(WASHINGTON) — Policymakers and investors will closely watch a decision from the Federal Reserve on Wednesday about whether to raise interest rates as the U.S. economy weathers two pressing challenges: a banking crisis and persistent inflation.
The precarious moment poses a dilemma for the Fed because its strongest tool, the benchmark interest rate, is a key cause of the financial emergency but the primary solution for high prices.
The central bank has aggressively raised interest rates over the past year, bringing inflation down significantly from a summer peak, though it remains more than triple the Fed’s target of 2%.
The rapid rise in interest rates, however, tanked the value of bonds held by Silicon Valley Bank, precipitating its failure and cascading damage for the financial sector.
Nearly 190 banks are at risk of collapse amid high interest rates and declining asset values, according to a study released by a team of university researchers earlier this month.
A continuation of rate hikes risks further intensifying the banking crisis, putting additional financial institutions at risk of collapse. However, a pause on rate increases could undermine the Federal Reserve’s fight against inflation, allowing high prices to persist and eat away at household budgets, economists previously told ABC News.
A survey by Bloomberg last week found that most economists expect the Fed to raise interest rates by 0.25% on Wednesday, matching the increase that the central bank imposed at its most recent meeting last month.
In recent days, some forecasters have predicted the Fed will forego an interest rate hike as it monitors the continuing fallout from the Silicon Valley Bank failure.
Goldman Sachs, for instance, told investors on Monday that it expects the Fed “to pause at its March meeting this week because of stress in the banking system.”
Over the last year, the Federal Reserve raised its benchmark interest rate by 4.5%, the fastest pace since the 1980s.
The Fed has put forward a string of borrowing cost increases as it tries to slash price hikes by slowing the economy and choking off demand. The approach, however, risks tipping the U.S. economy into a recession and putting millions out of work.
Persistent rate hikes also threaten the stability of the banking system.
Still, the Fed could avoid facing a choice between slowing price increases and preserving financial stability, since tighter lending practices taken up by private sector banks in response to the financial distress may cool the economy on its own accord, allowing the Fed to forego raising rates while still bringing down inflation.
“No matter what the Fed does later this month, financial conditions are tightening,” Julia Pollak, chief economist at Zip Recruiter, said last week.
(NEW YORK) — TikTok is facing growing scrutiny from government officials over cybersecurity fears about Americans’ data. U.S. officials are reportedly demanding that Chinese owners sell its stake in the app or risk a nationwide ban.
Later this week, TikTok CEO Shou Zi Chew is set to face questions from congressional lawmakers about the platforms’ data security practices and relationship with the Chinese government. Meanwhile, a proposed bill with bipartisan support and backed by President Joe Biden would empower the executive branch to ban TikTok and other apps owned by Chinese companies.
Former Under Secretary of State Keith Krach, who worked to crack down on TikTok under the Trump administration, joined “GMA3” hosts DeMarco Morgan and Eva Pilgrim to discuss why he views the app as a major cybersecurity threat.
PILGRIM: You believe TikTok is a national security threat. What concerns you the most?
KRACH: Well, I think the biggest thing is that TikTok can track keystrokes. Here’s what that means. That means that they have access to your passwords, all your data. They have access to your health records, your bank records. They have access to your geopolitical information or your geospatial information. That means that they can track where you are, where you’ve been and where you’re going. But I think one of the things that’s worse is that it’s not just about you. It’s about the people you digitally interact with. So look at it as a digital virus, because it can infect the people around you. And the only vaccine for this is a total ban.
MORGAN: Well, Keith, experts have called a potential TikTok ban unchartered territory. They’ve been talking about this for quite some time and a huge undertaking. And experts say a nationwide ban may not stop the app from collecting Americans’ data. How exactly would one work? And how concerned are you that Americans would be able to get around a ban?
KRACH: You know, it’s actually not unprecedented. We did the same thing with Huawei and 5G. And if you look at Huawei and 5G, that’s the backbone for the surveillance state, and TikTok is one of those key appendages that comes off of that. So right now in Congress, Sen. Warner, Sen. Thune, have a bill, the Restrict Act, that actually gives the Secretary of Commerce, Gina Raimondo, the authority to ban applications, technology from our adversaries.
PILGRIM: A bipartisan bill to give the president power to ban the app is gaining support in the Senate. You’ve discussed TikTok concerns with members of Congress and the Biden administration. But how real of a possibility is this? What are you hearing from them?
KRACH: Oh, this is certainly real. You know, I can tell you, as undersecretary, I had a lot of closed-door sessions with Congress. I couldn’t tell the difference between a Democrat and Republican when it came to Chinese technology. You know, this is our biggest national security threat. And I can tell you, if they can weaponize a balloon, they can certainly weaponize 150 million American TikTok users at their mercy.
MORGAN: So with that said, what’s your response to critics of this ban, including the ACLU, who argue it would limit free speech and violate the First Amendment?
KRACH: Look, I’m all for free speech. A big advocate for that. But the fact is, TikTok limits free speech. If you don’t believe me, just try to post something on Tiananmen Square or post something on Taiwan, and you’ll see what happens. You know, the other thing, too, is that TikTok has been used to limit freedom of the press. I was just talking to a reporter yesterday from the Financial Times, and she shared with me how TikTok, they actually use TikTok to track down one of their journalists and try to intimidate him writing an unflattering story about China.
PILGRIM: One of the thing a lot of parents talk about when it comes to TikTok and social media. According to recent CDC data, nearly one in three high school girls considered attempting suicide in 2021, up nearly 60% from a decade before. And now schools across the country are suing social media companies for allegedly contributing to the youth mental health crisis. TikTok says they prioritize safety and wellbeing of teens with age-restricted features, screen time limits and parental controls. But my question to you, what can Silicon Valley do to better protect our kids?
KRACH: Yeah. You know, Eva, I’ve got 11-year-old twins, a boy and a girl. So obviously, this is a big issue. You know, there’s social media and then there’s TikTok. TikTok is programed to be addictive. It preys actually on children. It’s kind of disguised as candy, but it’s actually cocaine. And this is one of the big things. If you look at how TikTok is actually being used inside of China– I’m not talking outside of China– they use it as an educational app for STEM, for science, technology, engineering and math. So there’s two big differences there. And TikTok is by far the worst.
(WASHINGTON) — Treasury Secretary Janet Yellen said Tuesday that “the situation is stabilizing and the U.S. banking system remains sound,” after regional bank failures have shaken the U.S. banking system.
“The Fed’s facility and discount window lending are working as intended to provide liquidity to the banking system,” she said during a speech at a meeting of the American Bankers Association in Washington. “Aggregate deposit outflows from regional banks have stabilized.”
She said the government’s intervention in the failures of Silicon Valley Bank and Signature Bank were “necessary” — and said “similar actions could be warranted” to protect smaller banks.
“The steps we took were not focused on aiding specific banks or classes of banks,” she said. “Our intervention was necessary to protect the broader U.S. banking system, and similar actions could be warranted if smaller institutions suffered deposit runs that pose the risk of contagion.”
She argued that the existence of smaller banks was important.
“Large banks play an important role in our economy, but so do small- and mid-sized banks,” she said. “These banks are heavily engaged in traditional banking services that provide vital credit and financial support to families and small businesses. They also increase competition in the banking sector, and often have specialized knowledge and expertise in the communities they invest in.
“Large banks play an important role in our economy, but so does small and mid-sized banks,” she said. “These banks are heavily engaged in traditional banking services that provide vital credit and financial support to families and small businesses. They also increase competition in the banking sector and often have specialized knowledge and expertise in the communities they invest in. Indeed, many of these banks have played an important role in supporting our economic recovery in the depths of the pandemic.”
“The Treasury is committed to ensuring the ongoing health and competitiveness of our vibrant community and regional banking institution,” she said.
(NEW YORK) — As fallout continues from the Silicon Valley Bank collapse — the second-biggest bank failure in U.S. history — people across the country are simultaneously feeling the impact of inflation in their pocketbooks.
The Federal Reserve will meet Wednesday to decide whether to raise or pause interest rates after continuously raising them over the past year in order to help curb inflation.
The Fed’s decision will have an impact on everything from individual credit card bills to the costs of everyday items to the banking crisis, experts say.
To help explain it all, ABC News chief economics correspondent Rebecca Jarvis and Good Morning America consumer correspondent Becky Worley answered viewers’ questions on topics including credit card payments, home buying and more.
1. What would a change in interest rates mean for people’s credit card payments?
Jarvis said that if the Fed decides to pause interest rates, as some experts predict will happen, it would have a “significant impact” on credit card payments.
“This will mean that some of those rates that have been climbing won’t climb as much in the near future,” Jarvis said, citing mortgage rates and higher interest rates on credit cards.
Jarvis added that even if the Fed takes a pause on raising interest rates this week, the rates could “still climb going forward.” Because of that, she said the most important step people should take is to continue paying off their credit card debt.
“If you have that credit card bill, you want to keep making those payments,” she said.
2. Is housing sitting on a bubble, like in 2007?
Jarvis said that fortunately today, we are in a “very different world” than the housing crisis of 2007, when interest rates went up and people were unable to repay their mortgage, leading to foreclosures and bankruptcies.
“First of all, the jobs market is as strong, historically, as it’s ever been,” Jarvis said. “Second of all … 85% of people who own homes have mortgages below 5%. What that means is if you were going to go out and buy a new house right now, you’d have to take out a far more expensive mortgage, so people don’t want to sell because they already have the best deal sitting in their own home.”
Jarvis said because people aren’t selling their homes, there is less inventory, which is leading to higher home prices.
“We don’t see the foreclosure we saw last time [in 2007], which is what makes this a much more sound market and housing,” she explained.
3. If I’m looking to buy a home, should I expect mortgage rates to improve?
According to Jarvis, one upside to the current banking crisis, combined with the potential for the Fed to pause interest rates, is that mortgage rates have decreased slightly, going from 7.15% to 7% over the past week.
“It’s tiny but that incremental difference can make a difference in what you pay,” Jarvis said.
When it comes to deciding whether or not now is the right time to buy a home, Jarvis said people should consider whether they will stay in the home for at least five years and whether they are staying within their budget with the purchase.
“Those are the most important questions that anyone should be asking if they’re thinking about buying a home, not just ‘Can I time this market properly?'” Jarvis said, adding that “renting is always an option, and there are great calculators at Bankrate.com and Realtor.com [to] check the whole thing out.”
4. Is now a good time to buy a car?
According to Worley, many people are paying the equivalent of a monthly mortgage or rent payment for their car.
The average car payment at the end of 2022 was $716 for a new car and $526 for a used car, according to Experian, a financial data analysis company.
Worley said that unfortunately for people either in the market for a car or who are currently making high car payments, it is now a “waiting game.”
“We’re waiting for those interest rates to stabilize or for them to go down,” she said.
Worley said one step people can take in the meantime, is to work on improving their credit score.
“If you have a higher credit score, you’ll get a lower interest rate when you can finally, hopefully, get into a lower rate and refinance or renegotiate,” Worley said. “But that’s really all we can do right now if you’re already locked into a high payment.”
5. Are cars still in short supply?
Yes, according to Worley.
“The supply chain is still a little bit messy,” Worley said. “And then dealers are, on many high-demand cars, putting a markup on top of the sticker price, and then you have high interest rates, so it is painful out there.”
Worley said her advice is to keep driving your current car for as long as you can, saying, “If you can eat 5,000 or 10,000 miles out of the old car, you should do it until those rates come down, if those rates come down.”
(WASHINGTON) — Treasury Secretary Janet Yellen plans to say during a speech on Tuesday that “the situation is stabilizing and the U.S. banking system remains sound,” according to excerpts of her prepared remarks provided by the Treasury Department.
“The Fed facility and discount window lending are working as intended to provide liquidity to the banking system,” she plans to say during a speech at the American Bankers Association’s summit in Washington. “Aggregate deposit outflows from regional banks have stabilized.”
She also plans to argue that the existence of smaller banks was important.
“Large banks play an important role in our economy, but so do small- and mid-sized banks,” she plans to say. “These banks are heavily engaged in traditional banking services that provide vital credit and financial support to families and small businesses. They also increase competition in the banking sector, and often have specialized knowledge and expertise in the communities they invest in.”
“Treasury is committed to ensuring the ongoing health and competitiveness of our vibrant community and regional banking institutions,” she’ll say.
(NEW YORK) — The collapse of Silicon Valley Bank, the second-biggest bank failure in U.S. history, has thrust the financial system into distress, pulling attention away from a separate problem: sky-high inflation.
The twin economic challenges pose a dilemma for the Federal Reserve because its strongest tool, the benchmark interest rate, is a key cause of the financial emergency but the primary solution for high prices.
The central bank has aggressively raised interest rates over the past year, bringing inflation down significantly from a summer peak, though it remains more than triple the Fed’s target of 2%.
The rapid rise in interest rates, however, tanked the value of bonds held by Silicon Valley Bank, precipitating its failure.
A continuation of the rate hikes risks further intensifying the banking crisis, putting additional financial institutions at risk of collapse. However, a pause on rate increases could undermine the Federal Reserve’s fight against inflation, allowing high prices to persist and eat away at household budgets, economists said.
“It’s a very delicate balance,” Andrew Levin, an economics professor at Dartmouth College and a former Fed economist, told ABC News. “If we’re in a situation where the Fed can’t make sure prices are stable because it’s too worried about the stability of the banking system, that would be a very unfortunate situation.”
Still, the Fed could avoid facing a choice between the two objectives, since tighter lending practices taken up by private sector banks in response to the financial distress may cool the economy on its own accord, allowing the Fed to forego raising rates while still bringing down inflation, economists said.
“It does seem as though financial instability could take care of inflation anyway,” Julia Pollak, chief economist at Zip Recruiter, told ABC News.
Over the last year, the Federal Reserve raised its benchmark interest rate 4.5%, the fastest pace since the 1980s.
The Fed has put forward a string of borrowing cost increases as it tries to slash price hikes by slowing the economy and choking off demand. The approach, however, risks tipping the U.S. economy into a recession and putting millions out of work.
So far, however, the economy has proven fairly resilient, Levin said, citing the robust job market.
“If the economy continues to be strong, inflation might well stay far above the Fed’s target,” Levin said. “Interest rates may need to go substantially higher to bring inflation down.”
In early March, Fed Chair Jerome Powell told Congress that inflation “has a long way to go and is likely to be bumpy,” saying the central bank expects “ongoing increases” to its benchmark interest rate.
But persistent rate hikes also threaten the stability of the banking system.
The rapid spike in interest rates over the past year dropped the value of Silicon Valley Bank’s treasury bonds and mortgage bonds, punching a hole in its balance sheet and scaring away some depositors, who triggered a devastating 48-hour bank run.
While Silicon Valley Bank faced uniquely acute exposure, it’s hardly the only vulnerable bank.
At the end of last year, U.S. banks were sitting on $620 billion in unrealized losses, or holdings that have fallen in price but have yet to be sold, the Federal Deposit Insurance Corporation found.
Swiss banking giant UBS bought ailing rival Credit Suisse on Monday for $3.2 billion, as Swiss banking regulators helped put together a rescue.
The largest financial institutions in the U.S. took action on Friday in an effort to stabilize the financial sector, placing $30 billion in First Republic bank, one of the embattled regional lenders.
Bank of America, Citi, JPMorgan Chase, Wells Fargo and Goldman Sachs were among a slew of big banks that participated in the effort. The bank’s shares have continued to plummet, however, dropping 47% on Monday.
While troubling for many, such financial disarray is a possible outcome one can expect from rapid interest rate hikes, Pollak said. Rather than undermine the fight against inflation, the banking crisis is part and parcel of it, she added.
“Typically the Fed raises rates until something breaks,” Pollak said. “That break unleashes panic and brings tightening lending standards to banks.”
“The immediate effect of tighter credit is households buying fewer houses and businesses investing less, and that affects the demand for goods,” she added, bringing prices down. “That cycle perpetuates itself.”
In turn, some forecasters predict that the Fed will forego an additional rate hike at its meeting on Wednesday, citing the fragility of the financial system.
In a research note, Goldman Sachs told investors on Monday that it expects the Fed “to pause at its March meeting this week because of stress in the banking system.”
Levin, of Dartmouth, said he thinks the Fed should take that cautious approach on rates this week.
“It should try to reassure the market that it’s on top of this and monitoring carefully,” he said.
If the financial stress continues, prices could fall anyway, he added.
“People won’t go out and buy that refrigerator,” he said. “The upward pressure on inflation could subside really quickly.”
(WASHINGTON) — The Federal Reserve was aware of risks to Silicon Valley Bank more than a year before its collapse, ABC News confirmed on Monday following a New York Times report.
Even more, ABC News has confirmed a Wall Street Journal report that the Fed cited risks to Silicon Valley Bank’s management as early as 2019 — four years before the bank’s collapse.
In all, the Fed cautioned the bank about its concerns on several occasions, ABC News confirmed.
In a 2021 review, the Fed identified significant vulnerabilities in the bank’s containment of risk, but the bank did not rectify the weaknesses.
The Federal Reserve of San Francisco, a regional entity that supervised Silicon Valley Bank, slapped the bank with six citations, including a note on the bank’s failure to retain enough accessible cash for a potential downturn, according to the Times and confirmed by ABC News.
The following year, in July 2022, Silicon Valley Bank received a closer look known as a full supervisory review, which rated the bank deficient for governance and controls.
Last fall, employees at the Federal Reserve of San Francisco met with top officials at the bank to address the lack of accessible cash and the potential risks posed by rising interest rates. Former Silicon Valley Bank CEO Greg Becker sat on the board of directors at the Federal Reserve Bank of San Francisco from January 2019 until the day of the bank’s collapse on March 10.
Details about the Fed’s conduct toward Silicon Valley Bank over the past two years were first reported by the New York Times and confirmed by ABC News. Silicon Valley Bank did not immediately respond to ABC News’ request for comment.
The Fed’s warnings proved prescient earlier this month, when the collapse of Silicon Valley Bank marked the second-biggest bank failure in U.S. history.
The bank’s deposit base, which draws heavily from startup firms in the technology industry, tripled in size during the pandemic-era tech boom between 2020 and 2022.
Rather than invest all of the deposits into other startups or venture firms, the bank placed a sizable share of the funds into long-term Treasury bonds and mortgage bonds, which typically deliver small but reliable returns amid low interest rates.
In short order, however, the low-interest rate environment evaporated. Over the last year, the Federal Reserve raised its benchmark interest rate 4.5%, the fastest pace since the 1980s.
The sudden spike in interest rates dropped the value of Silicon Valley Bank’s Treasury bonds and mortgage bonds, punching a hole in its balance sheet.
Two weeks ago, when Silicon Valley Bank announced it had lost $1.8 billion on the sale of those distressed bonds, major depositors withdrew their funds, prompting others to follow in quick succession.
The bank failed to generate enough cash to meet the demand of depositors seeking funds — a spiral downward that shuttered the bank in less than 48 hours.
The Fed is currently conducting an internal review of how it supervised and regulated Silicon Valley Bank, officials said. Those findings will be publicly released May 1.
(NEW YORK) — Let’s be honest: electric vehicles can get a bad rap.
Maybe it’s range anxiety. Or the scarcity — and uncertainty — of public charging stations. Both are valid reasons why some Americans are dubious of electric vehicles.
More industry watchers are now arguing a plug-in hybrid (PHEV) may be the “ideal” powertrain of choice for those wanting to try out EVs. Plug-in hybrids have a gasoline engine, at least one electric motor and a battery pack, which can be charged via regenerative braking or a plug. Some PHEVs can even travel up to 60 miles in electric mode.
They were once seen as a temporary solution to EV adoption. Not anymore.
“The reality is electric vehicles won’t work for everyone — not now, not in the next five or even 15 years,” Robby DeGraff, an analyst at AutoPacific, told ABC News. “There will always be people living in apartments or homes who don’t have a place to plug in. We should not be forcing EVs on people.”
DeGraff said the EV charging infrastructure lags in Milwaukee, Wisconsin, where he lives. He can count the number of level 3 chargers in the city, adding that many are often broken or offline. He attributes the excitement around EVs to Tesla, the top-selling EV automaker in the U.S., noting that the “Tesla buzz” hasn’t stopped even with the increased competition.
“If you’re a consumer toying with the idea of an EV … you look at the Tesla charging network, which is fantastic,” he said. “Teslas are still very desirable and hot.”
Last year 186,400 PHEV units were sold in the U.S. versus 774,000 battery electric vehicles (BEV). AutoPacific predicts sales of plug-ins to hit 305,000 this year and 425,900 in 2024. There are currently 51 PHEVs (including cars, SUVs, crossovers and one minivan) on the market and 61 BEVs. DeGraff said consumers would buy more PHEVs if they were aware of the benefits of owning one.
“They’re more affordable than a common electric vehicle and operate like a traditional hybrid when the electric range is out,” he said. “They have more flexibility … I think they’re perfect.”
The No. 1 selling PHEV in the U.S. is the Jeep Wrangler 4xe, which launched in 2021. The Wrangler 4xe now accounts for 24% of all Wrangler sales and more than 43,100 units were sold in 2022. (The 4xe is available in Willys, Sahara, High Altitude and Rubicon models.) Jeep then debuted the Grand Cherokee 4xe in late 2022.
The Wrangler 4xe gets 21 miles of electric range; the Grand Cherokee 4xe tops out at 25 miles. Jeep, part of the Stellantis automotive conglomerate, will introduce even more electrified models by 2025.
“By 2030, more than 50% of Jeep brand sales in the United States will be fully electric,” a spokesperson told ABC News.
Japanese automaker Toyota will add the latest generation of its Prius Prime this spring following the success of the RAV4 Prime sport utility vehicle, which has an EPA-estimated electric range of 42 miles.
“The demand for our Prime vehicles exceeds our ability to manufacture them,” a Toyota spokesperson told ABC News. “Almost every RAV4 Prime is pre-sold before they hit the lots. With the design and features of our all-new 2023 Prius Prime, we expect the same customer demand when it goes on sale.”
Toyota, a pioneer of hybrid technology, recently said it would focus more attention on BEVs, a significant shift for the company. Plug-in hybrids, however, will still be available to drivers who prefer them.
“Our strategy will continue to evolve as we work to meet customer demands but PHEVs will continue to be a piece of that strategy,” the spokesperson said.
Karl Brauer, executive analyst at iSeeCars.com, said plug-in hybrids have “zero downside” for owners, especially since they can be easily charged with a standard, 110v outlet — no pricey external charger required.
“With a PHEV you’re not at the mercy of the public charging infrastructure, which is still pretty lacking,” he told ABC News. “You will never face lines or deal with non-functioning chargers.”
Many PHEVs can qualify for state and federal tax credits, too. PHEVs may weigh more than non-hybrids but the instant torque from the electric motor will immediately satisfy drivers, Brauer said.
“PHEVs are the most complex type of car and the tech keeps getting better and better,” he said. “Battery packs are getting more efficient and lighter. The newest versions won’t suffer weight penalties as earlier models did.”
Mitsubishi Motors has been producing a plug-in version of its Outlander for a decade. The electrified SUV was a hit globally and landed in the U.S. in 2018. The niche automaker recently unveiled an updated Outlander PHEV with boosted electric range (38 miles), a third row and improved styling and handling.
“We essentially invented the segment,” Cason Grover, Mitsubishi Motors North America director of product planning, told ABC News. “The Outlander was a huge success for us, surprising a lot of people. It set us on a really good path.”
Grover touted the “surprising acceleration” of PHEVs, adding that electrification “brings lots of benefits.” He agreed that pairing a gasoline engine with an electric motor eliminates the fears drivers share about EVs.
“It’s nice to have that ability to drive long distances with an internal combustion engine,” he said.
Luxury automakers like BMW, Porsche and Bentley have also been making PHEVs for years. BMW recently added the XM, a high-performance plug-in hybrid SUV that produces a combined 644 horsepower and 590 lb-ft of torque from a twin-turbo V8 engine and electric motor.
The modish SUV can travel for 30 miles as EV before the 4.4-liter engine kicks in. Plus, the battery charges from zero to 100% in 3.25 hours, BMW says.
Bentley pairs a turbocharged V6 engine with an electric motor in its plug-in hybrid Bentayga and Flying Spur. The vehicles are powered by a 18.0 kWh lithium-ion battery that can be recharged in as little as two-and-a-half hours. The electric-only range on the Bentayga hybrid is at least 28 miles; the Flying Spur hybrid gets 25 miles in EV Drive mode.
German automaker Porsche sells more plug-ins overseas but the company’s all-electric Taycan has actually boosted interest in the company’s hybrids in the U.S., according to a spokesperson. Porsche launched the Panamera E-Hybrid in 2013 followed by the Cayenne E-Hybrid a year later.
“The Taycan has acted as a lighthouse and drawn the attention of non-traditional Porsche customers to the availability of a PHEV model range,” the spokesperson told ABC News.
The E-Hybrids have an EPA-tested range of 15 and 14 miles.
“In the real world, drivers found they would get 20% more range than listed,” the spokesperson said.
Plug-ins are starting to revolutionize the supercar world as well. Ferrari’s SF90 Stradale pairs a twin-turbocharged V8 with three electric motors, giving the car aphrodisiac qualities and mind-blowing acceleration.
McLaren’s Artura, the British’s marque new plug-in hybrid, delivers sleek styling, scintillating performance and insane speeds with minimal to no emissions. Owners can drive in silence for 19 miles before the twin-turbo V6 engine awakens.
Nicolas Brown, president of McLaren the Americas, said customers are not demanding a pure EV quite yet.
“Our focus is on high-performance hybrids,” he told ABC News. “This hybrid ticks all the boxes and the driver experience isn’t compromised. The battery technology isn’t there yet to have a true, all-electric track car.”
Brauer expects the electric range of PHEVs to increase in the coming years, with 100 miles a real possibility. Now, automakers have to do more to educate motorists about these vehicles, he argued.
“It’s unfortunate the average consumer isn’t more aware of plug-ins,” he said. “If you look at all the pros and cons of drivetrains, PHEVs would be that much more popular.”
(NEW YORK) — Awkward dads and their eager children may not dance together on TikTok for much longer — at least not in the U.S.
The prospect of a nationwide TikTok ban has escalated from a theoretical possibility to a serious policy consideration, drawing growing support in Washington, D.C.
However, scant details are known about how the policy would be implemented and what it would mean for more than 100 million U.S.-based users of the app.
China-owned TikTok has faced growing scrutiny from government officials over fears that user data could fall into the possession of the Chinese government and the app could ultimately be weaponized by China to spread misinformation.
The Biden administration has stiffened its posture toward TikTok in recent weeks, endorsing a bipartisan bill earlier this month that would empower the federal government to ban apps like TikTok.
The administration’s stance hardened further this week, when officials demanded that TikTok’s Chinese owner sell its stake in the app or risk getting banned, the company and a U.S. official previously told ABC News.
A TikTok ban could take effect in a variety of ways, including its forced removal from Apple and Google app stores or an outright block of access by internet service providers, experts told ABC News.
While dedicated users would find ways to circumvent any government crackdown, the app would suffer a dramatic decline in popularity and eventually be rendered defunct, they added.
“The U.S. doesn’t typically ban websites like this — it would be very much uncharted territory,” Timothy Edgar, a computer science professor at Brown University and a former national security official, told ABC News. “It would be an enormous undertaking.”
TikTok did not respond to ABC News’ request for comment.
In response to bans of TikTok on some government devices, TikTok previously told ABC News in a statement: “We appreciate that some governments have wisely chosen not to implement such bans due to a lack of evidence that there is any such need, but it’s disappointing to see that other government bodies and institutions are banning TikTok on employee devices with no deliberation or evidence.”
“We share a common goal with governments that are concerned about user privacy, but these bans are misguided and do nothing to further privacy or security,” the company added.
Here’s what to know about the different ways the government could implement a nationwide TikTok ban, and what it would mean for TikTok users:
The removal of TikTok from app stores
A simple way to significantly curtail access to TikTok is in the form of a mandatory withdrawal of the app from major app stores, such as those maintained by Google and Apple.
Such a measure would bar new users and limiting existing ones, experts said.
“It would prevent new users from downloading and installing the app,” Qi Liao, a professor of computer science at Central Michigan University, told ABC News. “And the app would not be able to download updates, eventually becoming obsolete.”
The approach has gained support from at least one U.S. Senator. Last month, Sen. Michael Bennet, D-CO, sent a letter to Apple CEO Tim Cook and Google CEO Sundar Pichai, calling on their companies to remove TikTok from their respective app stores and cited concerns about how TikTok handles the data of American users.
Google and Apple did not respond to a previous request for comment about the letter.
Savvy users could get around such a ban by using offline app installation that bypasses the app stores, Liao said.
Still, an app store ban would immediately limit TikTok’s audience, he added.
“As soon as you ban TikTok on the app store, it’s going to make an impact,” Liao said.
A block of access to TikTok’s servers or IP address
A ban of the app could also take effect using a barrier that blocks access to TikTok’s web servers or its IP address, the experts said.
In such a case, attempts to access the app would fail because users would not be able to receive digital content from TikTok or reach its web host.
“It would do enormous damage to TikTok,” Edgar said.
The government could use a “sinkhole,” or a specially designed server that redirects web traffic when users try to reach illicit websites, such as child pornography or pirated material, Edgar said.
“Users may go to a page saying, “TikTok was banned by the U.S. government and this page was seized by the Department of Justice,'” Edgar said.
As with other approaches, users could elude the government-imposed barrier, experts said.
To access the app, users could use a Virtual Private Network, or VPN, which allows one to pose as a user logging on from a location abroad, thereby circumventing the U.S.-specific ban, Liao said.
“In China, it’s the reverse,” Liao said. “People use a VPN to access blocked U.S. services because the Chinese government has such censorship.”
Despite the readily available workaround, the effort required to log in from a VPN will deter many people from continuing their use of TikTok, Edgar said.
“One you’ve banned it, mainstream users may not want to take those kinds of risks — it may not be that important to them,” he said. “TikTok influencers will lose huge amounts of followers.”
A clampdown by internet service providers
A TikTok ban may take shape as a denial of access imposed by internet service providers, companies like Verizon and AT&T that deliver internet access for individuals, homes, businesses and other institutions, experts said.
Internet service providers could “totally block the TikTok network,” leaving all customers unable to access the app, Liao said.
A TikTok ban imposed by India in 2020 required internet service providers to deny customers the ability to use the app, Sarah Kreps, director of Cornell University’s Tech Policy Institute, told ABC News.
“This is a case where in the U.S. you’d have to get Verizon to essentially block this app,” she said.
Liao, who noted that India’s approach also mandated the removal of TikTok from app stores, said a denial of access by internet service providers would expand measures that some companies already take to prevent the use of specific websites, such as age-inappropriate content.
“They’re already doing lots of traffic shaping,” Liao said.
Customers could potentially get around a barrier from internet service providers, or ISPs, by using a different SIM card, the chip implanted in a mobile device that identifies a customer, Liao said. Users could also forego a SIM card altogether, he added.
“Then you’ll completely bypass the ISP-blocking of TikTok,” he said.
As with the other solutions, this approach would not eliminate access entirely but would shrink the user base, Kreps said.
“The hope with that would be to slow down the flywheel,” she said. “You’re not going to prevent every single user from using TikTok but that would certainly make it much more difficult to use.”
(NEW YORK) — A string of bank collapses in recent days sent panic rippling through the financial sector, prompting an extraordinary U.S. government intervention to save depositors and a sharp drop for bank stocks in the U.S. and Europe.
Some people and institutions, however, made money amid the turmoil.
Silicon Valley Bank CEO Greg Becker sold $3.6 million worth of the company’s shares less than two weeks before the bank’s collapse, drawing scrutiny from lawmakers like Rep. Ro Khanna, D-Calif., who called on the bank to claw back the compensation.
Meanwhile, as panic mounted and bank stocks plummeted over a three-day period before the Silicon Valley Bank failure, $2.3 billion in profit flowed to short sellers, traders who bet that the shares would fall, data firm S3 partners said.
Finally, in the aftermath of the bank collapse, a wave of new depositors opened up accounts at some of the nation’s largest banks, such as JPMorgan Chase.
Here’s what you need to know who benefited from the banking crisis and why:
Silicon Valley Bank CEO Greg Becker
Financial filings showed millions worth of shares sold by Becker’s trust late last month, raising questions about what he knew about the imminent financial trouble faced by the bank.
Khanna, who represents the district in which Silicon Valley Bank was headquartered, called for the return of the money to depositors.
“I have said that there should be a clawback of that money,” Khanna said on Monday. “Whatever his motives, and we should find out, that $3.6 million should go to depositors.”
Silicon Valley Bank did not immediately respond to a request for comment.
Kevin Murphy, a professor of finance and business economics at the University of Southern California who specializes in executive compensation, said the stock sale has elicited valid concern.
“There’s no question that this raises eyebrows,” Murphy said. “The optics are bad.”
However, the conduct may be “less problematic” than it appears, he added.
After the exercise price and taxes associated with the sale, Becker stood to gain roughly $1 million, Murphy said, noting that the amount makes up a fraction of the $9.9 million in total compensation received by Becker last year.
Becker’s stock options were set to expire in May, leaving him just a few months shy of the deadline, Murphy added. The stock sale falls within conduct permitted by law.
“It raises red flags,” Murphy said. “But I wouldn’t put as much weight on it as the layman.”
Still, the company could ultimately claw back some or all of the money from Becker, he added, citing financial documents filed by the company earlier this month.
“They do have a policy in place,” he said. “There is scope here for the board to initiate a recoupment but it’s somewhat limited.”
Short sellers
Another set of individuals who profited amid the distress at Silicon Valley Bank is short sellers, investors who make money when a stock drops.
As shares of banks plummeted before and after the collapse of Silicon Valley Bank, short sellers have generated massive profits.
On a single day last week, shares of Silicon Valley Bank plummeted 60%. The stock price of First Republic Bank, another regional lender under stress, fell 30% on Thursday to a low last seen 13 years ago. It later rallied after big banks announced $30 billion in combined deposits in the bank.
Over a nine-day period in early March, short sellers raked in $7.1 billion on $50 billion worth of investments, a staggering return of about 14%, Ihor Dusaniwsky, a managing director at S3 partners, told ABC News.
“That’s a phenomenal return,” Dusaniwsky said. “You’re catching lightning in a bottle.”
The success of short sellers in recent days has stoked concern over the possible role such traders play in depressing the price of Silicon Valley Bank shares, heightening panic on social media and exacerbating the ensuing bank run.
The influence of short sellers deserves scrutiny in the case of Silicon Bank, since its depositors were made up of a relatively small group of venture capital firms, tech startups and other large investors, Connel Fullenkamp, an economics professor at Duke University who studies short selling, told ABC News.
“That’s something we have to take seriously in the case of Silicon Valley Bank because the community of depositors is so internet savvy and tech savvy,” Fullenkamp said. “A big part of the story is how much communication there was among the depositors and certainly this feedback loop of short sellers and depositors can make things worse.”
However, fears about the negative consequences of short selling in a banking crisis overlook the useful role played by such traders, he added.
“Without the short sellers, we get this really strong positive bias that prices keep going up and up — it’s too easy to create stock price bubbles,” he said. “Short sellers are skeptics who put their money where their mouth is.”
Big banks
In the aftermath of the Silicon Valley Bank collapse, as uncertainty spread through the financial system, a flood of depositors opened new accounts at large U.S. banks.
JPMorgan Chase, the largest U.S. bank, received a huge wave of customers and deposits, amounting to hundreds of accounts and billions of dollars, a source familiar with the matter told ABC News.
The bank is telling employees to forego targeting customers amid the financial turmoil but the inflow of customers has arrived regardless, the source said.
JPMorgan Chase declined to respond to a request for comment.
Other top banks, including Bank of America and Citi, have benefited from a similar flood of customers and deposits, the Financial Times reported.
Bank of America declined to comment; and Citi did not respond to a request for comment.
While some big banks gained depositors, the nation’s largest financial institutions took action on Monday in an effort to stabilize the financial sector, placing $30 billion in First Republic bank, one of the embattled regional lenders.
Bank of America, Citi, JPMorgan Chase, Wells Fargo and Goldman Sachs were among a slew of big banks that participated in the effort.
“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 press statement on Thursday.
“Regional, midsize and small banks are critical to the health and functioning of our financial system,” the statement added.
