Shares in two more US regional banks have been suspended. Regulators moved in to halt trading in Los Angeles-based PacWest and Arizona’s Western Alliance on Thursday after they became the latest victims of an escalating crisis that began with Silicon Valley Bank in March.
The message from central banks and bank supervisors is that this is not a rerun of the global financial crisis of 2008. That may be true. With the exception of Switzerland’s Credit Suisse, European banks have escaped the turmoil. It is specific US banks that are the problem.
There are a number of reasons for that: the business models of the banks concerned; failures of regulation; the large number of small and mid-sized banks in the US; and the rapid increase in interest rates from the country’s central bank, the Federal Reserve.
Luis de Guindos, vice-president of the European Central Bank (ECB), remarked on Thursday that “the European banking industry has been clearly outperforming the American one”. Although he will be praying his words do not come back to haunt him, he is broadly right. European banks, including those in the UK, do look more secure than those in the US – primarily because they tend to be bigger and more tightly regulated.
Despite being the 16th biggest bank in the US, Silicon Valley Bank was not considered systemically important and so was less stringently regulated than institutions viewed by federal regulators to be more pivotal. Many of its customers were not covered by deposit insurance and were heavily exposed to losses on US Treasury bonds as interest rates rose. The other banks that failed subsequently have tended to share many of the same characteristics: they were regionally based and are vulnerable to rising borrowing costs.
Unless the Fed rides to the rescue with cuts in interest rates, the options are: amalgamation, regulation or more banks going bust. The response of the US authorities suggests little appetite for a laissez-faire approach.
According to official data, the US has more than 4,000 banks – an average of 80 for each of the 50 states. The number has fallen by more than two-thirds since the peak of more than 14,000 in the early 1980s, but there is certainly room for greater consolidation. In an age of instant internet bank runs, customers will be attracted to the idea that big is beautiful.
The US authorities certainly do not seem averse to further amalgamation. When First Republic ran into trouble, it was seized by the Federal Deposit Insurance Corporation and its deposits and assets were sold to one of the giants of US banking – JP Morgan Chase. Inevitably, there will be more takeovers and fire sales of assets as alternatives to bank failures. It is reasonable to assume that in 10 years’ time the number of US banks will be considerably smaller than it is today.
What’s more, the banks that remain – including those that are not taken over – are likely to be more tightly regulated and more closely supervised. Even if the Fed, the ECB and the Bank of England are right and a repeat of the global financial crisis has been averted, lessons are already being learned.

May 3, 2023
PACIFIC WESTERN BANK ISSUES UPDATE
FOR IMMEDIATE RELEASE
...
The bank has not experienced out-of-the-ordinary deposit flows following the sale of First Republic Bank and other news. Core customer deposits have increased since March 31, 2023, with total deposits totaling $28 billion as of May 2, 2023 with insured deposits totaling 75% vs. 71% at quarter end and 73% as of April 24, 2023.

I suppose we will end up finding a number of answers to that question. Will some ChatGPT-style large language model manage to do some insider trading? Will it, like, ingest some corpus of data that includes inside information, and then use it to answer questions like “which stocks should I buy?” Will some big company’s corporate development department use the model to answer questions like “should we buy Company X and what price should we pay for it,” and will the developers of the model use that information nefariously? Will the model itself become sentient, get a Robinhood account and use that information nefariously? Etc.
Or I mean will someone ask ChatGPT a question like “what companies are frauds,” and ChatGPT will cheerfully and confidently say “oh Company Y is a total fraud, their revenues are super inflated,” and then people will short the stock, and then it will turn out that Company Y is fine and ChatGPT is just really good at confidently making stuff up? Is that securities fraud? By whom? (Or: Ask “what stocks are good,” ChatGPT says “Company Z is great, they have found a cure for cancer and their revenue will double,” people buy the stock, it was all made up.) Will sell-side analysts or journalists use ChatGPT to do their work, and will ChatGPT introduce market-moving factual mistakes?
Lots of fun possibilities. But the most immediate way in which ChatGPT is going to be securities fraud is the usual “everything is securities fraud” way:

• 1) ChatGPT is going to be disruptive to some number of businesses and industries.
• 2) Some companies will lose money because ChatGPT disrupts their business.
• 3) This will be bad, for them, and their stocks will drop.
• 4) Every bad thing that happens to a public company can be characterized as securities fraud: “You didn’t sufficiently warn us about the bad thing, so we bought the stock thinking it was good, but then the bad thing happened and the stock dropped, so we were defrauded.”

ChatGPT risk factors are starting to be included in securities offering documents, and the risks are starting to be realized:

Chegg Inc. plummeted 42% after warning that the ChatGPT tool is threatening growth of its homework-help services, one of the most notable market reactions yet to signs that generative AI is upending industries.
The company, which offers online guidance for students taking tests and writing essays, also gave revenue and profit forecasts for the current quarter that fell well short of analysts’ estimates. Chegg makes much of its money from subscriptions, which start at $15.95 a month, a revenue source that’s in peril if students see AI chatbots as an alternative to paying.
The impact of ChatGPT, an OpenAI tool that surged in popularity last year, began to be felt this spring, Chief Executive Officer Dan Rosensweig said in prepared remarks accompanying Chegg’s first-quarter earnings Monday.

And I tell you what, when I see that a public company has announced bad news and its stock dropped, I look for the lawsuits. We are early yet — the stock dropped yesterday — but lawyers move fast; I have not yet seen any lawsuits filed, but at least two law firms have announced “investigations” of Chegg and are looking for clients.
At this point the lawsuits seem a bit far-fetched: “You should have warned us months ago that artificial intelligence would hurt your business” is unfair given how quickly ChatGPT has exploded from nowhere to become a cultural and business phenomenon. But now everyone is on notice! If you are not warning your shareholders now about how AI could hurt your business, and then it does hurt your business, you’re gonna get sued.

An experimental Alzheimer’s medication slowed declines in patients’ ability to think clearly and perform daily tasks by more than a third in a large clinical trial, drugmaker Eli Lilly said Wednesday.
Based on the results, in people with early symptomatic Alzheimer’s disease, Lilly said it plans to file for approval from the US Food and Drug Administration by the end of June.
The medicine, donanemab, works by removing plaque buildups in the brain known as amyloid that are a hallmark of Alzheimer’s disease. However, there were some side effects reported; there were three deaths in the trial among people taking the drug, two of which were attributed to adverse events such as brain swelling or microhemorrhages, known as amyloid-related imaging abnormalities or ARIA. The trial was run in more than 1,700 patients for 18 months.
Alzheimer's drug lecanemab receives accelerated approval amid safety concerns
“For every medicine, for every disease, there are potential risks and potential benefits,” said Lilly’s chief scientific and medical officer, Dr. Daniel Skovronsky. But he noted that almost half of the participants taking the drug, 47%, showed no decline on a key measure of cognition over the course of a year, compared with 29% of people taking a placebo.
That’s “the kind of efficacy that’s never been seen before in Alzheimer’s disease,” Skovronsky said.
Alzheimer’s affects more than 6 million Americans, with an estimated 1.7 million to 2 million people over 65 in the early stages of the disease, according to Lilly. Drug development for Alzheimer’s has been riddled with failures, but Lilly’s drug is among a new group showing promise. The first, Eisai and Biogen’s Leqembi, received accelerated FDA approval in January.