure on Younger Americans

Americans in their 30s and younger are already showing signs of financial strain : in the fourth quarter they fell behind on credit-card payments by 90 days or more at a rate similar to that in 2009, at the end of the financial crisis.

Three Million U.S. Households Making Over $150,000 Are Still Renting

The number of renter households making $150,000 or more a year rose by 87% between 2016 and 2021 to more than 3 million, according to five-year estimates from the U.S. Census Bureau.

Key Developments Around the World Global Economy Gets Tailwind From Falling Energy Prices

Energy prices are roiling the global economy for the second time in a year, with plunging oil and natural-gas prices pumping up economic growth , putting money into consumers' pockets and easing pressures on government budgets.

U.S., EU Try to Defuse Subsidies Dispute to Focus on Russia, China

The U.S. and Europe agreed Friday to new steps aimed at resolving a spat over subsidies for clean-energy technology, an effort to preserve a trans-Atlantic relationship strengthened following Russia's invasion of Ukraine.

Xi Jinping Brings China's Reform Era to an End

A decade into Xi Jinping's rule, the puzzle pieces of his designs for China are in place, marking a definitive end to Deng Xiaoping's reform-and-opening era to unshackle China from the ideological turmoil of Mao Zedong's rule.

How Beijing Boxed America Out of the South China Sea China's Premier Seeks to Soothe Anxieties About Economy, Business Environment

Saudi Arabia, Iran Restore Relations in Deal Brokered by China

Iran and Saudi Arabia agreed to re-establish diplomatic relations Friday in a deal mediated by China, a sign of Beijing's rising influence in the Middle East, where the U.S. has long been the dominant power broker.

China Plans New Middle East Summit as Diplomatic Role Takes Shape

British Prime Minister Says China Presents 'Epoch-Defining' Challenge

China poses an "epoch-defining systemic challenge" to the U.K. and its allies, U.K.'s prime minister said, as the government said it would spend an extra $6 billion on its nuclear-armed submarine fleet and replenishing munitions.

Forward Guidance Monday (all times ET)

Time N/A: ECB's Panetta in Eurogroup meeting in Brussels

10 a.m.: The Conference Board Employment Trends Index for U.S. for February

Tuesday

Time N/A: ECB's de Guindos in ECOFIN meeting in Brussels

3 a.m.: U.K. employment report for January

8:30 a.m.: U.S. consumer-price index for February

5:20 p.m.: Fed's Bowman speaks at Independent Community Bankers Association's ICBA Live 2023

Research Philadelphia Fed Finds Rise in 'Banking Deserts' During Pandemic

Pennsylvania, Delaware and New Jersey lost a net 627 bank branches during the pandemic, leading to more areas without retail branches near residents and businesses, according to new research from the Federal Reserve Bank of Philadelphia.

Pittsburgh-based PNC Bank, Wells Fargo and Santander Bank closed the most branches during the pandemic, a combined 210 locations in the three states, authors Alaina Barca and Lei Ding said.

Bank branch closings trended up after the 2007-09 recession, driven by the financial crisis and the rising popularity of online banking. But the pandemic shifted the trend into a higher gear, according to the report, with an average net closure pace of 251 branches a year in those states compared with a prepandemic pace of 105 branches a year.

The authors said the number of so-called banking deserts rose to 63 by June 2022 from 48 in 2019 in the three states. They defined a banking desert as a census tract with no bank branch within a defined radius of the tract's center of population-2 miles in urban areas, 5 miles in suburban areas and 10 miles in rural areas.

Rural and suburban areas had slightly more bank branch closings than cities during the pandemic, a surprising finding. "This may be explained by the expansion of certain large banks in the major cities," the report said. Areas with banking deserts included Williamsport, Pa., and Vineland, N.J.

Low- and moderate-income and nonwhite communities were "generally no more likely to have been affected by pandemic-period branch closures than other communities," the report said.

-Bob Fernandez

Commentary Bank Mayhem Is on Fed's Radar on Jobs Friday

Credit-market participants on Friday lowered their Fed rate expectations probably over concerns that trouble at Silicon Valley Bank could spread, making the Fed wary of raising rates, Justin Lahart writes.

Who Killed Silicon Valley Bank?

Everyone, except Silicon Valley Bank management it seems, knew interest rates were heading up , as Federal Reserve Chairman Jerome Powell has been shouting this from the mountain tops, yet SVB froze and kept business as usual, borrowing short-term from depositors and lending long-term, without any interest-rate hedging, Andy Kessler writes.

Banks Trade Relief Now for Regulation Later

Nobody wants to be called systemically important- until they need a hand , Aaron Back writes. Midsize lenders are likely to feel relieved in the immediate term, but their case for a lighter regulatory touch is now dead.

Critical-Mineral Diplomacy Needs to Focus on Supply, Not Demand

With renewables as with fossil fuels, developing diplomatic relations with big producer nations will be key to energy security. Talks between worried buyers are a sideshow , Stephen Wilmot writes.

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03-13-23 0715ET