​Happy Friday!!!
Whew – tough week with all eyes on $200B First Republic Bank and an upcoming FOMC meeting next week that will likely result in another rate increase….  Here is the Uncle Sean Update for 4/28/23:
 Quick look at some macroeconomic data points that came out this week:GDP came in at 1.1% in the first quarter of 2023 (well below median estimate of 1.9%) showing a material decline from the 2.6% increase in 4Q22.  However, the slowdown came in the form of inventory drawdown (which will almost certainly reverse) offset by increases in consumer and government spending.Core PCE (the Fed’s favored inflation metric) landed at a stubborn 4.6% YoY rate in March.All of which likely pave the way for more FOMC rate increases beginning next week. The Federal Reserve Board released their post-mortem review of the supervision and regulation of Silicon Valley Bank (SVB) failure.  Brace yourself for the shocking revelation (Uncle Sean sarcasm) that it was due to a bank run predicated by a “highly concentrated business model, and a reliance on uninsured deposits” leaving SVB “acutely exposed to the specific combination of rising interest rates and slowing activity in the technology sector that materialized in 2022 and early 2023.”  Additional key items point to:The speed of the run was unprecedented; and technology enabled immediate withdrawals.SVB’s board of directors and management failed to manage basic interest rate and liquidity risks.Supervisors did not fully appreciate the extent of the vulnerabilities as SVB rapidly grew in size and complexity.When supervisors did identify vulnerabilities, they did not take sufficient steps to ensure that SVB fixed those problems quickly enough.The Board’s tailoring approach in response to the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA) and a shift in the stance of supervisory policy impeded effective supervision by reducing standards, increasing complexity, and promoting a less assertive supervisory approach.Here is the full 118 page Federal Reserve report. Additionally, the FDIC released their report detailing supervision of Signature Bank (SBNY) failure.  Not surprising to see some common threads with the SVB review above.  Failure was due to a bank run “precipitated by contagion effects in the wake of the announced self-liquidation of Silvergate and the failure of SVB, after both experienced deposit runs.”  Rapid growth in concentrated industries (VC and PE), exposure to crypto industry turmoil, and an “overreliance on uninsured deposits”.  Additional key items from the report:The speed with which depositors withdrew funds from SBNY and SVB was unexpected and surprised the regulators and the banking industry.The root cause of SBNY’s failure was poor management from unrestrained growth without developing and maintaining adequate risk management practices and controls.Failure to understand the risk of its association with and reliance on crypto industry deposits or its vulnerability to contagion from crypto industry turmoil.Several SRs related to liquidity risk management, Bank Secrecy Act/Anti-Money Laundering (BSA/AML), and model risk management (MRM) remained outstanding for multiple examination cycles.FDIC communications of examination results were not always timely to SBNY board.  FDIC resource challenges were also cited.Here is the full 63 page FDIC report. Based on the two failed bank reviews, I would speculate that a tougher regulatory environment going forward is a foregone conclusion…..  Mhmm – here’s my shocked face…  😬😬😬 Binance.US has terminated the $1.3B Voyager Digital bankruptcy acquisition stating “hostile and uncertain regulatory climate in the United States has introduced an unpredictable operating environment impacting the entire American business community.”  Meanwhile, Binance CEO hires lawyers as Feds probe ‘egregious’ conduct…. Yep, these two instances sure seem linked to me. 😲 The NCUA has filed charges against Jefferey B. Moats, the former CEO and board member of Edinburg Teachers Credit Union (ETCU; charter 66366), for knowingly causing a substantial loss to ETCU exceeding $4M.  They are also issuing a civil money penalty of $1M against Moats.ETCU was previously conserved back in March 2021 and the NCUA removed Moats from his position at the CU due to his actions.  ETCU was later released from conservatorship (a feat not often accomplished) in January of this year. DailyPay (on-demand / EWA platform) continues to add large bank clients (Santander, PNC Bank, TD Bank) as their business clients add EWA as a service to their employees.  The article also recognizes DailyPay as the “second-largest user of The Clearing House’s real-time payments network, behind only digital payment pioneer PayPal and its Venmo unit.” Melio (B2B payments) announced partnership with Shopify where Melio will power Shopify Bill Pay allowing merchants to easily schedule, pay, and manage their vendors and contractors from the same Shopify admin platform. Be Careful!!!  The FDIC and OCC flagged specific overdraft practices as “unfair or deceptive practices” including APSN debit card transactions. And more regulatory statements….  The CFPB, DOJ, EEOC, and FTC issued a joint statement on enforcement efforts against discrimination and bias in automated systems.The emphasis is on tech marketed as “artificial intelligence / AI” with the goal of taking bias out of decision making – actually has the potential to produce outcomes that may result in unlawful discrimination. Well now….  This is getting interesting….  Recall last month where the SEC issued a Wells Notice to Coinbase recommending that the “SEC file an enforcement action against the Company alleging violations of the federal securities laws.”  Coinbase has already sued the SEC citing lack of clarity on regulations…Early on Thursday of this week, SEC Chairman Gensler posted a video on Twitter basically stating that crypto markets suffer from a regulatory compliance problem, not a clarity issue…  Of course he did not name any specific companies.HOWEVER, later that same day, Coinbase posted their own video stating they do not list securities; AND announced that they “are prepared to defend that position in court.” Uncle Sean is not an attorney (that statement is actually quite laughable), but good luck with continuing to sue your primary regulator…. 😮 Notable FinTech funding for the week:Super (savings app and credit builder) raised $85M in Capital consisting of $60M Series C plus a $25M credit facility.Summer (student debt management / repayment platform) raised $6M in Series A extension round.IDPartner (online identity verification platform) raised $3.1M Seed round in the smoking hot digital identity space. 
Random Uncle Sean stuff:Okay – we are going to get straight to some Dad Jokes so we can turn off the TV / media streaming and go outside and play!!!!!What if there were no hypotheticals…..  😊I have a statistical average joke, but it’s mean…. (oh I love that one)If the earth really was flat, cats would have pushed everything off of it by now.One of the big differences between me and Aunt Patty is that if she says “smell this” – it probably smells nice…  😂As Spock once said, “don’t play around with superglue…”  🖖🙃 
Have a GREAT weekend and please stay safe!!!
Uncle Sean
Sometimes known as Sean Mayo – contact me directly for scope and pricing of custom reports / analysis projects at smayo@fedfis.com | 214-604-6961 – or you can contact FedFis Sales Team at 512-960-0911 | info@fedfis.com #FedFisHasTheData FedFis
FedFis, LLC disclaimer – The views and opinions of Uncle Sean are of his own and may not necessarily represent the views, endorsements, and/or opinions of FedFis, LLC – we all know he’s a little bit different; but that’s why we love him.