Tag: Breaking News: Politics

Google founder, former Disney exec to get subpoenas in JPMorgan Epstein lawsuit

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A mugshot of Jeffrey Epstein released by the U.S. Justice Department.

Source: U.S. Justice Department

Google founder Sergey Brin, former Disney executive Michael Ovitz, Hyatt Hotels executive chairman Thomas Pritzker and a fourth billionaire, real estate investor Mort Zuckerman, will be subpoenaed in a lawsuit against JPMorgan Chase by the government of the U.S. Virgin Islands related to sex trafficking by Jeffrey Epstein.

The subpoenas were first reported Friday by The Wall Street Journal. A source familiar with the matter confirmed them to CNBC.

The subpoenas demand communications and documents related to the bank and Epstein, The Journal noted.

News of the subpoenas comes three days after it was reported that JPMorgan CEO Jamie Dimon will answer questions under oath in the lawsuit, which alleges that the bank ignored warning signs about Epstein for years and continued retaining him as a customer.

Kelly Sullivan | Getty Images Entertainment | Getty Images

Last week, the Virgin Islands in a press release noted that it “alleges JPMorgan Chase could have prevented harm and trauma faced by the survivors of Jeffrey Epstein’s heinous abuse.”

“But instead the bank chose to look the other way on these legal matters while continuing to use their banking relationship to grow their business with new clients introduced by Epstein,” the release said.

On March 20, Judge Jed Rakoff ruled the suit against the bank, as well as a similar one by women who say Epstein trafficked them, can proceed toward trial.

The plaintiffs claim that JPMorgan knowingly benefited from participating in Epstein’s trafficking scheme, which transported women to his residence in the Virgin Islands so that he could sexually abuse them.

Jamie Dimon, CEO, JP Morgan Chase, during Jim Cramer interview, Feb. 23, 2023.

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JPMorgan has denied allegations in the suits which are pending in U.S. District Court in Manhattan.

The bank earlier this month sued former JPMorgan investment banking chief Jes Staley, claiming he is responsible for the suits related to Epstein.

The bank seeks to claw back more than $80 million that it paid Staley. He quit as CEO of Barclays in 2021 after a probe by United Kingdom financial regulators over his ties with Epstein.

A lawyer for the Virgin Islands earlier this month said in court that Dimon knew in 2008 that Epstein was a sex trafficker. That was the year that Epstein first was hit with sex crime charges in state court in Florida.

“If Staley is a rogue employee, why isn’t Jamie Dimon?” the attorney, Mimi Liu said at the hearing,

“Staley knew, Dimon knew, JPMorgan Chase knew” about Epstein’s criminal conduct, Liu said.

A JPMorgan lawyer said at the time that the bank disputed those claims, “in particular the point about Jamie Dimon having any specific knowledge.” A bank spokeswoman has said, “Jamie Dimon has no recollection of reviewing the Epstein accounts.”

JPMorgan only ended its customer relationship with Epstein in 2013.

Epstein, a former friend of Donald Trump, Bill Clinton and Britain’s Prince Andrew, was arrested on federal child sex trafficking charges in July 2019. He killed himself a month later in a Manhattan jail cell after being denied bail.

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March 31, 2023
Trump faces about 30 criminal counts for document fraud in New York indictment

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U.S. President Donald Trump delivers an update on the so-called Operation Warp Speed program, the joint Defense Department and HHS initiative that has struck deals with several drugmakers in an effort to help speed up the search for effective treatments for the ongoing coronavirus disease (COVID-19) pandemic, in an address from the Rose Garden at the White House in Washington, U.S., November 13, 2020.

Carlos Barria | Reuters

Former President Donald Trump has been hit with about 30 criminal charges related to alleged document fraud in the indictment issued against him by a New York grand jury, NBC reported Friday.

The indictment, which was approved Thursday, remains sealed in Manhattan Supreme Court.

Trump, who is the leading contender for the 2024 Republican presidential nomination, is scheduled to be arraigned in Manhattan court on Tuesday.

At least part, if not all, of the indictment is understood to be related to Trump’s reimbursement of his then-lawyer and fixer Michael Cohen for a $130,000 hush money payment made to porn star Stormy Daniels before the 2016 presidential election.

The Trump Organization recorded payments that Trump made to Cohen for that purpose as “legal expenses.”

It is a misdemeanor under New York law to misclassify business expenses. That can become a felony if done to cover up another crime.

Daniels, whose legal name is Stephanie Clifford, was paid to keep silent about her claim that she had sex with Trump in 2006. He denies her account.

Trump is the first U.S. president, former or otherwise, to be charged in a criminal case.

A Quinnipiac University poll released this week found that a majority of Americans believe that Trump should be disqualified from running for the White House if he is charged with a crime.

However, there is no law against Trump seeking the presidency while facing charges.

Follow our live coverage of the NY grand jury’s indictment of former President Donald Trump.

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March 31, 2023
New York grand jury indicts former President Donald Trump in hush money payment case

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A New York grand jury voted Thursday to indict former President Donald Trump in connection with a $130,000 hush money payment to porn star Stormy Daniels ahead of the 2016 election, his lawyer told CNBC.

Trump attorney Joe Tacopina told NBC News that Trump is expected to surrender to the Manhattan District Attorney’s office early next week.

Trump is the first former president to be charged with a crime, a development that will reverberate around the country. The indictment comes as he is the leading contender seeking the 2024 Republican presidential nomination.

The office of Manhattan District Attorney Alvin Bragg confirmed the indictment Thursday evening.

“This evening we contacted Mr. Trump’s attorney to coordinate his surrender to the Manhattan D.A.’s Office for arraignment on a Supreme Court indictment, which remains under seal. Guidance will be provided when the arraignment date is selected,” said a spokesperson for Bragg’s office.

The number of charges Trump faces in the indictment was not disclosed Thursday. And it was not known whether the indictment was limited to conduct related to the payment to Daniels or if it also includes conduct surrounding a separate hush money payment to former Playboy model Karen McDougal by the publisher of The National Enquirer.

Trump blasted the decision, calling it “Political Persecution and Election Interference at the highest level in history.” Just Wednesday, he had said in a social media post that he had “gained such respect for this grand jury.”

The charge stems from the district attorney’s investigation into how the Trump Organization recorded a reimbursement to Trump’s then-lawyer Michael Cohen after Cohen paid Daniels, who’s also known as Stephanie Clifford, to keep her quiet about an alleged sexual encounter she says she had with Trump in 2006.

Follow our live coverage of the New York grand jury vote to indict former President Donald Trump.

Trump was filming his TV show, “Celebrity Apprentice,” at the time of that purported tryst, and was married to his current wife, Melania Trump, who had given birth to their son, Barron, a few months earlier.

The Trump Organization in business records described the reimbursement to Cohen as a legal expense.

Falsifying business records is normally a misdemeanor under New York law, but can be elevated to a felony if the misstatement was done to cover up another crime.

Trump denies having sex with Daniels or committing wrongdoing of any kind.

“This is Political Persecution and Election Interference at the highest level in history,” Trump said in a statement. “The Democrats have lied, cheated and stolen in their obsession with trying to ‘Get Trump,’ but now they’ve done the unthinkable — indicting a completely innocent person in an act of blatant Election Interference.”

Tacopina and another Trump lawyer, Susan Necheles, said: “President Trump has been indicted. He did not commit any crime.”

“We will vigorously fight this political prosecution in Court,” the defense lawyers said.

The indictment, which will be prosecuted by Bragg’s office, is the first in what could end up being several criminal cases against Trump, the leading contender for the 2024 Republican presidential nomination.

Trump is also under investigation by the U.S. Department of Justice in two separate criminal cases. One is related to his efforts to overturn the Electoral College victory of President Joe Biden in the 2020 election as he made false claims of widespread ballot fraud in the popular vote that year. The other probe is focused on Trump’s removal of government records from the White House, and whether he obstructed justice by keeping them at his Mar-a-Lago club in Palm Beach, Florida, for more than a year as government officials sought their return.

A state prosecutor in Atlanta is also separately investigating Trump and a number of his allies over their attempt to get Georgia officials to reverse his loss to Biden in the state in 2020.

Former US President Donald Trump speaks at a campaign event in Waco, Texas, on Saturday, March 25, 2023.

Brandon Bell | Getty Images

Cohen, in a statement to NBC News, said: “For the first time in our Country’s history, a President (current or former) of the United States has been indicted. I take no pride in issuing this statement and wish to also remind everyone of the presumption of innocence; as provided by the due process clause.”

“However, I do take solace in validating the adage that no one is above the law; not even a former President,” Cohen said. “Today’s indictment is not the end of this chapter; but rather, just the beginning. Now that the charges have been filed, it is better for the case to let the indictment speak for itself. The two things I wish to say at this time is that accountability matters and I stand by my testimony and the evidence I have provided to” the Manhattan district attorney, he said.

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The Manhattan prosecution of Trump comes more than four years after Cohen, who loyally served him for years before that, turned on Trump and began cooperating with federal, state and local law enforcement officials in New York.

Cohen pleaded guilty in 2018 to federal criminal charges that included campaign finance violations for both the Daniels payment and a separate payment he facilitated to McDougal, the former Playboy model, to buy her silence over an affair she said she started with Trump in 2006.

The Federal Election Commission in 2021 fined the publisher of The National Enquirer $187,500 for “knowingly and willfully” violating campaign law by paying McDougal a $150,000 “catch and kill” fee to buy her story and bury it ahead of the 2016 election.

Michael Cohen, former attorney for former U.S. President Donald Trump, arrives to the New York Courthouse in New York City, U.S., March 13, 2023.

Eduardo Munoz | Reuters

Cohen said the payments were designed to protect Trump’s chances in that election, when he faced Democratic nominee Hillary Clinton. Trump escaped punishment from the FEC.

Cohen met 20 times with investigators from the DA’s office before testifying over two days last week before the grand jury in Manhattan Criminal Court. That panel began meeting in late January and heard testimony from multiple witnesses before Cohen.

Trump and a number of Republican elected officials have accused Bragg, who is a Democrat, of pursuing the investigation to harm him politically.

Bragg’s focus on the payment to Daniels in recent months came as a surprise, as it was considered by many to be the weakest possible criminal case against Trump in a probe that began four years ago under Bragg’s predecessor as DA, Cyrus Vance Jr.

Adult-film actress Stephanie Clifford, also known as Stormy Daniels speaks US Federal Court with her lawyer Michael Avenatti (R) on April 16, 2018, in Lower Manhattan, New York.

Eduardo Munoz Alvarez | AFP | Getty Images

In February 2022, two top prosecutors who were working on the investigation quit after Bragg indicated he was suspending the probe.

At the time, that investigation was focused on Cohen’s allegations that Trump and the Trump Organization reported different values for the same real estate properties to lower their tax burden and insurance costs and to maximize the value of loans against them, among other things.

One of the prosecutors, Mark Pomerantz, in his resignation letter said Trump was “guilty of numerous felony violations,” which related to the “preparation and use of his annual Statements of Financial Condition,” which “were false.”

Attorney General Letitia James in September filed a civil lawsuit seeking at least $250 million in penalties from Trump, his company, and three of his adult children, alleging widespread fraud in financial statements.

James’ lawsuit, which is headed to trial later this year, seeks to permanently bar Trump, Donald Trump Jr., Eric Trump and Ivanka Trump from serving as an officer of a company in New York and permanently prohibit the Trump companies named in the suit from doing business in New York state.

In December, a Manhattan jury convicted two subsidiaries of the Trump Organization of multiple crimes related to a scheme that since 2005 had sought to avoid paying taxes on executive compensation in the form of perks including free apartments and luxury cars to then-chief financial officer Allen Weisselberg.

Trump was not personally charged in that case, but he “knew exactly what was going on,” a prosecutor said in closing arguments in Manhattan Supreme Court.

The Trump subsidiaries convicted in the case were fined $1.6 million for the scheme in January at sentencing.

Weisselberg, who had pleaded guilty in that case in August, was sentenced in January to five months in jail. He is scheduled to be released from the notorious Rikers Island jail on April 19, which factors in time off his sentence for good behavior.

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March 30, 2023
OpenAI faces complaint to FTC that seeks investigation and suspension of ChatGPT releases

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GPT-4 sign on website displayed on a laptop screen and OpenAI logo displayed on a phone screen are seen in this illustration photo taken in Poland on March 14, 2023.

Jakub Porzycki | Nurphoto | Getty Images

OpenAI is facing a new complaint to the Federal Trade Commission that urges the agency to investigate the group and suspend its commercial deployment of large language models, including its latest iteration of the popular tool ChatGPT.

The complaint, made public by the nonprofit research group Center for AI and Digital Policy on Thursday, accuses OpenAI of violating Section 5 of the FTC Act, which prohibits unfair and deceptive business practices, and the agency’s guidance for AI products.

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CAIDP calls GPT-4 “biased, deceptive, and a risk to privacy and public safety.” The group says the large language model fails to meet the agency’s standards for AI to be “transparent, explainable, fair, and empirically sound while fostering accountability.”

The group wants the FTC to require OpenAI establish a way to independently assess GPT products before they’re deployed in the future. It also wants the FTC to create a public incident reporting system for GPT-4 similar to its systems for reporting consumer fraud. It also wants the agency to take on a rulemaking initiative to create standards for generative AI products.

CAIDP’s president Marc Rotenberg signed onto a widely-circulated open letter released on Wednesday that called for a pause of at least six months on “the training of AI systems more powerful than GPT-4.” Tesla CEO Elon Musk, who co-founded OpenAI, and Apple co-founder Steve Wozniak were among the other signatories.

OpenAI did not immediately respond to a request for comment. The FTC declined to comment.

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March 30, 2023
House lawmakers tear into top bank regulators in second hearing this week on SVB collapse

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House lawmakers tore into top U.S. bank regulators Wednesday, questioning their competency and saying examiners were asleep at the wheel, at a second day of congressional hearings this week about how Silicon Valley Bank and Signature Bank collapsed practically overnight on March 10 and March 12.

“We need competent financial supervisors, but Congress can’t legislate competence,” House Financial Services Chairman Rep. Patrick McHenry, R-N.C., told top officials at the Federal Reserve, Treasury and FDIC at the beginning the hearing.

The committee’s ranking member, Rep. Maxine Waters, D-Calif., questioned whether the repeated warnings regulators delivered to SVB about its balance sheet and long-term interest risks were sufficient.

“The light touch cautions from the Fed to SVB management are clearly not what Congress intended for bank supervision,” said Waters.

Rep. Juan Vargas, D-Calif., put it more bluntly. “It seems like [SVB] blew you guys off, and you didn’t do anything.”

Federal Reserve Vice Chair Michael Barr did not disagree with this assessment. “I expect that we’re going to find that we need to have more of an emphasis on supervisors using the tools they have more promptly, and putting in mitigations in place more promptly when they see problems at banks that they’re supervising,” he said.

McHenry slammed the panel for a lack of transparency over that fateful weekend when the three regulators hastily arranged backup financing to ensure depositors at the two banks wouldn’t lose any money in their collapse.

There are no notes publicly available from regulators’ emergency meetings the weekend the banks collapsed, McHenry said. “That lack of transparency has a negative effect on the public view of the safety of the financial arena,” he added.

The question of what records would be given to Congress came up repeatedly in the contentious hearing.

Rep. Brad Sherman, D-Calif., requested a broad survey of banks that are undercapitalized the same way SVB was.

“Are there any banks out there, and roughly how many, that have capital of under 5% if you subtract from their stated capital their unhedged, unrealized losses on long-term debt?” Sherman asked the regulators.

“Let us get back to you on that,” said Martin Gruenberg, chairman of the Federal Deposit Insurance Corp. “We’ll get the numbers and share them with you very quickly.”

Republican Rep. Bill Huizenga of Michigan, demanded raw, confidential supervisory information about the banks, available to regulators ahead of the collapses.

Gruenberg did not agree explicitly to provide confidential information, instead suggesting the committee would need to issue a subpoena for this information. “I think you have the authority to compel that information,” he said, “and [the FDIC] will be responsive to you.”

Members of the Republican majority House challenged many of the decisions made by regulators in the hours and days after SVB collapsed and Signature Bank followed 48 hours later. Chief among these was what regulators did, or didn’t do, in the three days from the time they each learned of SVB’s looming collapse, on Thursday to Sunday, when they decided that the failures of SVB and Signature Bank posed a systemic risk to the financial system.

“Despite U.S. regulators having clear knowledge of insufficient risk management, it seems the examiners and your supervisors were asleep at the wheel while signs that Silicon Valley Bank was heading towards a collapse were staring them right in the face for many, many months,” Rep. Ann Wagner, R-Mo., said to Barr.

On Tuesday, bank stocks turned negative following a similar hearing before the Senate Banking Committee. Investors may have been spooked by the three top regulators each saying they favored more stringent rules for banks with more than $100 billion in assets.

Nellie Liang, undersecretary for domestic finance at the Treasury Department, testified alongside Gruenberg and Barr before the House committee after appearing Tuesday before the Senate Banking Committee.

Sens. Elizabeth Warren, D-Mass., and Catherine Cortez Masto, D-Nev., both members of Senate Banking, introduced bipartisan legislation on Wednesday that would require federal regulators to claw back all or part of compensation earned by bank executives in the five-year period preceding a banking failure.

“Americans are sick and tired of fat cat bankers paying themselves handsomely while risking other people’s hard-earned money,” Warren said in a statement. “It’s time for Congress to step up and strengthen the law so bank executives bear the cost of failure, not line their pockets and walk away scot-free.”

Sens. Josh Hawley, R-Mo., and Mike Braun, R-Ind., also sponsored the bill.

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March 29, 2023
Key lawmakers say upcoming hearings on bank failures aim to boost U.S. confidence in banking sector

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WASHINGTON — A bipartisan group of lawmakers overseeing the recent turmoil in the banking sector said Wednesday that they aim to increase Americans’ confidence in the banking industry after Silicon Valley Bank and Signature Bank collapsed over the last two weeks.

The two House and Senate committees that oversee banking have announced back-to-back hearings next week to examine regulatory lapses that missed signs the banks were in trouble. Federal Deposit Insurance Corp. Chairman Martin Gruenberg, Federal Reserve Vice Chair for Supervision Michael Barr and Treasury Undersecretary for Domestic Finance Nellie Liang are scheduled to testify at both hearings.

The high-profile hearings come as lawmakers try to understand what caused the two institutions to fold, and as many Democrats float legislation to bolster safeguards for the financial system. Regulators and lawmakers are also trying to contain further damage to the economy and reinforce confidence in the banking system.

“My hope is that this first hearing, we can actually get a lot of the information out and establish [the facts],” Rep. Patrick McHenry, a North Carolina Republican and chairman of House Financial Services Committee, said during a summit of the American Bankers Association. “I think this will bring a great deal of certainty and confidence to the market.”

Last week, the Fed appointed Barr to lead a review of the SVB failure. McHenry said he welcomed the probe and “the other views of financial regulators, as well.”

The Republican said Congress has a “very important role to play” in reviewing how the banks failed. But he stopped short of calling for legislation to prevent future collapses.

McHenry said he wanted to ensure the push for legislation matches “the realities of the situation.”

Sen. Tim Scott, a South Carolina Republican and ranking member of the Senate Banking Committee, also said writing new laws should take a back seat at the hearings to investigating what happened.

“Unfortunately, in Washington, that’s often what occurs, that those on the committee on the left will talk about Dodd-Frank and the reforms that were done in 2018,” he told the bankers’ group. He was referring to calls in Congress to unwind some of the provisions in the 2018 law that weakened regulatory powers in the landmark 2010 Dodd-Frank law.

“Nothing could be a clearer red herring than that,” he added.

Former SVB CEO Greg Becker lobbied lawmakers for certain exclusions from Dodd-Frank. But Scott said regulators already had the authority they needed to safeguard the banking system and failed to do so.

He also said bank executives had a responsibility to adjust their strategies as the Fed embarked on an aggressive interest rate hiking cycle to stem inflation.

McHenry also questioned the value of adding new regulatory authority or laws to govern the financial sector.

“It’s important to note that we can’t regulate competence,” McHenry said. “Management of institutions need to be competent, boards of directors need to be competent. We can’t legislate that either in the financial sector or among financial institutions management, nor with the regulators.”

Sen. Sherrod Brown, an Ohio Democrat and chairman of Senate Banking Committee, compared the SVB collapse to the devastating train crash in East Palestine, Ohio. He said the disaster in his state and the bank failures stemmed in part from companies pushing for fewer regulations and putting less effort into their own safeguards.

“They have one thing in common: corporate lobbyists pushed for weaker rules, less oversight,” he told the ABA in opening remarks. “Companies cut costs, failed to invest in safety – or perhaps in the case of SVB, were too incompetent to realize they too should care about safety.”

Brown, who said the congressional hearings can remain “mostly” bipartisan, warned banking lobbyists against using the crisis as a chance to lobby Congress for weaker oversight. He said “we continue to pay the price” when policymakers allow weaker regulations.

Rep. Maxine Waters, ranking member of the House Financial Services Committee, told the ABA that Congress will have to “take a deep dive” into what took place at Silicon Valley Bank. The California Democrat, who has called for legislation to strengthen congressional authority over clawbacks for bank executives, said she is taking a close look at the high rate of uninsured deposits at SVB.

At the time of its failure, 94% of the bank’s deposits sat above the FDIC’s $250,000 insurance limit.

“And of course, I’m looking to see whether or not all of the oversight agencies … really did miss the opportunity to see what was happening and to know what was going on with the balance sheet and to be able to correct things before they got to the point of collapse,” Waters said.

She added that the financial regulators’ quick decision to close SVB and secure customers’ deposits demonstrated the Biden administration’s competence.

“The way that the FDIC, the Treasury, president, they way that they handled this should be a message to everybody that your government is at work and can solve problems — serious problems — if they are working together,” she said.

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March 24, 2023
‘Blanket insurance’ of bank deposits is not being discussed, Yellen tells senators

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U.S. Secretary of the Treasury testifies before the Senate Appropriations Subcommittee on Financial Services March 22, 2023 in Washington, DC.

Win Mcnamee | Getty Images

WASHINGTON — Federal bank regulators are not considering any plans to insure all U.S. bank deposits without congressional approval, Treasury Secretary Janet Yellen told members of a Senate Appropriations subcommittee on Wednesday.

Several banking groups and consumer advocates have called for some kind of a universal deposit guarantee after the government refunded most of the uninsured deposits at two banks that collapsed earlier this month, California-based Silicon Valley Bank and New York-based Signature Bank.

In response to a direct question about whether Treasury would circumvent Congress to insure all deposits, Yellen replied: “I have not considered or discussed anything having to do with blanket insurance or guarantees of all deposits.”

Yellen made the comment to senators during a hearing on Capitol Hill to consider the Treasury Department’s 2024 budget request.

The statement fueled a decline in the stock market, and a drop in regional bank shares.

Congress has broad authority over the FDIC insurance limit, currently set at $250,000 as part of the Dodd-Frank financial reforms. Congress can also temporarily suspend the limit, like it did in 2020 as part of the government’s response to Covid-19.

This time around, only a handful of Democrats have openly suggested Congress consider raising the limit across all deposits. An influential bloc of House Republicans, meanwhile, has already come out against any hike. This makes it difficult to envision how a bill to raise the limit would pass the GOP-controlled House.

In Washington, the emergency deposit guarantees made for SVB and Signature have set off a fierce debate over whether big banks that took excessive risks got a special bailout, while smaller banks are being forced to confront a rush of withdrawals — triggered by public fears about the big banks — without any special help.

“I’m very troubled,” said Maine Republican Sen. Susan Collins. “It seems to me, by guaranteeing all of the deposits [at SVB] that you’re creating a situation where they are immune from losses … in a way that puts the well managed community bank at a competitive disadvantage. So I guess my question to you is, how is this fair?”

Yellen said that at the time, regulators weren’t thinking about giving one bank an advantage over any other bank. At the time, they were thinking about “the implications for the broader banking system because of the contagion potential,” she said.

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That explanation has not been enough to satisfy small and mid-sized banks, however.

“If policymakers decide to provide unlimited deposit insurance to some institutions, they cannot leave others out—certainly not the community banks that have, as always, operated on a safe and sound basis,” Rebeca Rainey, CEO of the Independent Community Bankers of America, said in a recent statement.

While Yellen ruled out universal blanket deposit guarantees, she appeared to be open to other potential ways to help smaller banks offer additional insurance to large deposits.

One idea volunteered by Democratic West Virginia Sen. Joe Manchin was to create a system where depositors who needed to keep cash in excess of the $250,000 FDIC limit could pay slightly higher bank fees, akin to an insurance premium, in order to secure a higher level of FDIC insurance.

“Shouldn’t I be able to buy or pay a little higher bank fee, to get protection … with a cap maybe at $10 million?” Manchin said to Yellen near the end of her testimony. “We’ve been talking … some senators have been talking back and forth … and I don’t think we should [craft legislation] without you all involved, showing us how to structure that.”

“I think this is very worthwhile, for you and your colleagues to be discussing what’s appropriate here,” Yellen replied. “And we would be more than willing to work with you to think this through.”

She added: “For the moment, we’re trying to stabilize the situation using the tools at our disposal.”

These efforts are starting to bear fruit, Yellen told a bankers group Tuesday. She said that “aggregate deposit outflows from regional banks have stabilized.”

But while the trends are moving in the right direction, the amount of money banks borrowed in the week ending March 15 from the Fed’s discount window set a new record at $153 billion, according to the Fed’s weekly report, a sum that suggests the banking sector is not quite stable yet.

Clarification: This story has been updated to make clear that Yellen made her comment about “blanket insurance” while answering a senator’s question about whether Treasury would circumvent Congress in order to insure all deposits.

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March 22, 2023
Sens. Booker, Warnock press big bank CEOs to pause overdraft fees after SVB failure

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Sen. Cory Booker (D-NJ) speaks during Attorney General nominee Merrick Garland’s confirmation hearing before the Senate Judiciary Committee, Washington, DC, February 22, 2021.

Al Drago | Pool | Reuters

WASHINGTON — Sens. Cory Booker and Raphael Warnock have urged the CEOs of 10 major banks to waive overdraft and nonsufficient fund fees that could cost some Americans more than $100 a day in the wake of the failures of Silicon Valley Bank and Signature Bank.

In letters dated Tuesday, the New Jersey and Georgia Democrats asked banks to help customers whose payments were delayed or missing due to the collapse of SVB and Signature earlier this month. The letters went to the CEOs of Wells Fargo, U.S. Bank, Truist Financial Corporation, TD Bank, Regions Financial Corporation, PNC Bank, JP Morgan Chase, Huntington National Bank, Citizens Bank and Bank of America.

“Disruptions across the banking industry this month rattled consumers and threw into jeopardy the paychecks of millions of American workers,” wrote Booker, who is a member of the Senate Committee on Small Business and Entrepreneurship, and Warnock.

The fees, which can reach up to $111 a day for low account balances or up to $175 on low account fees, “compound the difficult financial situation customers find themselves in, particularly when their lack of funds is due to an unprecedented, unexpected delay,” the senators added.

JPMorgan declined to comment. The other banks that received the letters did not immediately respond to requests for comment.

The Federal Deposit Insurance Corporation closed SVB on March 10 after the bank announced a nearly $2 billion loss in asset sales. The agency said SVB’s official checks would continue to clear and assets would be accessible the following day.

Regulators shuttered New York-based Signature Bank days later in an effort to stall a potential banking crisis. Many of its assets have since been sold to Flagstar Bank, a subsidiary of New York Community Bankcorp.

Booker and Warnock said banking customers whose paydays fell between March 10 and March 13 were unable to receive or deposit checks from payroll providers banking with SVB and Signature Bank. They also noted that online merchant Etsy notified customers of payment delays because it used SVB payment processing.

The senators also cited an unrelated, nationwide technical glitch on the 10th that caused missing payments and incorrect balances for Wells Fargo customers.

“These delays will disproportionately harm the impacted customers who are part of the sixty-four percent of Americans living paycheck-to-paycheck, who are often ‘minutes to hours away from having the money necessary to cover’ expenses that lead to overdraft nonsufficient fund fees,” Booker and Warnock wrote.

They praised steps taken by the Treasury and the FDIC to stem a possible economic catastrophe by ensuring access to depositor funds over the $250,000 FDIC-guarantee threshold and creating a new, one-year loan to financial institutions to safeguard deposits in times of stress.

Treasury Secretary Janet Yellen on Tuesday said the Treasury is prepared to guarantee all deposits for financial institutions beyond SVB and Signature Bank if the crisis worsens.

“In line with quick, decisive government response to assist the businesses and individuals who were helped immediately in order to contain the broader fallout of these bank failures, we urge you to act with similar urgency to backstop American families from unexpected and undeserved charges,” the senators wrote.

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March 22, 2023
Republicans request Fed and FDIC oversight records for failed Silicon Valley Bank and Signature Bank

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The Signature bank logo is seen in this photo illustration in Warsaw, Poland on 13 March, 2023.

Jaap Arriens | Nurphoto | Getty Images

WASHINGTON — The top Republicans on committees that oversee the U.S. financial system sent letters Monday to Federal Reserve Chair Jay Powell and FDIC Chair Martin Gruenberg formally requesting documents and personnel records related to the oversight of two banks that failed over the last 11 days.

The lawmakers wanted “full information about what appears to be glaring bank mismanagement, fundamental lack of prudence in bank risk and balance sheet management, and regulators’ lack of basic supervision and enforcement of safety and soundness rules, regulations, and principles,” wrote House Financial Services Committee Chairman Patrick McHenry, N.C., and Senate Banking Committee ranking member Sen. Tim Scott, S.C.

A spokesperson for the Federal Reserve told CNBC on Monday it received its letter and planned to respond. A spokesperson for the FDIC declined to comment, citing agency policy regarding congressional correspondence.

The letters come as Congress seeks to learn more about how the second largest bank collapse in U.S. history unfolded earlier this month, when Silicon Valley Bank went in just a matter of days from fully operational to government owned on March 10. New York-based Signature Bank failed two days later before U.S. bank regulators put in a backstop to cover uninsured deposits and other safeguards for the broader system.

The Scott and McHenry letter also requested a timeline of regulators’ decision-making in the hours and days following the initial closure of SVB and Signature.

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Specifically, GOP lawmakers are questioning the Treasury Department’s designation that the collapse of SVB and Signature — and the potential losses of hundreds of billions of uninsured deposits — posed a systemic risk to the banking sector.

That designation gave it authority to unwind both institutions in a way that it said “fully protects all depositors,” by tapping the FDIC’s deposit insurance fund to cover uninsured deposits.

The Fed also created a Bank Term Funding Program aimed at safeguarding institutions affected by the market instability of the bank failures.

In the days following the collapse, reports have emerged indicating that Silicon Valley Bank ignored repeated warnings from regulators that the bank would be at risk of collapse in the event that interest rates rose quickly.

Both Republicans and Democrats in Congress have raised questions about whether regulators ignored signs of trouble at the banks or failed to take appropriate action in response to weaknesses that they did see.

But while Democrats have been quick to call for a return to more stringent regulations and capital requirements for mid-sized banks, Republicans have so far indicated they would oppose additional regulations.

Read more of CNBC’s coverage of the bank crisis

Rather than suggest the Fed and FDIC did not regulate the banks tightly enough, Republicans instead suggested that culpability may lie with individual regulators, not the overall regulatory landscape.

The letters sent Monday also advised both the Fed and the FDIC to preserve all records of their oversight of the two failed banks, a request that telegraphs the intent to open a congressional investigation.

With Republicans in the majority in the House, McHenry has broad discretion as to how he will direct the committee he chairs to proceed in any investigation.

On the Senate side, however, the Senate Banking Committee is chaired by Ohio Democratic Sen. Sherrod Brown, with Scott as the No. 2.

Last week, Brown sent a letter of his own to Gruenberg, Treasury Secretary Janet Yellen, and Michael Barr, the vice chair for supervision at the Federal Reserve board. In it, Brown suggested that responsibility for the bank failures lay in part with top executives at the failed banks.

Brown also asked the regulators to “identify and close regulatory gaps, shortfalls, or failures by state or federal regulators that contributed to the banks’ failures.” He did not ask for the names of individual Fed or FDIC officials involved in supervising the banks.

— CNBC’s Chelsey Cox contributed reporting.

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March 20, 2023
Treasury Secretary Yellen says not all uninsured deposits will be protected in future bank failures

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WASHINGTON — Treasury Secretary Janet Yellen sought to reassure markets and lawmakers on Thursday that the federal government is committed to protecting U.S. bank deposits following the failure of Silicon Valley Bank and Signature Bank over the weekend.

“Our banking system remains sound and Americans can feel confident that their deposits will be there when they need them,” Yellen said in testimony before the Senate Finance Committee.

Under questioning, however, Yellen admitted that not all depositors will be protected over the FDIC insurance limits of $250,000 per account as they did for customers of the two failed banks.

A Silicon Valley Bank office is seen in Tempe, Arizona, on March 14, 2023.

Rebecca Noble | AFP | Getty Images

Yellen has been at the center of emergency federal efforts this past week to recover deposits for account holders at two failed banks, the California-based SVB and the crypto-heavy Signature Bank, based in New York.

A majority of SVB’s customers were small tech companies, venture capital firms and entrepreneurs who used the bank for day-to-day cash management to run their businesses. Those customers had $175 billion on deposit with tens of millions in individual accounts. That left SVB with one of the highest shares of uninsured deposits in the country when it collapsed, with 94% of its deposits landing above the FDIC’s $250,000 insurance limit, according to S&P Global Market Intelligence data from 2022.

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U.S. bank regulators announced a plan Sunday to fully insure all deposits at the two failed banks, including those above the $250,000 limit covered by traditional FDIC insurance. The additional protection will be paid for out of a special fund made up of fees levied on all FDIC-insured institutions.

In addition, the Federal Reserve loosened its borrowing guidelines for banks seeking short-term funding through its so-called discount window. It also set up a separate unlimited facility to offer one-year loans under looser terms than usual to shore up troubled banks facing a surge in cash withdrawals. Both programs are being paid for through industry fees, not by taxpayers, the Biden administration has emphasized.

“This will help financial institutions meet the needs of all of their depositors,” Yellen said. “This week’s actions demonstrate our resolute commitment to ensure that depositors’ savings remain safe.”

Democrats and Republicans in Congress have largely supported the emergency actions taken in the past week. But with markets recovering somewhat, lawmakers Thursday questioned Yellen about whether backstops for big banks will become a new norm, and what that could mean for community lenders.

“I’m concerned about the precedent of guaranteeing all deposits and the market expectation moving forward,” Sen. Mike Crapo, R-Idaho, the committee’s ranking member, said in his opening remarks.

People line up outside of a Silicon Valley Bank office on March 13, 2023 in Santa Clara, California.

Justin Sullivan | Getty Images

Republican Sen. James Lankford of Oklahoma pressed Yellen about how widely the uninsured deposit backstops will apply across the banking industry.

“Will the deposits in every community bank in Oklahoma, regardless of their size, be fully insured now?” asked Lankford. “Will they get the same treatment that SVB just got, or Signature Bank just got?”

Yellen acknowledged they would not.

Uninsured deposits, she said, would only be covered in the event that a “failure to protect uninsured depositors would create systemic risk and significant economic and financial consequences.”

Lankford said the impact of this standard would be that small banks would be less appealing to depositors with more than $250,000, the current FDIC insurance threshold.

U.S. Treasury Secretary Janet Yellen takes questions on the Biden administration’s plans following the collapse of three U.S. lenders including Silicon Valley Bank and Signature Bank, as she testifies before a Senate Finance Committee hearing on U.S. President Joe Biden’s proposed budget request for fiscal year 2024, on Capitol Hill in Washington, March 16, 2023.

Mary F. Calvert | Reuters

“I’m concerned you’re … encouraging anyone who has a large deposit at a community bank to say, ‘We’re not going to make you whole, but if you go to one of our preferred banks, we will make you whole.’”

“That’s certainly not something that we’re encouraging,” Yellen replied.

Members of Congress are currently weighing a number of legislative proposals intended to prevent the next Silicon Valley Bank-type failure.

One of these is an increase in the $250,000 FDIC insurance limit, which several senior Democratic lawmakers have called for in the wake of SVB’s collapse.

Following the 2008 financial crisis, Congress raised the FDIC limit from $100,000 to $250,000, and approved a plan under which big banks contribute more to the insurance fund than smaller lenders.

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March 18, 2023
How a TikTok ban in the U.S. might work

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The TikTok logo is displayed outside TikTok social media app company offices in Culver City, California, on March 16, 2023.

Patrick T. Fallon | AFP | Getty Images

TikTok is at risk of being banned in the U.S. if Chinese parent ByteDance won’t sell its stake. Millions of Americans who use the popular video app are left wondering what that means for them.

Some fans of the service may turn to virtual private networks (VPNs) to try and connect to TikTok should a ban take place, a workaround that can make it seem like their internet connection is coming from a different country. But that loophole may not be so easy to exploit.

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It’s not an issue yet, as there are still some ways a TikTok ban could be avoided or accessed legally in the U.S. Here are the key things under consideration.

What a ban or forced sale could look like

The Committee on Foreign Investment in the U.S. (CFIUS) is the interagency body evaluating national security concerns around the app to determine how to minimize risk if it continues to operate domestically. The group can recommend to President Joe Biden that ByteDance’s 2017 acquisition of Musical.ly, a TikTok precursor, be unwound, forcing a sale of those assets.

TikTok has recommended a mitigation plan as an alternative to a forced sale. But that’s a longshot solution as CFIUS already threatened a ban if ByteDance won’t sell its stake.

A forced sale would be a complex step, requiring a years-old transaction to be unwound. The Trump administration pursued that route once before to no avail. The Chinese government would likely oppose it again, but it would need to be careful in its protests because the heart of its argument to the U.S. is that TikTok operates independently.

“That would be part of the calculus and how aggressively China would want to respond,” said Lindsay Gorman, a senior fellow for emerging technologies at the German Marshall Fund’s Alliance for Securing Democracy. Gormany previously served as a senior advisor at the Biden White House.

Should the U.S. ban TikTok, the mechanics on what happens from there get murky. Oracle is the cloud hosting service for all of TikTok usage in the U.S. Internet service providers like Comcast (NBC Universal’s parent company) and Verizon direct traffic to end users. And the app stores controlled by Apple and Google are the primary places for consumers to download the TikTok app.

Shannon Reaves, a partner in Stroock’s CFIUS compliance group, said any requirement on a third party would not come from CFIUS, which is tasked with evaluating foreign investments alone.

“There won’t be action from CFIUS as a result of this review that will be taken against third parties that are not a part of this transaction,” Reaves said. “So your Apples and your Googles and so forth, that that will not happen.”

The government may have to turn to legislation or executive orders to get app distributors, ISPs and cloud services to block access to TikTok.

While there will likely always be cracks that can be exploited by a subset of computer literate users, the typical consumer would find it difficult to access a government banned service, said Douglas Schmidt, an engineering professor at Vanderbilt.

“There will almost always be ways around this,” Schmidt said. “It would just be a lot more difficult for the average person to do it without getting an advanced degree in computer security or something.”

In other words, a VPN won’t be enough, in part because going that route would still likely require app store credentials, which will indicate a user’s location. Gerald Kasulis, a vice president at NordVPN, said there’s also technology available to detect when a user is trying to access an app with a VPN.

The security concerns

Concerns around TikTok’s security risk come down to two main issues. The first is who can access U.S. consumer information and the second is who has the ability to determine what information reaches U.S. users. Under Chinese law, companies can be required to hand over internal information to the government for supposed national security purposes.

TikTok has sought to reassure the U.S. government that U.S. user data is stored outside of China. The company has developed an elaborate plan known as Project Texas that includes the vetting of its code in the U.S. and a separate board of directors for a domestic subsidiary, with members reviewed by the U.S. government.

TikTok CEO Shou Zi Chew, who’s set to testify before a U.S. House panel next week, told The Wall Street Journal that Project Texas would do just as much as divestment to resolve any security concerns.

But the mood in Washington isn’t moving in TikTok’s favor, and legislators have lost whatever trust they once may have had in China and its motives. That issue resurfaced earlier this year, when a suspected Chinese spy balloon was spotted flying across a large swath of the U.S. Biden ordered the military to shoot down the balloon last month.

When it comes to consumer technology, users have no idea what information is making its way to the Chinese government. And the U.S. government has a lot of work to do to provide clarity on what would happen if the app was to be banned.

“Even for someone who studies this stuff, it’s not easy to detach and detangle all these apps,” said Gorman. “As a society, we have not made the decision that the app stores, the Apple App Store or the Google Play Store, should be restricting apps based on the amount of information they collect. It can’t be put on any individual and it really does need to be addressed by governments.”

While many users may think their casual social media use would be of little interest to a foreign government, Schmidt said that data can have a surprising amount of value to bad actors.

“Having information about your habits and your interests and your interactions and where you go and what you do could be used for things like either phishing attacks to get access to more information, or for things like blackmail, if you’re doing things that you might not want other people to know about,” Schmidt said.

It’s unfamiliar territory for U.S. companies, in contrast to China, which blocks access to all sorts of content, including most major U.S. internet services.

“Trying to police data access is very, very difficult, especially when there’s suspicion that the folks who are doing this have a reason to do it,” Schmidt said. “And they’re heavily incentivized to collect this information and use it for all kinds of purposes.”

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March 17, 2023
Trump will surrender to face charges if indicted, defense lawyer says

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Former U.S. President Donald Trump gestures during an event at a fire station following the recent derailment of a train carrying hazardous waste, in East Palestine, Ohio, February 22, 2023.

Alan Freed | Reuters

Former President Donald Trump will surrender to face criminal charges if indicted by a Manhattan grand jury, his lawyer said Friday evening.

The lawyer, Joseph Tacopina, spoke on the heels of a report by WNBC that federal, state and local law enforcement agencies are preparing security arrangements for the possibility that Trump will be indicted as early as next week.

“Will follow normal procedures if it gets to that point,” Tacopina told CNBC when asked what Trump would do if that possibility becomes reality.

Trump is under investigation by the Manhattan District Attorney’s Office for his company recording as legal expenses a reimbursement to his former personal attorney Michael Cohen for $130,000 he gave porn star Stormy Daniels before the 2016 election to keep her quiet about an alleged sexual tryst with Trump.

Trump denies having sex with Daniels, and has condemned the probe and other criminal investigations he faces as partisan witch hunts.

In this March 17, 2011 file photo, attorney Joseph Tacopina speaks to the media outside Superior Court in New Haven, Conn.

Jessica Hill | AP

Ever since the grand jury was empaneled in recent months, and the perceived likelihood of an indictment grew, questions have been raised about whether Trump would resist surrendering if charged, and what would happen if he did so.

Trump, who has 24-hour protection by the U.S. Secret Service, currently resides at his Mar-a-Lago club in Palm Beach, Florida, which he rarely leaves.

Under Florida law, the state’s governor is responsible for making sure a person in the state is arrested and delivered to another state if that person is indicted on a felony charge.

However, Florida law also gives the governor the power to call for a further investigation before a defendant is extradited if that defendant refuses to comply with extradition.

Florida Gov. Ron DeSantis currently is positioning himself as a likely contender for the 2024 Republican presidential nomination.

Trump declared himself as a candidate for the GOP nomination last fall.

Even before that Trump and his allies have chafed at DeSantis’ popularity among fellow Republicans.

Cohen, who met 20 times with investigators over several years, testified for two days earlier this week to the grand jury. Daniels spoke to prosecutors via Zoom on Wednesday.

Cohen previously pleaded guilty to a federal criminal campaign charge related to making the payment to Daniels, which he has said Trump directed him to do to avoid harming his chances of winning the White House in 2016.

That crime is the hinge of what could be the prosecution of Trump in state Criminal Court in Manhattan.

Companies are barred by New York state law from misclassifying the nature of expenses, such as, theoretically, calling the reimbursement to Cohen for the Daniels payment “legal expenses.”

Violating that law can result in a misdemeanor charge. But that can be raised to a felony if the misstatement is done to cover up another crime.

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March 17, 2023
Fed loans, account guarantees helped stabilize ‘deposit flows’ at regional banks, Treasury official says

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Wally Adeyemo at CNBC’s Delivering Alpha, Sept. 28, 2022.

Scott Mlyn | CNBC

WASHINGTON — The record-setting number of emergency loans that were made to banks this week by the Federal Reserve was key to stabilizing withdrawals from small and mid-sized U.S. banks, Treasury Deputy Secretary Wally Adeyemo told CNBC Friday.

The impact of the swift actions by federal regulators last weekend to stabilize the U.S. banking system helped contain the fallout but were still rippling through the economy almost a week later.

The markets still haven’t fully priced in the federal aid or the $30 billion 11 banks deposited into First Republic Bank to help boost confidence into the system, he said.

“It will take time for markets to catch up with the actions that have been taken by us and by these banks,” Adeyemo said on CNBC’s “Squawk on the Street.” “And what we’ve done now is given these institutions time to think through how they organize their businesses going forward.”

Following the collapse of California-based Silicon Valley Bank and New York-based Signature bank last Friday and Sunday, respectively, regulators announced a series of emergency measures to stabilize the nation’s banking system.

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They included guaranteeing the deposits of customers at the two failed banks; creating a new fund, the Bank Term Funding Program, to make short-term loans to banks on generous terms; and easing conditions at the Fed’s traditional overnight bank lending arm, the so called “discount window.”

The result of the actions was a dramatic turnaround in the fortunes of numerous banks, said Adeyemo. That included banks that had anticipated potential mass withdrawals, and pledged collateral ahead of time expecting to need emergency loans.

“While a number of banks coming into the weekend prepositioned the need to get more liquidity, what we found over the course of the week is that they have had to use less and less of it,” said Adeyemo. “And now that we’ve seen a stabilization in terms of deposits to those institutions.”

But while the trends were moving in the right direction, the amount of money banks borrowed in the past week through Wednesday from the Fed’s discount window set a new record at $153 billion, according to the Fed’s weekly report.

The previous record for discount window loans was $111 billion, set at the height of the financial crisis in 2008.

The identities of the banks that borrowed will not be made public for another two years. But the sum suggests the banking sector is not quite stable yet.

The ongoing questions about bank stability dovetail with another question arising out of the Fed actions. Whether uninsured deposits at banks that fail in the future will be covered the same way they were at SVB and Signature.

“Are all uninsured depositors in the U.S. banking system protected right now?” CNBC’s Sara Eisen asked Adeyemo.

The answer was that, for now, this is a Biden administration goal, but not a reality.

“Ultimately, the president has made clear our goal is to protect depositors to make sure that they have the money they need to run their businesses, and make sure their families are taken care of,” said Adeyemo.

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March 17, 2023
Russia tried to influence U.S. elections in 2022 and will do it again, nation’s top intel agency says

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Russia’s President Vladimir Putin attends a news conference after trilateral meeting with Azerbaijan’s President Ilham Aliyev and Armenia’s Prime Minister Nikol Pashinyan in Sochi, Russia October 31, 2022.

Sergey Bobylev | Sputnik | via Reuters

Russia conducted malign influence operations in the 2022 U.S. midterm elections and is using increasingly clandestine means to “penetrate the Western information environment,” the U.S. intelligence community said in a new report Wednesday.

Moscow will also work to “strengthen ties” to Americans in media and politics as it works to carry out “future influence operations,” the Office of the Director of National Intelligence said in the latest edition of its annual assessment of worldwide threats to U.S. national security.

The 2023 report came four months after the most recent midterm elections, where concerns about Russian influence efforts were more muted in comparison with the two previous presidential election cycles in 2016 and 2020.

The intelligence community found that Russian President Vladimir Putin ordered an influence campaign in the 2016 election with a “clear preference” for then-candidate Donald Trump, who would go on to win that race.

Trump — who during that campaign had called on Russia to find his then-rival Hillary Clinton’s emails — later questioned whether Russia interfered in the 2016 election. During a meeting with Putin in 2018, Trump indicated that he believed the Russian leader’s claim that the Kremlin did not meddle in the 2016 race — essentially siding with Putin’s stance over his own intelligence community’s assessment. Trump later backtracked on those remarks.

Ahead of last November’s midterms, researchers reportedly identified Russian efforts to interfere by using social media accounts posing as Americans to stoke partisan anger and undermine trust in the electoral process. The FBI and the Department of Justice’s cybersecurity agency had warned ahead of the midterms that foreign actors were likely to try and spread disinformation before and after Election Day.

The office, which oversees the nation’s 18 intelligence agencies, added that this latest warning about Russian election meddling was starker and more certain than in its previous report.

In 2022, for instance, the office determined that Russia “almost certainly” sees U.S. elections as opportunities for malign influence to influence its foreign policy goals. Moscow will also “probably” try to cultivate relationships with U.S. figures in politics and the media “in hopes of developing vectors for future influence operations,” it said at that time.

In the 2023 edition, the agency dropped the words “almost certainly” and “probably” from its assessment.

The report added, “Russia’s influence actors have adapted their efforts to increasingly hide their hand,” using a “vast ecosystem of Russian proxy websites, individuals, and organizations that appear to be independent news sources.”

Through creating original content or seizing on preexisting divisive discourse, Moscow “intensifies that content to further penetrate the Western information environment,” according to the assessment. “These activities can include disseminating false content and amplifying information perceived as beneficial to Russian influence efforts or conspiracy theories.”

Russia’s already-tense relations with the U.S. and other Western powers have been hugely strained by the country’s invasion of Ukraine. The intelligence community warned in its threat assessment that Russia, which holds the world’s largest stockpile of nuclear weapons, is continuing to develop long-range nuclear-capable missiles.

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March 8, 2023
White House endorses new Senate TikTok bill, urges Congress to pass it ‘quickly’

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U.S. Senator Mark Warner (D-VA) and other U.S. senators unveil legislation that would allow the Biden administration to “ban or prohibit” foreign technology products such as the Chinese-owned video app TikTok during a news conference on Capitol Hill in Washington, March 7, 2023.

Bonnie Cash | Reuters

The White House threw its support behind a new bipartisan Senate bill on Tuesday that would give the Biden administration the power to ban TikTok in the U.S.

The legislation would empower the Commerce Department to review deals, software updates or data transfers by information and communications technology in which a foreign adversary has an interest. TikTok, which has become a viral sensation in the U.S. by allowing kids to create and share short videos, is owned by Chinese internet giant ByteDance.

Under the new proposal, if the Commerce secretary determines that a transaction poses “undue or unacceptable risk” to U.S. national security, it can be referred to the president for action, up to and including forced divestment.

The bill was dubbed the RESTRICT Act, which stands for Restricting the Emergence of Security Threats that Risk Information and Communications Technology.

Sen. Mark Warner, D-Va., who chairs the Senate Intelligence Committee, formally unveiled the legislation on Capitol Hill alongside a bipartisan group of Senate co-sponsors. The White House issued a statement publicly endorsing the bill while Warner was briefing reporters.

“This bill presents a systematic framework for addressing technology-based threats to the security and safety of Americans,” White House national security adviser Jake Sullivan said in a statement, adding that it would give the government new tools to mitigate national security risks in the tech sector.

Sullivan urged Congress “to act quickly to send the bill to the President’s desk.”

“Critically, it would strengthen our ability to address discrete risks posed by individual transactions, and systemic risks posed by certain classes of transactions involving countries of concern in sensitive technology sectors,” said Sullivan.

A TikTok spokeswoman did not respond Tuesday to CNBC’s request for comment.

Sullivan’s statement marks the first time a TikTok bill in Congress has received the explicit backing of the Biden administration, and it catapulted Warner’s bill to the top of a growing list of congressional proposals to ban TikTok.

As of Tuesday, Warner’s legislation did not yet have a companion version in the House. But Warner told CNBC he already had “lots of interest” from both Democrats and Republicans in the lower chamber.

Warner declined to say who he and Republican co-sponsor Sen. John Thune, R-S.D., might look to for support in the House, but added, “I’m very happy with the amount of interest we’ve gotten from some of our House colleagues.”

Earlier this month, the House Foreign Affairs Committee passed a bill that, if it became law, would compel the president to impose sanctions on Chinese companies that could potentially expose Americans’ private data to a foreign adversary.

But unlike Warner’s bill, the House legislation, known as the DATA Act, has no Democratic co-sponsors, and it advanced out of committee along party lines, complicating its prospects in the Democratic-majority Senate.

Senators introducing the bill on Tuesday emphasized that unlike some other proposals, their legislation does not single out individual companies. Instead, it aims to create a new framework and a legal process for identifying and mitigating specific threats.

“The RESTRICT Act is more than about TikTok,” Warner told reporters “It will give us that comprehensive approach.”

The new Senate bill defines foreign adversaries as the governments of six countries: China, Russia, Iran, North Korea, Venezuela and Cuba. It also says it will apply to information and communication technology services with at least 1 million U.S.-based annual active users or that have sold at least 1 million units to U.S. customers in the past year.

That could reach far beyond TikTok, which in 2020 said it had 100 million monthly active users in the U.S.

The company has been under review by the Committee on Foreign Relations in the U.S. stemming from ByteDance’s 2017 acquisition of Musical.ly, which was a precursor to the popular video-sharing app.

But that process has stalled, leaving lawmakers and administration officials impatient to deal with what they see as a critical national security risk. TikTok has maintained that approval of a new risk mitigation strategy by CFIUS is the best path forward.

“The Biden Administration does not need additional authority from Congress to address national security concerns about TikTok: it can approve the deal negotiated with CFIUS over two years that it has spent the last six months reviewing,” TikTok spokesperson Brooke Oberwetter said in a statement before the bill text was released.

“A U.S. ban on TikTok is a ban on the export of American culture and values to the billion-plus people who use our service worldwide,” the company said. “We hope that Congress will explore solutions to their national security concerns that won’t have the effect of censoring the voices of millions of Americans.”

TikTok’s interim security officer Will Farrell described in a speech on Monday the layered approach the company plans to take to mitigate the risk that the Chinese government could interfere with its operations in the U.S.

The so-called Project Texas would involve Oracle hosting its data in the cloud with strict procedures over how that information can be accessed and even sending vetted code directly to the mobile app stores where users find the service.

Farrell said TikTok’s commitments would result in an “unprecedented amount of transparency” for such a technology company.

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March 7, 2023
New bipartisan Senate TikTok bill will be unveiled Tuesday

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WASHINGTON — A highly anticipated bipartisan Senate bill to give the president the authority to respond to threats posed by TikTok and companies like it will be unveiled Tuesday afternoon by Senate Intelligence Committee Chairman Mark Warner, a committee spokeswoman told CNBC.

The Virginia Democrat will hold a 3 p.m. ET press conference with South Dakota Republican Sen. John Thune, the lead co-sponsor of the legislation.

The precise text of the legislation has yet to be released, but Warner suggested this past weekend that the bill will not be limited simply to reining in TikTok, which is owned by Chinese tech giant ByteDance.

“In terms of foreign technology coming into America, we’ve got to have a systemic approach to make sure we can ban or prohibit it when necessary,” Warner said on Fox News Sunday.

“TikTok is one of the potentials,” that could be targeted by the bill, Warner said. “They are taking data from Americans, not keeping it safe.”

“But what worries me more with TikTok is that this could be a propaganda tool. The kind of videos you see would promote ideological issues,” he added.

Warner’s bill comes nearly a week after the House Foreign Affairs Committee advanced a Republican-sponsored bill that aims to do much of the same thing.

The House legislation passed the GOP-controlled committee 24-16 along party lines, with unanimous GOP support and no Democratic votes.

Dubbed the Deterring America’s Technological Adversaries, or DATA, Act, the House bill mandates that the president impose broad sanctions on companies based in or controlled by China that engage in the transfer of the “sensitive personal data” of Americans to entities or individuals based in, or controlled by, China.

And while the DATA Act has advanced beyond its committee of jurisdiction, it was unclear Monday when, or if, it would receive a vote in the full House.

Bills that authorize U.S. President Joe Biden to rein in Chinese companies that collect Americans’ personal data have gained steam in recent months, as talks between TikTok and the Treasury Department’s Committee on Foreign Investment in the U.S. have stalled.

CFIUS, which evaluates risks associated with foreign investment deals, is scrutinizing ByteDance’s 2017 purchase of Musical.ly.

TikTok hopes the CFIUS probe will ultimately result in a deal between the company and the government to address data privacy issues while protecting the company’s ability to operate in the United States.

“The swiftest and most thorough way to address national security concerns is for CFIUS to adopt the proposed agreement that we worked with them on for nearly two years,” TikTok spokeswoman Brooke Oberwetter told CNBC last week.

But as the CFIUS probe drags on without resolution, the White House has reportedly begun to focus more energy on the potential of Congress to clear a legal path for Biden to take action against companies that pose a national security threat.

Within the administration, Commerce Secretary Gina Raimondo has emerged as a point person in this effort.

“There’s a number of members in the U.S. Senate who are thinking hard about what’s the right way to protect American national security,” Raimondo said in a recent interview with Bloomberg News.

“We will work with Congress to figure out the right way to legislate to protect America from these concerns,” she added.

Last Monday, the Biden administration released new implementation rules for a TikTok ban that applies only to federal government-owned devices, which was passed by Congress in December.

TikTok’s CEO, Shou Zi Chew, is scheduled to appear as a witness at a House Energy and Commerce Committee hearing on March 23.

CNBC’s Mary Catherine Wellons contributed reporting to this story.

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March 6, 2023
Ericsson to lay off 8,500 workers as part of cost-cutting plan

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Photographer | Collection | Getty Images

Swedish telecom company Ericsson will lay off 8,500 workers as part of its cost-cutting measures, the company confirmed to CNBC on Friday.

Reuters earlier reported on the layoffs, which will affect roughly 8% of its staff of 105,529 worldwide. The company employs about 11,994 people in North America, according to its website.

An Ericsson spokesperson said the cuts were part of an “acceleration of structural cost reductions efforts” as announced during the company’s Capital Markets Day on Dec. 15. The spokesperson said most of the layoffs would take effect in the first half of 2023 but could also extend into 2024.

“The way headcount reductions will be managed will differ depending on local country practice,” the spokesperson said in a statement. “Our aim is to manage the process in every country with fairness, respect, professionalism and in line with local labour legislation. Any impact to employees will be first communicated to them.”

The company is seeking cost reductions at a run-rate of 9 billion Swedish kronor, or about $860 million, by the end of 2023. Ericsson said it expects to start seeing the effect of its cost savings in the second quarter of this year.

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February 25, 2023
U.S. will create at least two semiconductor manufacturing clusters by 2030, Commerce Secretary Gina Raimondo says

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Commerce Secretary Gina Raimondo testifies before a Senate Appropriations Subcommittee on Commerce, Justice, Science, and Related Agencies hearing on Capitol Hill in Washington, D.C., U.S., February 1, 2022.

Andrew Harnik | Reuters

WASHINGTON — The U.S. will use funds from the $52 billion CHIPS and Science Act to create at least two large-scale logic fabs for the manufacture of semiconductors, along with multiple high-volume advanced packaging facilities, by 2030, Commerce Secretary Gina Raimondo announced Thursday.

Raimondo’s announcement comes as the department prepares to open applications next week for businesses to receive funding under the CHIPS Act, signed into law by President Joe Biden in August.

“Each cluster will include a robust supplier ecosystem, R&D facilities to continuously innovate new process technologies, and specialized infrastructure,” Raimondo told students at Georgetown University’s School of Foreign Service. “Each of those clusters will employ thousands of workers in well-paying jobs.”

U.S.-based manufacturing plants, known as “fabs,” will produce advanced memory chips “on economically competitive terms,” Raimondo said. The fabs will also help meet the need for current generation and mature-node chips “most critical to economic and national security,” she added.

“These are the chips that go into cars, medical devices, and many of our defense capabilities,” she added.

The CHIPS Act was established to increase U.S. competitiveness in the semiconductor market against manufacturing monopolies like Taiwan, which produces 92% of the world’s leading-edge chips, according to Raimondo. The massive reliance on a single country for production exacerbated supply-chain problems during the pandemic, and generated national security concerns because any disruption to chip production can hinder the production of a range of goods.

“This is fundamentally a national security issue,” she said. “As I said, CHIPS is about gaining a technological edge, export controls are about keeping it.”

Raimondo also highlighted concerns about China’s usage of semiconductors in its technological weapons systems. Taiwan’s proximity to China — and the prospect of Chinese aggression against Taiwan — has also raised concerns within the Biden administration and Congress.

“Don’t be naive about this, China … (wants) the technology to improve their military capability, and export controls (are) narrowly defined or designed to make sure they don’t get these chips to improve their military capability,” Raimondo told Georgetown students.

The Commerce secretary reiterated the government’s plans to invest $11 billion in what it calls a National Semiconductor Technology Center.

“The vision for it is an ambitious public-private partnership where government, industry, customers, suppliers, educational institutions, entrepreneurs, and investors converge to innovate, connect, and solve problems,” Raimondo said of the center, which will actually comprise several locations around the country aimed at “solving the most impactful, relevant and universal R&D challenges in the industry,” she added.

“Most importantly, the NSTC is going to ensure the U.S. leads the way in the next generation of semiconductor technologies—everything from quantum computing, materials science, and AI to the future applications we haven’t even thought of yet,” Raimondo said.

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February 23, 2023
Supreme Court rules 9-0 that bankruptcy filers can’t avoid debt incurred by another’s fraud

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The Supreme Court in a unanimous decision Wednesday ruled that a woman could not use protection under the U.S. bankruptcy code to avoid paying a debt that resulted from fraud by her partner.

The court said that the woman, Kate Bartenwerfer, owed the debt to San Francisco real estate developer Kieran Buckley even if she did not know or could not have known about her now-husband David’s misrepresentations about a house they sold to Buckley for more than $2 million.

The decision resolves a difference of opinion between several federal circuit appeals courts on the question of whether an innocent party can be liable in bankruptcy proceedings for another person’s fraud.

The 9-0 ruling written by Justice Amy Coney Barrett underscored a Supreme Court decision in 1885, which found that two partners in a New York wool company were liable for the debt due to the fraudulent claims of a third partner even though they were not themselves “guilty of wrong.”

Barrett dismissed Bartenwerfer’s grammatically focused argument that the relevant section of the bankruptcy code, written in a passive voice as “money obtained by fraud,” refers to “money obtained by the individual debtor’s fraud.”

“Innocent people are sometimes held liable for fraud they did not personally commit, and, if they declare bankruptcy, [the bankruptcy code] bars discharge of that debt,” Barrett wrote.

“So it is for Bartenwerfer, and we are sensitive to the hardship she faces,” she wrote.

The debt to Buckley, which was originally a court judgment of $200,000 imposed in 2012, since has grown to more than $1.1 million as a result of interest, according to Janet Brayer, the attorney who represented Buckley in a lawsuit over the house sale.

Brayer said that debt is growing at a current rate of 10% annually and that it excludes attorney fees to which she is entitled to under California law.

“We have been working on this since 2008, and now finally have been vindicated and justice served for all victims of fraud, Brayer said. “Hence, I am a happy girl today.”

Iain MacDonald, a lawyer for Bartenwerfer, did not have an immediate comment on the ruling, saying he planned to discuss the decision with her.

Justice Sonia Sotomayor, in a concurring opinion joined by Justice Ketanji Brown Jackson, noted that the ruling involves people who acted together in a partnership, not “a situation involving fraud by a person bearing no agency or partnership relationship to the debtor.”

“With that understanding, I join the Court’s opinion,” Sotomayor wrote.

The ruling on Bartenwerfer’s case came 18 years after the events that triggered the dispute.

Bartenwerfer, and her then-boyfriend David Bartenwerfer, jointly bought a house in San Francisco in 2005 and planned to remodel it and sell it for a profit, the ruling noted.

While David hired an architect, engineer, and general contractor, monitored their progress and paid for the work, “Kate, on the other hand, was largely uninvolved,” Barrett wrote.

The house was eventually bought by a man named Kieran Buckley after the Bartenwerfers “attested that
they had disclosed all material facts relating to the property,” Barrett noted.

But Buckley learned that the house had “a leaky roof, defective windows, a missing fire escape, and
permit problems.”

He then sued the couple, claiming he had overpaid for the home based on their misrepresentations of the property.

A jury ruled in his favor, awarding him $200,000 from the Bartenwerfers.

The couple was unable to pay the award or other creditors and filed for protection under Chapter 7 of the bankruptcy code, which normally allows people to void all of their debts.

But “not all debts are dischargeable,” Barrett wrote in her ruling.

“The Code makes several exceptions to the general rule, including the one at issue in this case: Section 523(a)(2)(A) bars the discharge of ‘any debt … for money … to the extent obtained by … false pretenses, a false representation, or actual fraud,’” Barrett wrote.

Buckley challenged the couple’s move to void their debt to him on that ground.

A U.S. Bankruptcy Court judge ruled in his favor, saying “that neither David nor Kate Bartenwerfer could discharge their debt to Buckley,” the opinion by Barrett noted.

“Based on testimony from the parties, real-estate agents, and contractors, the court found that David had knowingly concealed the house’s defects from Buckley,” Barrett wrote.

“And the court imputed David’s fraudulent intent to Kate because the two had formed a legal partnership to execute the renovation and resale project,” she added.

The couple appealed the ruling.

The U.S. Bankruptcy Appellate Panel for the 9th Circuit Court of Appeals found that David still owed the debt to Buckley given his fraudulent intent.

But the same panel disagreed that Kate owed the debt.

“As the panel saw it [a section of the bankruptcy code] barred her from discharging the debt only if she knew or had reason to know of David’s fraud,” Barrett wrote.

Bartenwerfer later asked the Supreme Court to hear her appeal of that ruling.

In her opinion, Barrett noted that the text of the bankruptcy code explicitly bars Chapter 7 from being used by a debtor to discharge a debt if that obligation was the result of “false pretenses, a false representation, or actual fraud.”

Barrett wrote, “By its terms, this text precludes Kate Bartenwerfer from discharging her liability for the state-court judgment.”

The justice noted that Kate Bartenwerfer disputed that, even as she admitted, “that, as a grammatical matter, the passive-voice statute does not specify a fraudulent actor.”

“But in her view, the statute is most naturally read to bar the discharge of debts for money obtained by the debtor’s fraud,” Barrett wrote.

“We disagree: Passive voice pulls the actor off the stage,” Barrett wrote.

The justice wrote that Congress, in writing the relevant section of the bankruptcy code, “framed it to ‘focu[s] on an event that occurs without respect to a specific actor, and therefore without respect to any actor’s intent or culpability.’”

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February 22, 2023
‘They started the war’: Russia’s Putin blames West and Ukraine for provoking conflict

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A family watches a TV broadcast of Russian President Vladimir Putin’s annual state of the nation address in Moscow on February 21, 2023.

Yuri Kadobnov | Afp | Getty Images

Russian President Vladimir Putin on Tuesday used a widely-watched speech to deny responsibility for the war in Ukraine and lash out at his adversaries.

In a more than hour-long speech, Putin claimed Russia had been attempting to allow citizens in the contested Donbas region to speak their “own language” and had been seeking a peaceful solution. He also cited the expansion of NATO and new European anti-rocket defense systems as provoking Russia, and said the objective of the west was “infinite power.”

Western nations and Ukraine have repeatedly rejected Putin’s narrative. The U.S. administration on Saturday formally concluded that Moscow had committed “crimes against humanity” during its year-long invasion of its neighbor. Political analysts say Putin’s decision to invade Ukraine was the biggest mistake of his political career and has weakened Russia for years to come.

Russia annexed Crimea in 2014 after a falsified referendum. The invasion was widely condemned by the international community and resulted in rounds of Western sanctions against Russian officials. Last year it also annexed four Ukrainian regions (Donetsk and Luhansk which cover much of the Donbas region, and Kherson and Zaporizhzhia) which Ukraine and its allies also condemned as illegal and illegitimate.

Putin on Tuesday discussed the Donbas, claiming the Kremlin saw threats increasing in the contested region ahead of the Feb .24 invasion.

“We had no doubt that by February 2022, everything was prepared for a punitive action in Donbas, where [the] Kyiv regime provided artillery and aviation and other weapons to attack Donbas in 2014. In 2015, they attempted again to directly attack Donbas, they continued shelling, terror,” he said, according to a Sky News translation.

“All of this was completely against the documents that were accepted by the United Nations Security Council. I would like to repeat: they started the war. And we used the force in order to stop it.”

Putin’s “state of the nation” address Tuesday was delivered in Moscow to lawmakers and military officials and was broadcast on state TV.

Feb. 24 will mark one year since Russia mounted a large-scale invasion of Ukraine, beginning a ground war in Europe that Putin still refers to as a “special military operation.” Intense fighting continues across the war-torn nation with the death toll reportedly in the tens of thousands.

Putin said Russia would create a highway to Crimea and enact a program of “social restoration” to territories it claims control over.

Ukrainian officials are defiant, with President Volodymyr Zelenskyy repeatedly insisting the country will not surrender to anything but a restoration of the country’s pre-invasion borders.

U.S. President Joe Biden made a surprise visit to the Ukrainian capital Kyiv on Monday, where he met with Ukrainian President Volodymyr Zelenskyy.

Biden said the trip was to “reaffirm our unwavering and unflagging commitment to Ukraine’s democracy, sovereignty, and territorial integrity.” He also promised to deliver more artillery ammunition and anti-armor systems, and to announce new sanctions on Russian companies and its elites.

Biden is due to deliver another speech, pointedly following Putin’s, in Poland. He is also meeting with Polish President Andrzej Duda.

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February 21, 2023