(NEW YORK) — Sam Bankman-Fried on Monday sought to dismiss most of the criminal charges he faces in connection with the collapse of FTX, the crypto exchange he founded.
Bankman-Fried filed a motion to dismiss 10 of the 13 counts he faces, including fraud, conspiracy and foreign bribery.
The two-page motion included a reference to declarations from two of Bankman-Fried’s attorneys that would give the underlying reasons why he thinks the charges should be dismissed. The motion said at least some of the charges failed to properly state an offense.
Bankman-Fried was arrested in December 2022 in the Bahamas, where FTX was based. He has been confined to his parents’ home in Palo Alto, California, since his extradition to the United States.
He has pleaded not guilty to the charges contained in the indictments returned in Manhattan, New York, where federal prosecutors said he misappropriated billions of dollars from FTX before it went bankrupt. Prosecutors allege he used the money to cover losses at his hedge fund, Alameda Research, to buy lavish real estate and to make political donations.
In a November 2022 interview with ABC News, before his arrest, Bankman-Fried said he was ultimately responsible for the downfall of both companies, but denied that he knew “that there was any improper use of customer funds.”
Prosecutors have until the end of the month to respond to Bankman-Fried’s motion to dismiss.
(KEMMERER, Wyo.) — TerraPower, founded by billionaire and Microsoft co-founder Bill Gates in 2008, is opening a new nuclear power plant in Kemmerer, Wyoming. The plant will be the first of its kind, with the company hoping to revolutionize the nuclear energy industry in the U.S. to help fight climate change and support American energy independence.
“Nuclear energy, if we do it right, will help us solve our climate goals,” Gates told ABC News. “That is, get rid of the greenhouse gas emissions without making the electricity system far more expensive or less reliable.”
Gates met with ABC News’ chief business, economics and technology correspondent Rebecca Jarvis in Kemmerer to talk about the project.
“Nuclear has some incredible pluses,” Gates said. “It’s not weather dependent, you can build a plant, but the amount of energy coming out of a very small plant is gigantic.”
While nuclear energy is well known for having a lot of potential, the safety risks associated with it have historically concerned some investors; however, Gates said he’s confident TerraPower can build an innovative nuclear reactor that is safe and practical for the future.
Most nuclear reactors in the U.S. use water to cool the system, but water is not the best at absorbing heat, and there are pressure risks associated with overheating, which could eventually lead to a meltdown. This new reactor, which is set to open in 2030, will use liquid sodium instead of water to cool it. Sodium’s boiling point is eight times higher than water, and, unlike water, liquid sodium does not need to be continually pumped back into the system.
“We’ve solved all the areas where there have been safety challenges. And we have dramatically less waste,” Gates said. “A great thing is that the regulator in the United States is the best in the world and they do a very good job. So part of the process between now and 2030 is an immensely detailed review with that safety commission about how this design is far safer than anything that came before.”
The new plant, which has been in the works for 15 years, faced delays at the end of 2022, after Russia’s invasion of Ukraine in February of that year resulted in the loss of a special fuel source made in Russia. But Gates assured these issues are temporary.
“A lot of uranium mines and processing factories got shut down because people expected Russia to stay as a supplier. We do need to build that up domestically,” Gates said. “But we have uranium domestically. We have the ability to do the processing domestically… In the long run, because of our uranium deposits here, because of the efficiency of the reactor, this thing can have a completely domestic supply chain.”
Kemmerer, once the site of a booming coal industry, has since seen a decline in recent years, with the coal plant scheduled to shut down after operating for almost 60 years. Gates emphasized the importance of reintegrating older energy industries of the U.S. into future energy industries as a way of revitalizing communities. The nuclear plant plans to employ hundreds of construction workers and previous employees from the coal plant where skills overlap, while providing energy to hundreds of thousands of homes, the TerraPower said in a recent press release.
Gates on artificial intelligence
Gates also spoke with ABC News about his opinions on AI and what it means for the future of the world. He said he views the technology as game-changing, saying “it’s pretty fundamental.”
“We’re often surprised how good it is. Sometimes we’re surprised at what it can’t do right. Early days, but revolutionary,” Gates said.
He said he sees big potential for AI to create shockwaves in all industries where it will change the way we think about things.
“In health and education, used properly, it will be fantastic,” Gates said. “That’s a big deal. Improving education, you know, making sure students who are in private schools or even suburban schools, that they have this way of getting great feedback. You know, I’m excited.”
Gates also said how impressed he was at OpenAI’s ChatGPT software and the leaps it had made within the last year, telling ABC News: “I was surprised last year that going from GPT-3 to GPT-4, it improved so much.”
The risk of AI safety has also been on Gates’ mind, he said, and he voiced some of his concerns regarding the rapid advance of the technology and the negative consequences if it were to be used with bad intentions.
“We’re all scared a bad guy could grab it,” Gates said, adding: “If you just pause the good guys, and you don’t pause everyone else, you’re probably hurting yourself.”
And while Gates said he doesn’t believe government regulators are up to speed about the technology and prepared to make big decisions yet, he does believe that the pros of AI outweigh the cons, and that the conversation around it is headed in the right direction.
“The field, more than any field I know, is actually putting in a lot of the smart people into, OK, what comes next and how do we make sure that’s beneficial,” Gates said. “I see the AI, used properly, is providing a lot of benefits that, no, I wouldn’t want to throw those away.”
(WASHINGTON) — President Joe Biden and Transportation Secretary Pete Buttigieg on Monday plan to announce a new rulemaking process to look at requiring airlines to compensate passengers who experience inconvenience because of “controllable airline cancellations or significant delays.”
The process is expected to include compensation, along with refunds and other amenities, in certain situations, according to the White House.
“When an airline causes a flight cancellation or delay, passengers should not foot the bill,” Buttigieg said in a statement.
He said the process would require airlines “for the first time in U.S. history” to compensate passengers and additional expenses, including meals and hotels.
They’d also be required to cover rebooking when they have “caused a cancellation or significant delay,” he said.
The president will also announce that the Department of Transportation will launch “an expanded Airline Customer Service Dashboard” at FlightRights.gov that will highlight “which airlines currently offer cash compensation, provide travel credits or vouchers, or award frequent flyer miles and cover the costs for other amenities,” according to a White House official.
According to the official, the dashboard will show no airlines currently provide compensation in addition to refunds if passengers experience significant delays or cancelations due to something the airline can control, like mechanical issues.
(NEW YORK) — McDonald’s customers are more reluctant to add fries to their order, grocery shoppers are less willing to swallow the elevated price of Unilever mayonnaise and Target customers are balking at some high-priced items.
Executives from each of these companies mentioned the respective observations in recent earnings calls or reports, suggesting an emerging trend: some consumers are pushing back on inflation.
Despite more than two years of higher-than-usual inflation, consumers remain resilient. Retail sales slid in recent months but stood well above the same period last year; while consumer sentiment inched upward in April, Conference Board data showed.
Still, consumers have begun to refuse some high prices as pandemic-era habits change and some buyers fear an economic downturn, analysts told ABC News. Consumers are putting off big-ticket purchases, they said, though analysts differed on buyers’ willingness to tolerate high prices for food.
The consumer pushback could continue if price hikes remain elevated, they added, noting that the healthy state of U.S. households would continue to fuel spending in the near term.
“Consumers are generally starting to slow spending and become a bit price sensitive,” Randy Konik, a retail analyst at financial services firm Jefferies, told ABC News.
“Inflation is going to keep putting pressure on consumer wallets,” he added.
Consumer prices rose 5% last month compared to a year ago, extending a monthslong slowdown of price increases, but leaving inflation more than double the target rate of 2%.
The price hikes for some consumer staples stand significantly higher than the overall rate, however. The cost of flour has jumped more than 17% over the past year; while the price of cookies has risen over 16%, government data showed.
In all, food prices climbed 8.5% over the past year, a pace more than 50% faster than the overall rate.
The price hikes have stuck around despite an aggressive set of rate hikes at the Federal Reserve that aim to cut prices by slowing the economy.
The combination of inflation and high interest rates has put a squeeze on consumers, who bear the burden of elevated prices but face expensive borrowing costs if they want to take out a loan to ease the financial pain, said Konik, of Jefferies.
The resistance toward high prices, Konik added, has particularly manifested for two sets of goods: in-store food and big-ticket purchases such as cars and boats.
The two groups of items make up a “price sensitivity barbell,” he said, adding that frustration has arisen from repeatedly encountered grocery prices on one end of the spectrum and one-time sticker shock for major purchases on the other.
Simeon Siegel, a retail analyst at BMO Financial Group, echoed the observation about consumer intolerance centered on big-ticket items and durable goods, tracing the current reluctance back to a pandemic-era wave of purchases for items like exercise bikes and couches.
“During the pandemic, everyone over-purchased,” he said. “The question is: What did they over-purchase?”
“Pelotons and patio furniture are big-ticket items,” he added. “They don’t need to be replenished.”
However, consumers have been forced to tolerate high prices for recurring purchases and they’ve remained willing to do so, Siegel added.
“Someone who has bought a carton of milk and consumed it has gone on to purchase it many times over,” he said.
Consumers will spend on high-priced essentials for the foreseeable future, Siegel said. “People spend on items they need,” he added.
Konick, however, said he expects a continued slowdown in consumer spending on goods with elevated prices, both big and small.
“We’re not going to see the consumer crash,” he said. “But because inflation is going to stay somewhat sticky and because interest rates aren’t going down anytime soon, we’re going to see a slow erosion.”
(NEW YORK) — The Jeep Wrangler can ford rivers, crawl over boulders, traverse deserts and blaze through uncharted territory. Fierce yet affordable, the humble 4X4 has long been the go-to vehicle for outdoor enthusiasts.
These days, however, the rugged sport utility vehicle may seem more like a luxury ute than off-roading warrior.
Last month, Jeep executives introduced the redesigned 2024 Wrangler, replete with all the modern necessities: 12-way power adjustable front seats, a 12.3-inch touchscreen, advanced safety features, contrast accent stitching and acoustic front glass and thicker carpeting for a quieter ride.
These updates took a lot of engineering prowess to get right, according to Jim Morrison, senior vice president and head of Jeep North America.
“Drivers can now have water up to their knees and still have a power seat,” he told ABC News.
Morrison, a veteran Jeep executive, knew that to keep Jeep owners happy — and bring in new customers — the Wrangler had to be as good on road as it is off-road.
“The new inclusion of power seats truly speaks to who Jeep’s real customer base is: affluent people,” Ed Kim, president of consulting firm AutoPacific, told ABC News. “These customers want the image and style of a Wrangler. For affluent customers, there has been this long and growing desire for real, rugged off-road vehicles.”
Like Jeep, automakers Rivian and Kia saw the sales potential of adventure-type vehicles, said Kim.
“Even the Kia Telluride has more rugged styling than the typical family crossover and it’s been a success,” he noted.
As the Wrangler’s popularity has risen, so has the price. A base 4-door Wrangler Sport starts at $36,990. The Rubicon 392, with a 6.4L V8 SRT Hemi engine, has an MSRP of $82,495.
The Wrangler 4xe, the top-selling plug-in hybrid in the U.S., starts at $54,735 before a $3,750 federal tax credit is applied.
In February, Jeep introduced two 20th anniversary editions: a Wrangler Rubicon 4xe and a Wrangler Rubicon 392. Jeep execs capped production of the two models to 3,000 units, calling them “the most capable Wranglers yet.” They were priced accordingly: $69,585 for the 4xe model and $90,895 for the 392. A Level II upfit by American Expedition Vehicles (AEV) added more than $20,000 to the price.
Consumers did not care; the 20th anniversary Wrangler Rubicon 392 — with a price tag of $113,820 — sold out within an hour. The $90,895 version was gone in less than 24 hours.
“We are seeing more demand for high-priced Wranglers,” said Morrison. “Wrangler has a high residual value.”
Kim said the high prices can be attributed to two factors: the supply crunch and automakers choosing to produce “more lavishly equipped models” to make up for a loss in volume. Jeep has also started to customize Wranglers at its factory in Ohio, allowing customers to spend even more.
“The Wrangler has long been an aftermarket favorite — you buy it and immediately do a lift kit on it, add big wheels and tires. A whole industry was built around the Wrangler,” Kim said. “Jeep saw an opportunity to do customization at the factory. Rubicons now come with the best off-road gear already installed.”
Jeep’s longtime competitors were Chevrolet and Ford, mainstream automotive brands that middle-income Americans could afford. Now, Jeep competes with upscale brands like Infiniti and Acura, said Kim. More than 200,000 Wranglers were sold last year, making it Jeep’s second most popular model after the Grand Cherokee.
“Jeep executives have talked about pushing the brand into a more premium space,” Kim said. “New Wranglers are street vehicles 99% of the time. Very few customers go off-road in them.”
These days corporate executives and wealthy families are buying the Wrangler. Even Porsche 911 owners are trading in their sports cars for one, according to Tyson Jominy, vice president of data and analytics at J.D. Power.
“The 4-door Wrangler is a family vehicle,” he told ABC News. “Adding four doors expanded its user friendliness and moved the Wrangler upmarket. The Wrangler became the halo SUV.”
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Lofty prices and high interest rates haven’t frightened customers from buying a Wrangler yet, said Jominy.
“It remains to be seen if the prices have become too high,” he said. “The Wrangler has few incentives, if any. But there’s no slowing down the Wrangler. There are so few like it. The only competitor is the Ford Bronco.”
Orlando resident Colin Wallace said his Wrangler Rubicon 4xe is the best Jeep he’s owned. He commutes to and from his office on electric power alone, gassing up maybe once a month. Wallace, a former Volkswagen GTI and Porsche Cayman owner, pays nearly $400 a month to lease the plug-in hybrid though he knows of other Rubicon 4xe owners who pay $800 a month. The sticker price of his 4xe is $66,000 — more than a Porsche Macan SUV he had on order.
Wallace touted the Wrangler’s improved highway handling though he cautioned prospective buyers to temper their expectations.
“A lot of people who are drawn to the Wrangler 4xe are expecting a Prius,” he told ABC News. “It’s not one. It lacks the niceties. It’s at a luxury price point but doesn’t have safety features you’d expect for $60,000.”
Jominy said Americans often overlook the Wrangler’s faults — drifting on the highway, poor fuel economy and rough ride — for the benefits of owning one.
“The Wrangler doesn’t pretend to be something it’s not,” he said. “You can take the doors and windshield off. Kids love them. Wranglers are so much fun because they’re so unique from everything else on the road.”
He added, “You know there’s going to be trade-offs, even at the high prices. You forgive it for things that you normally wouldn’t.”
Morrison said the latest version of the Wrangler solves his one complaint with the SUV.
“I can now drive 80 mph and talk to my mom on the phone,” he said.
(NEW YORK) — When it comes to the password habits of Americans, there’s some room for improvement. But some tech companies are hoping a new security technology known as a “passkey” may offer a solution.
Passkeys, as they’re known, is a new security technology that works by having a person’s smartphone generate unique cryptographic “key,” which can then be used to unlock that person’s various online accounts – no password required.
“If I had to use one word it would be ‘lazy,'” Patricija Cerniauskaite, a spokesperson for digital security firm Nordpass, told ABC News, describing the habits of some Americans when it comes to their passwords.
A new report from Nordpass finds 83% of the most common passwords globally can be hacked in less than one second. According to Nordpass, the most common password among Americans last year was the word “guest. “123456” was the second most-common password, and in third place was, simply, “password.”
Cerniauskaite says the prominence of weak passwords is nothing new, in part because of the sheer volume of accounts internet users now have to manage.
“For a general person, it’s impossible to learn and remember 80 or 100 different, complicated password[s],” Cerniauskaite said. That’s why, she says, many people resort to words and phrases that are easier to remember, but less secure.
“It’s understandable, but it compromises people’s security,” she said.
Recently, tech companies including Google, Apple, and Microsoft have been rolling out passkeys to offer a solution to Americans’ bad password habits.
“The server will be sending a request to your device which can only be answered by the related passkey stored there,” Cerniauskaite said. “So when the passkeys are paired, you will actually be logged into your account.”
“You’ve confirmed to your device that you are who you say you are,” David Pierce, Editor At Large of The Verge, told ABC News. “And your device now goes to the website and says, ‘yup, it’s David.’ And you’re good to go.”
To set up a passkey, users navigate to the login screen of an account, and select the option to sign in with a passkey (usually the option is accompanied by a small icon that looks like a person standing next to a key). Then, the account will prompt the user to log in to their phone using a face scan, a fingerprint, or other security measure.
“It replaces a password, which is a series of letters and numbers and symbols that you have memorized, with essentially biometric information stored on your device,” Pierce said.
Passkeys are stored on a person’s phone or computer. Experts say this is more secure than having a company oversee a server full of user passwords, which could be vulnerable to hacking.
“Even if your password is good and safe, it can be stored somewhere and often those places are hackable and that’s how passwords get leaked,” Pierce said. “That is much much harder to do in a case like this.”
In addition, Pierce says, passkeys address the problem of “phishing” scams – where malicious actors create fake websites, designed to look like real login pages, with the intention of collecting the usernames and passwords of people who fall for the scam.
“You can’t give a hacker your password anymore, you can’t be socially engineered into giving someone your password,” he said, because “you don’t have a password anymore.”
This week, Google announced that passkeys are now available for Google accounts across most major platforms. Websites like eBay, Shopify, CVS Health, Kayak, and Best Buy all support the technology – but some major players are missing. Popular websites like Amazon, Facebook, and Twitter have yet to announce passkey support. Pierce says that’s likely to change as the technology matures.
“It will happen kind of, account by account, service by service, company by company,” he said. “It would be great if everybody would decide to do it at the same time, but that’s not likely going to happen.”
There are other drawbacks to passkeys as tying authentication to smartphones also ties it to smartphone batteries.
“If I’m out in the world and my battery dies – my password manager just died,” Pierce said.
(NEW YORK) — A better-than-expected jobs report on Friday defied interest rate hikes that aim to slash inflation by cooling the economy.
Instead, the U.S. added 253,000 jobs in April, marking a slight decline from an average of 290,000 over the previous six months. The unemployment rate fell to 3.4%, matching a 54-year low, government data showed.
The job gains, however, did not accrue evenly across sectors. Some industries posted blockbuster expansions while others lagged far behind.
“There are good signs and there’s broad growth,” William Spriggs, chief economist for the labor federation AFL-CIO, told ABC News. “But many of the sectors didn’t do very much.”
Here’s what to know about which industries are seeing jobs grow the fastest and why:
Business and professional services: 43,000 jobs added
The sector that featured the most job gains covers a wide-reaching set of positions referred to as business and professional services, which includes highly trained employees such as attorneys, accountants, managers and computer engineers, among others.
The sector added 43,000 jobs last month, nearly doubling an average of 25,000 jobs gained over the previous six months.
The major expansion arrives despite high-profile layoffs last month in the media and tech industries, with some cuts involving management at companies such as Disney, Vice Media and Lyft.
The layoffs elsewhere may have driven some of the job growth in this sector, since companies across the economy depend on tech professionals but often face difficulty attracting them, Julia Pollak, a labor economist at ZipRecruiter, told ABC News.
“Their contraction is a boon to the rest of the economy, which almost had no chance recruiting top software engineers before,” Pollak said. “Finally, it stands a chance.”
Health care: 40,000 jobs added
Health care, an industry that has shown strong job growth in recent months, continued at a blistering pace in April.
The performance in this industry owes in large part to the aging U.S. population, Pollak said.
Roughly 17% of Americans are 65 years of age or older, according to a report released in February by the Administration of Aging, a government agency. That share of the population, which counts 55.7 million people, has grown nearly 40% since 2010, the report said.
Employment at nursing and residential care facilities made up almost a quarter of the jobs added in the sector last month, government data showed.
“This is an industry with tremendous long-term prospects,” Pollak said. “Where labor can’t easily be replaced by ChatGPT.”
Despite a bright future, the sector faced major difficulties during the pandemic when an overwhelming need for care led to staffing shortages and burnout, Spriggs said.
“We know that the sector was hurt deeply by the COVID crisis,” he said. “I think this is a very good sign that it’s on its way to recovery.”
Leisure and hospitality: 31,000 jobs added
Leisure and hospitality, an industry decimated by the pandemic, sustained strong growth in April as it continued to climb back toward pre-pandemic employment levels.
More than 80% of the job gains in the sector took place at food service and drinking establishments, which have benefited from the return of dining out and nightlife as coronavirus cases have waned.
But employment in the industry remains 2.4% below the employment level in February 2020, government data showed.
The shortfall of workers leaves room for growth in the sector, no matter how the wider economy fares, said Jeffrey Roach, chief economist at Charlotte-based investment firm LPL Financial.
“We should expect continued job gains in these industries even if the broader economy shrinks,” Roach said.
(NEW YORK) — Former first lady Michelle Obama has announced her latest venture, PLEZi Nutrition, aimed at creating healthy food and beverage options for parents to give “healthier, great-tasting products” to their kids.
Obama first shared the news of the public benefit company, whose purpose is to “help raise a healthier generation of kids,” during closing remarks on Wednesday at the Wall Street Journal’s Future Of Everything Festival.
“I’ve learned that on this issue, if you want to change the game, you can’t just work from the outside. You’ve got to get inside — you’ve got to find ways to change the food and beverage industry itself,” she said in her speech, addressing thousands of industry leaders in attendance. “I’m proud to announce the national launch of a company designed not just to provide better products, but to jumpstart a race to the top that will transform the entire food industry.”
The first product to launch under the brand is a new kids’ drink, PLEZi, that will come in four flavors and contains 75% less sugar than the average leading fruit juices, with no added sugar, plus fiber and other nutrients. The drinks are currently available nationwide at Target and Sprouts, as well as online at Walmart, with a goal to “ultimately be available anywhere you can buy a soda or sports drink.”
Obama has long been invested in public health, particularly in children’s nutrition. During her time as first lady, she launched the Let’s Move! campaign, the Chef’s Move to Schools program, which paired chefs with interested schools to create healthy meals that meet schools’ dietary guidelines and budgets, and championed the Healthy, Hunger-Free Kids Act that her husband, former President Barack Obama, signed into law in December 2010.
Now, as a co-founder and strategic partner with PLEZi Nutrition, Michelle Obama will work behind-the-scenes to guide the company’s mission as “a driver of change and model for how food and beverage brands can support the health of our next generation,” the company stated.
PLEZi Nutrition is “focused on lowering sugar content and lowering sweetness to help adjust kids’ palates to crave less sweetness overall,” the company said in a press release shared with ABC News. “In addition to reducing the sugar and sweetness, they are adding in nutrients kids need, all with the aim to replace sugary drinks and snacks.”
On average, kids in the U.S. don’t consume the recommended levels of nutrients and instead consume far too much added sugar — 53 pounds of added sugar per year on average, according to the press release.
“Sugar-sweetened beverages, also referred to as sugary drinks, are the leading source of added sugar, and nearly two-thirds of youth consume sugary drinks on a given day,” the statement continued.
In the years ahead, PLEZi has plans to expand beyond beverages and into the healthy snacks space.
The company will also work to provide beyond its product lines with an educational platform for parents and kids. It also plans to dedicate a chunk of its marketing budget to promotional content around what’s best for kids’ health, including the importance of water as a primary beverage for kids.
Obama also announced the PLEZi “Kitchen Cabinet” advisory group, led by food policy expert Debra Eschmeyer, who will guide and advise those educational efforts, marketing approaches and product development. The group includes doctors, professors, bestselling authors and CEOs with combined accolades and experience in public health, school nutrition, parenting, medicine and advocacy.
Eschmeyer previously served as executive director of the Let’s Move! initiative and is a former senior White House policy adviser for nutrition.
PLEZi Nutrition states on its website that it has already made an initial $1 million donation to FoodCorps’ Nourishing Futures initiative, which aims to “ensure all 50 million students across the country have access to nutrition education and free school meals by 2030.”
(LOS ANGELES) — Shares of PacWest Bancorp plunged more than 50% in early trading on Thursday, marking the latest spasm of financial distress after three of the nation’s 30-largest banks fell within a matter of weeks.
In all, PacWest stock has fallen more than 85% this year, erasing hundreds of millions of dollars in value.
The Los Angeles-based midsized lender is exploring “all options” as it weighs offers from potential investors as well as the sale of a $2.7 billion loan portfolio, PacWest said in a statement on Wednesday.
However, the company rejected concern about a sudden run on deposits, saying it has “not experienced out-of-the-ordinary deposit flows” since the seizure and sale of First Republic on Monday.
Deposits, PacWest said last month, increased nearly 4% over an 11-day period in late March, even after the collapse of Silicon Valley Bank had set off financial uncertainty.
As the Fed aggressively hiked interest rates over the past year, the value of long-term Treasury and mortgage bonds dropped, punching a hole in the balance sheets at some regional banks.
The failure of Silicon Valley Bank in March sent shockwaves through the financial system that days later helped bring down New York City-based Signature Bank. On Monday, First Republic fell under government control before a sale to JPMorgan Chase.
While high interest rates contributed to the collapses, each of the banks also retained a sizable portion of uninsured depositors, who tend to panic without a government backstop for their funds.
PacWest appears to fit the mold, since its balance sheet carries securities vulnerable to high interest rates and a share of its deposits are uninsured, Greg Nini, a finance professor at Drexel University, told ABC News.
“The important ingredients are those fundamentals,” he said. “It sure sounds like collapse is possible.”
PacWest has not responded to ABC News’ request for comment.
The distress at First Republic earlier this week delivered some “knock-on effects” that further destabilized the bank, Nini added.
Addressing concern about deposits that lack government protection, PacWest said on Wednesday that insured deposits make up 75% of its holdings, which marks a sharp increase from the end of last year, when just 48% of its deposits were insured.
Despite rising fear about the fate of PacWest, the significant portion of guaranteed deposits should prevent the bank from sliding into failure, Julian Vogel, a finance professor at San Jose State University, told ABC News.
“I really don’t think it should be on the brink. Those people’s money is absolutely safe,” Vogel said. “Even if the company goes down, they will get their money, period.”
“While I understand that the drop in stock price can be fear-inducing, it’s not necessarily related to the overall performance of the company on a day-to-day basis.”
Stock prices at other regional banks dropped in early trading on Thursday, suggesting that the financial fallout was not limited to PacWest. Phoenix-based Western Alliance Bancorp shares plummeted about 32%; while Salt Lake City-based Zions Bancorp fell 8%.
Since the banking trouble has been largely concentrated at regional lenders located in the Southwest, depositors could be spreading concern through word of mouth, Vogel said.
“They’re all in the same region, which means that the people that have money in PacWest likely know their neighbor or friend or somebody from the gym that has money with banks affected by First Republic or Silicon Valley Bank,” he said.
The outcome at PacWest marks a “very pivotal” moment for the financial system, Vogel said.
“This is the first time that we’re seeing a bank that really shouldn’t have anything to worry about,” Vogel said. “It’s a solid company. Depositors are mostly insured.”
“If consumers keep panicking,” he added. “Then this could be the start of a new phase and there will be a lot more ahead.”
(WASHINGTON) — The Biden administration will support public assessments of generative AI systems like ChatGPT to educate the public about whether these new systems align with the administration’s “bill of rights” for AI that’s aimed at preventing the new technology’s misuse, The White House announced early on Thursday.
These assessments will take place at a hacker convention in Las Vegas in August, the White House said.
Vice President Kamala Harris on Thursday plans to meet with the CEOs of Alphabet, Anthropic, Microsoft and OpenAI to “underscore” their “responsibility” as they develop AI and to “emphasize the importance of driving responsible, trustworthy, and ethical innovation with safeguards that mitigate risks and potential harms to individuals and our society,” the White House said. This meeting will be closed to the press.
The White House also confirmed that the National Science Foundation will spend $140 million to open seven new national research institutes studying AI, which will expand the number of institutes to 25 across the country.
These institutes will work with institutes of higher education, private companies and the government to “to pursue transformative AI advances that are ethical, trustworthy, responsible, and serve the public good,” the White House said.
“The new Institutes announced today will advance AI R&D to drive breakthroughs in critical areas, including climate, agriculture, energy, public health, education, and cybersecurity,” read the statement from the White House.
The White House’s budget office will also be announcing on Thursday that it plans to make public a draft of the policy guidance it plans to provide federal agencies with regarding the use of AI systems that makes sure its use “centers on safeguarding the American people’s rights and safety.”
The White House Office of Management and Budget plans to release the draft this summer and will open it up for public comment before it’s finalized, the White House said.
With regard to the public assessments of platforms like ChatGPT, the White House said that it has received a commitment “from leading AI developers, including Anthropic, Google, Hugging Face, Microsoft, NVIDIA, OpenAI, and Stability AI, to participate in a public evaluation of AI systems, consistent with responsible disclosure principles.” The assessments will take place at a hacker convention, called DEF CON 31, which is scheduled to be held in Las Vegas this August, according to the White House.
“This will allow these models to be evaluated thoroughly by thousands of community partners and AI experts to explore how the models align with the principles and practices outlined in the Biden-Harris Administration’s Blueprint for an AI Bill of Rights and AI Risk Management Framework,” the White House said. “This independent exercise will provide critical information to researchers and the public about the impacts of these models, and will enable AI companies and developers take steps to fix issues found in those models. Testing of AI models independent of government or the companies that have developed them is an important component in their effective evaluation.”
These are not the first steps the Biden Administration has taken regarding the issue.
In February, President Joe Biden signed an executive order that directed federal agencies to “root out bias in their design and use of new technologies, including AI, and to protect the public from algorithmic discrimination,” said the White House.
