First Republic Bank, Media Mayhem, WSJ's Epstein Scoop

Twitter News Digest for the week of 4/26-5/2

Hey everyone!

This week’s news digest covers the second-largest bank failure in US history, the ongoing battle between Twitter and the media, and Wall Street Journal’s big Jeffrey Epstein story. Don’t miss the Memes of the Week at the bottom.

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First Republic Bank

Last week, First Republic Bank collapsed and was put into government (FDIC) receivership.

First Republic is the second-largest US bank ever to fail. It’s collapse is a sign that, despite assurances from financial authorities, the banking crisis which began in March is not over yet.

First Republic had been unsuccessfully trying to sell itself for weeks. Sunday night, the FDIC tweeted that it reached a deal with JP Morgan Chase, which will acquire its assets.

In order to convince JP Morgan to take on First Republic, the FDIC agreed to cover $13B in First Republic’s losses and loan JP Morgan $50B to make the purchase.

It also agreed to lift a rule that prohibits any bank from controlling more than 10% of total US deposits. JP Morgan now holds over $2.4 trillion in deposits, the most of any bank.

The move further consolidates power among banks deemed “too big to fail” by the government. Critics saw the acquisition as another step toward nationalizing the banking system.

In a remarkable twist, the news further validated the viral “Inverse Cramer” meme.

After the first wave of bank failures in March, Jim Cramer tweeted First Republic was a "very good bank." Now, it is the fifth major bank to fail this year, following Silvergate, SBV, Signature, and Credit Suisse.

Late Sunday night, Elon gave a strong warning about the economy in response to a tweet by economist Larry Summers, using the bank failures as evidence to argue that a “severe recession” is approaching.

Monday morning, a US Treasury spokesperson said the banking system is “sound and resilient” and that Americans should have confidence in the safety of their deposits.

Tuesday, several regional bank stocks showed signs of distress, including PacWest Bancorp, Western Alliance Bank, and Metropolitan Bank. As it became clear that more regional banks were likely impaired, RFK Jr tweeted “The banking collapse is the tip of an economic mega-crisis.”

Amazingly, the banking crisis is playing out parallel to another financial mega-story: the debt ceiling negotiation between Congress and the White House.

This week, Treasury Secretary Janet Yellen warned that US could run out of money as early as June 1 if Congress doesn’t authorize the government to borrow more money.

Last week, House Republicans passed a bill to raise the debt ceiling. However, it is unlikely to pass the Democratic Senate because it calls for reductions in government spending.

Tuesday, the White House said it will not negotiate with Republicans, insisting the debt ceiling should be raised as a matter of formality.

Both the banking collapse and debt ceiling could transform the global financial landscape in the blink of an eye. Nothing is certain, which is why we’ll keep watching these stories here.

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