Tag: finance and investments

The Supreme Court just handed Joe Biden a series of setbacks. It may have also given Democrats new motivation to reelect him | CNN Politics

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CNN
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President Joe Biden wasn’t planning to take questions on Thursday. His helicopter was waiting outside on the White House’s South Lawn.

But after a 10-minute statement on the Supreme Court’s affirmative action ruling, a CNN reporter called out, “Is this a rogue court?” The president stopped in his tracks.

Pausing to think a moment, he looked over his shoulder. “This is not a normal court,” he said before leaving.

This week’s monumental rulings – striking down affirmative action in college admissions and unraveling Biden’s student debt relief plan among them – amount to serious setbacks for a president who promised as a candidate to advance racial equity and erase student debt.

They are also an urgent reminder to Democrats of the enduring consequences of elections at a moment Biden’s advisers are searching for ways to inject enthusiasm into his bid for another term.

What impact that will have on the coming election remains unknown. But Biden and his team have already begun assigning blame on Republicans for dismantling programs that have benefited young, college-educated and minority voters – all critical components of the Democratic coalition Biden will need to mobilize if he hopes to win reelection.

That three justices within the court’s conservative majority were appointed by President Donald Trump – both Biden’s predecessor and, according to polls, his most likely opponent next year – creates even more of an impetus for Biden to use the rulings as a political cudgel as his campaign heats up.

“The excesses of the Supreme Court are going to backfire,” said Rep. Ritchie Torres, a New York Democrat. “You know, the Supreme Court’s decision to overturn Roe versus Wade reduced what was supposed to be a red wave in the 2022 election cycle to nothing more than a red trickle. So not only is the Supreme Court’s decision bad law, it’s also bad politics and it’s going to come back to haunt the Republican Party.”

Speaking to a group of Democratic donors in New York City on Thursday evening, Biden sought to underscore the stakes of the court’s new supermajority, a preview of how he’ll frame the issue over the coming year.

“The Supreme Court is becoming not just conservative, but almost – it’s like a throwback. It’s like a throwback, some of the decisions they’re making,” Biden told donors in a private dining room inside the Seagram Building. “Did you ever think we’d be in a position, after 50 years of acknowledging the right of privacy in the Constitution, suggesting that there’s no such thing as the right to privacy?”

Despite his criticism of the court, Biden has rejected some liberal suggestions on reforming the panel. He opposes expanding the number of justices that sit on the court and hasn’t embraced term limits.

“If we start the process of trying to expand the court, we’re going to politicize it, maybe forever, in a way that is not healthy,” Biden said during a friendly interview on MSNBC shortly after Thursday’s decision on affirmative action.

Biden’s student loan plan, which came about last year after months of agonizing internal debate over its costs and eligibility criteria, was intended to free low- and middle-income Americans from crippling debt.

Throughout the process, Biden expressed concern at being seen as offering a handout to the wealthy. Eventually, pressure to fulfill one of his top campaign promises led to the plan to forgive up to $20,000 in student loan debt for certain borrowers.

For months the White House publicly said there was no alternative plan if the Supreme Court struck down the student debt relief program. But behind the scenes, top White House officials were working for several weeks to fulfill a simple directive from the president to “be ready in the event the Supreme Court did not do the right thing,” White House officials said.

The president’s charge to his team was described as this: “If the court ruled against the program, find other ways to deliver relief for as many working and middle-class borrowers as possible, accounting for all the legal issues.”

For the past few weeks, White House chief of staff Jeff Zients gathered his team for weekly meetings to map out all scenarios for the Supreme Court’s ruling and explore all legal avenues available to them after the president told his team to build a “fully developed response” to all possible rulings, officials said.

Zient’s office – led by deputy chief of staff Natalie Quillian, the Domestic Policy Council, National Economic Council and White House Counsel’s Office – worked with the Department of Education and the Department of Justice to come up with options the administration could take if the ruling was not in their favor.

“All of these meetings were structured around one question – how would we be able to deliver relief to as many borrowers as we could, as quickly as possible under any possible outcome of the Supreme Court,” official said.

The White House also stayed in touch with and fielded suggestions for next steps from debt relief advocate groups and congressional allies throughout the process. Lawyers from the White House, Justice Department and Education Department examined all of the recommendations, including administration action and the legal authorities available to the administration, and ultimately crafted responses for multiple scenarios.

Inside the White House, some officials had held out hope the court would uphold Biden’s student debt program, pointing to some surprising decisions over the past weeks that saw some conservative justices joining liberals on issues of voting rights and congressional redistricting.

But even Biden acknowledged after the court’s oral arguments in February he wasn’t certain the ruling would go his way.

“I’m confident we’re on the right side of the law,” Biden told CNN in March when asked if he was confident the administration would prevail in the case. “I’m not confident of the outcome of the decision yet.”

His instinct was correct. The president was in the Oval Office on Friday morning when he was informed of the Supreme Court’s decision by his senior aides and then engaged in meetings stretching into the afternoon to fine-tune their response after the ruling was not in their favor.

Ultimately, the president directed his team to move forward with a new plan, which includes pursuing a new path for debt relief through the authorities in the Higher Education Act of 1965, which was promoted by some debt relief advocate groups and progressive lawmakers, as well as creating a temporary 12-month “on-ramp repayment” program for federal student loan borrowers when payments resume in October.

A day earlier, Biden was watching the news on television when the affirmative action decision was handed down by the court, according to an official. A team from the White House counsel’s office came to brief him on the ruling.

“In our conversations with the White House about why student debt cancelation was needed, it’s about reducing the racial wealth gap,” said Wisdom Cole, national director of the Youth & College division at the NAACP. “If the administration is committed to diversity, equity, and inclusion, they must use every tool in their toolkit. Every legal authority to ensure that we see relief happen.”

Demonstrating urgency in responding to the court’s actions was a key objective as the White House prepared for both rulings, according to people familiar with the matter.

Looming over the preparations was the impression left after last year’s Supreme Court term that the Biden administration was unprepared for the decision striking down the nationwide right to abortion, despite a leaked court opinion months ahead of time indicating the justices were prepared to overturn Roe v. Wade.

The White House has strongly denied it was caught flat-footed on abortion and has pointed to actions taken in the months after the decision to expand access, including to medication abortion.

The issue proved galvanizing to Democratic voters in November’s midterm elections and has propelled Democratic victories even in traditionally Republican districts.

Whether the court’s ruling on student debt relief and affirmative action can have a similar effect will prove critical over the coming year, as Biden works to convince voters he is still fighting to fulfill his promises. Initial reaction from progressive Democrats was positive.

“It was not a foregone conclusion that the President would act so swiftly today. But he announced an alternative path to student debt cancellation by using his Higher Education Act authority given by Congress – and that deserves praise,” said Adam Green, co-founder of the Progressive Change Institute.

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April 12, 2021
5 ways a debt default could affect you | CNN Politics

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CNN
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President Joe Biden and House Republicans may have as little as a month to prevent the US from defaulting on its debt, which would impact millions of Americans and unleash economic and fiscal chaos here and around the world.

Treasury Secretary Janet Yellen warned Monday that the government may not be able to pay all of its bills in full and on time as soon as June 1. However, the forecast was uncertain, and the default date might come several weeks later, she said. The US hit its $31.4 trillion debt ceiling in January, and Treasury has been using cash and “extraordinary measures” to satisfy obligations since then.

Just what would happen if the nation defaults on its debt is unknown since it’s never actually happened before. A close call in 2011 roiled the financial markets and prompted Standard & Poor’s to downgrade the US’ credit rating to AA+ from AAA.

Yellen gave a sense of the turmoil it would cause in her letter to House Speaker Kevin McCarthy on Monday.

“If Congress fails to increase the debt limit, it would cause severe hardship to American families, harm our global leadership position, and raise questions about our ability to defend our national security interests,” she wrote.

To be clear, a debt default doesn’t mean all payments would stop and people would permanently lose out on money they are owed. Treasury would have the funds to satisfy some obligations, but it’s not certain how the agency would handle the disbursements. Much would also depend on how long it takes Congress to address the borrowing cap.

“Tens of millions of people across the country who expect payments from the federal government may not get them on time,” said Shai Akabas, director of economic policy at the Bipartisan Policy Center.

Here are five ways that Americans could be affected by debt default:

About 66 million retirees, disabled workers and others receive monthly Social Security benefits. The average payment for retired workers is $1,827 a month in 2023.

Almost two-thirds of beneficiaries rely on Social Security for half of their income, and for 40% of recipients, the payments constitute at least 90% of their income, according to the National Committee to Preserve Social Security and Medicare.

These payments could be delayed in a debt default scenario, though it’s possible Treasury could continue making on-time payments because of the entitlement program’s trust fund, Akabas said.

The benefits are disbursed four times a month, on the third day of the month and on three Wednesdays. Roughly $25 billion a week is sent out, according to the Congressional Budget Office.

“Even a short delay in the payment of Social Security benefits would be a burden for the millions of Americans who rely on their earned benefits to pay for out-of-pocket health care expenses, food, rent and utilities,” Max Richtman, the committee’s CEO, said in a statement.

Many other government payments could also be affected, including funding for food stamps; federal grants to states and municipalities for Medicaid, highways, education and other programs; and Medicare payments to hospitals, doctors and health insurance plans.

More than 2 million federal civilian workers and around 1.4 million active-duty military members could see their paychecks delayed. Federal government contractors could also see a lag in payments, which could affect their ability to compensate their workers.

Also, certain veterans benefits, including disability payments and pensions for some low-income veterans and their surviving families, could be affected.

“Such calamity would place further stress on our servicemembers, retirees, and veterans, as well as their families, caregivers, and survivors,” Rene Campos, senior director of government relations for the Military Officers Association of America, said in a blog post. “Though life in uniform is not always predictable, those who serve or have served their country expect their country to honor their commitment to service.”

About $25 billion in pay or benefits for active-duty members of the military, civil service and military retirees, veterans and recipients of Supplemental Security Income is sent out on the first day of the month, according to the CBO.

Americans’ investments would take a direct hit. Case in point: Markets had what was then their worst week since the financial crisis during the 2011 debt ceiling standoff after the Standard & Poor’s downgrade.

Even if the debt ceiling impasse is resolved soon after a default, stocks could shed as much as a third of their value. That would wipe out around $12 trillion in household wealth, according to Moody’s Analytics.

If a default occurs, yields on US Treasuries will inevitably rise to compensate for the increased risk that bondholders won’t receive the money they’re owed from the government.

Since interest rates on loans, credit cards and mortgages are often based on Treasury yields, the cost of borrowing money and paying off debt would rise. That’s on top of the increased costs Americans are already facing from the Federal Reserve rate hikes.

Families and businesses would also have a tougher time getting approved for lines of credit since banks would have to be more selective about to whom they loan money. That’s because their costs of borrowing money will also rise, which limits the amount of money they can lend out.

A debt default could trigger an economic downturn, which would prompt a spike in unemployment. It would come at a particularly fragile time – when the nation is already dealing with rising interest rates and stubbornly high inflation.

How much damage would be done would depend on how long the crisis continues. If the default lasts for about a week, then close to 1 million jobs would be lost, including in the financial sector, which would be hard hit by the stock market declines. Also, the unemployment rate would jump to about 5% and the economy would contract by nearly half a percent, according to Moody’s.

But if the impasse dragged on for six weeks, then more than 7 million jobs would be lost, the unemployment rate would soar above 8% and the economy would decline by more than 4%, according to Moody’s. The effects would still be felt a decade from now.

“It would be a body blow to the economy, and it would be a manufactured crisis,” said Bernard Yaros, an economist at Moody’s.

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April 12, 2021
Biden has already canceled $66 billion in student loans. Here’s how 3 people received debt relief | CNN Politics

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Washington
CNN
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Even though the Supreme Court struck down President Joe Biden’s student loan forgiveness program, more debt will be canceled during his time in office than under any other president.

The Biden administration has already canceled a record $66 billion in student loan debt for nearly 2.2 million borrowers.

While his one-time student loan forgiveness program would have been far reaching, promising up to $20,000 of debt cancellation for eligible borrowers and wiping out roughly $400 billion overall, the Department of Education has made some lesser-known changes to existing student loan forgiveness programs.

The administration has made it easier for people to qualify for the Public Service Loan Forgiveness program, which grants relief for public sector workers after they’ve made 10 years of qualifying payments.

It has also made more people eligible for the borrower defense to repayment program that cancels student loan debt for borrowers who attended a school that may have misled them or violated certain state laws, as well as made loan discharges automatic for more borrowers who are permanently disabled.

Here’s how three people received student loan forgiveness due to the changes the Biden administration has made to existing federal programs.

Margo Myles, 52, got a letter from the Department of Education in late March saying that nearly $25,000 of her federal student loan debt had been canceled.

Myles had borrowed the money in the early 2000s to earn an associate degree in paralegal studies, but the education didn’t pay off. She found work in the legal field a few years after finishing school but was earning just $9 an hour – not enough to pay her bills and her student loans.

“I was trying to reorganize my life. For me, and for so many other students, this should have been a door,” Myles said of her degree program.

Instead, she defaulted on her student loans. The default dinged her credit and resulted in the garnishment of her federal tax refunds. Myles said she wasn’t allowed to request her academic transcript while her loans were in default, preventing her from enrolling elsewhere.

The Department of Education later found that schools owned by the now-defunct Corinthian Colleges – which include Myles’ alma mater, known at the time as Florida Metropolitan University – engaged in “widespread and pervasive misrepresentations” about students’ employment prospects, including guarantees they would find a job as well as the ability to transfer credits.

Under the borrower defense program, borrowers can apply for debt relief if they were misled by their college. Last June, the Department of Education announced that any student who attended a Corinthian-owned college would automatically qualify for the benefit. The move made 560,000 more borrowers eligible.

About nine months later, Myles learned that she was one of the qualifying borrowers and her debt was discharged. The Department of Education said it would request credit reporting agencies to repair her credit within 45 days, according to the letter she received.

Myles, who now lives in Cheyenne, Wyoming, and works in insurance, plans to continue her education by pursuing a bachelor’s degree and then a law degree.

“I’ve always wanted to go back to school. I don’t care if I’m 60 when I finish,” she said.

Applying for the Public Service Loan Forgiveness program was a yearslong, frustrating process for Paige Vass, a special education teacher in Virginia.

The PSLF program cancels remaining federal student loan debt for eligible government and nonprofit workers after they have made 120 qualifying monthly payments, which takes at least 10 years.

But the program has been riddled with problems. Many people reached 10 years of repayment believing they qualified for cancellation of their remaining debt, but instead found out that they had the wrong kind of loan or were making payments in the wrong kind of repayment plan.

Vass applied after teaching for more than 10 years, but her paperwork was returned several times, for things like having an incorrect date or a signature in the wrong place.

She decided to try applying one more time last year after the Biden administration temporarily expanded eligibility for the program with a one-year waiver.

“My fingers were crossed, but I also thought I might be chasing a unicorn,” Vass, 47, said.

“But I was like, I’ve got to try. This is a huge debt and a huge weight on our family,” she added. She and her husband, who is also an educator, have two children.

This spring, not only did Vass find out that she qualified for more than $30,000 in debt relief, but she is also set to receive a refund of about $5,000 because she had overpaid. Under the rules of the temporary waiver, she had made more payments than the 120 required for debt forgiveness.

The debt relief means she may be able to spend more time with her kids. In the past, when she’s owed hundreds of dollars for her student debt each month, she’s worked summer school, taught skiing and worked for the on-demand delivery company DoorDash for some extra cash.

“There’s been so many changes and so many hardships for teachers over the last three years. To me (the loan forgiveness) felt like a statement on behalf of our country’s administration that says, ‘You are valuable and we appreciate what you do, and you do make a difference,’” Vass said.

Last year, Charles Goldenberg, a radiologist in New York City, got an email notifying him that his more than $340,000 in federal student loan debt had been canceled because he qualified for the PSLF program.

While in training, and making little money, Goldenberg was paying off his loans through an income-driven repayment plan, which lowered his monthly payments. But those payments hardly covered the interest accumulation, and his balance ballooned before the pandemic pause went into effect in 2020.

Now, at 42, Goldenberg said the student debt cancellation gives him the opportunity to move on with his life.

“And I think that’s the whole point of the PSLF program. You spend years of training and schooling above and beyond college, making less money than you would when you’re out of training. It’s not without sacrifice. It’s because you work for eligible employers … where you’re not going to be making the kind of money that I make now,” he added.

Goldenberg had been paying off some his loans for 19 years, but not every payment had counted toward the PSLF program until he consolidated his loans about two years ago.

Thanks to the one-year waiver put in place by the Biden administration, some payments he made earlier became eligible.

Applying for the relief had also been a long process for Goldenberg. His loan servicer had difficulty verifying that one of his employers, a nonprofit hospital in Miami, qualified for the program. He eventually found proof on the Department of Education’s website that the hospital did qualify.

Now that Goldenberg is done with training and is earning more money, his student loan payments would be much higher when the pandemic-related pause ends later this year than they were three years ago. He expects they would be $2,500 or more a month if not for the debt relief.

“Now I can use the money that I make for myself, for a mortgage, for family, for other expenses, for retirement. So it really opened up my financial future in a big way,” he said.

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April 12, 2021
AI chip boom sends Nvidia’s stock surging after whopper of a quarter | CNN Business

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New York
CNN
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The AI boom is here, and Nvidia is reaping all the benefits.

Shares of Nvidia

(NVDA) exploded 28% higher Thursday after reporting earnings and sales that surged well above Wall Street’s already lofty expectations. That was enough to make investors temporarily forget about America’s dangerous debt ceiling standoff, sending the broader stock market higher — even after credit rating agency Fitch warned late Wednesday that America could soon lose its sterling AAA debt rating.

Nvidia makes chips that power generative AI, a type of artificial intelligence that can create new content, such as text and images, in response to user prompts. That’s the kind of AI underlying ChatGPT, Google’s Bard, Dall-E and many of the other new AI technologies.

“The computer industry is going through two simultaneous transitions — accelerated computing and generative AI,” said Jensen Huang, Nvidia’s CEO, in a statement. “A trillion dollars of installed global data center infrastructure will transition from general purpose to accelerated computing as companies race to apply generative AI into every product, service and business process.”

Huang said Nvidia is increasing supply of its entire suite of data center products to meet “surging demand” for them.

Last quarter, Nvidia’s profit surged 26% to $2 billion, and sales rose 19% to $7.2 billion, each easily surpassing Wall Street analysts’ forecasts. Nvidia’s outlook for the current quarter was also significantly — about 50% — higher than analysts’ predictions.

Nvidia’s stock is up nearly 110% this year.

“There is not one better indicator around underlying AI demand going on … than the foundational Nvidia story,” said Dan Ives, analyst at Wedbush. “We view Nvidia at the core hearts and lungs of the AI revolution.”

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April 12, 2021
Why there won’t be a backlash against the Supreme Court this time | CNN Politics

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CNN
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The Supreme Court handed down several key rulings this past week that dismayed liberals. Chief among them was the court’s decision to disallow colleges and universities from using race or ethnicity as a specific factor in admissions. The court also found that President Joe Biden’s student debt forgiveness plan was unconstitutional and that a Colorado web designer could refuse to create websites that celebrate same-sex weddings over religious objections.

Unlike last year, when the Supreme Court greatly upset liberals by overturning Roe v. Wade, this year’s big rulings by the justices are unlikely to spark a major backlash from the public at large.

This is well reflected in the public polling. Roe v. Wade, the 1973 decision that legalized abortion nationwide, had become massively popular.

Right before the decision to overturn Roe leaked in May 2022, a Fox News poll found that 63% of registered voters were opposed to such a move while 27% supported it. An ABC News/Washington Post poll put the split at 54% wanting the court to uphold Roe and 28% wanting the decision overturned.

This majority of Americans who wanted abortion to be legal nationally have maintained their stance since the Supreme Court officially struck down Roe in June 2022. Since that time, abortion supporters have won every related measure placed on the ballot across the country – from deep-blue states like California to ruby-red ones like Kentucky.

California is an important state to note because voters there faced a 2020 ballot measure to consider the use of race, sex or ethnicity in government institutions (such as education). A clear majority, 57%, voted against allowing state and local entities to consider such factors in public education, employment and contracting decisions.

When a state that voted for Biden by nearly 30 points is against affirmative action, it shouldn’t be surprising that the nation as a whole is.

A Pew Research Center poll released last month found that 50% of Americans disapproved of certain colleges and universities taking race and ethnicity into account in admissions decisions to increase diversity. Only 33% approved of the practice.

This Pew poll is no outlier. An ABC News/Ipsos poll conducted after the court decided its case showed that 52% of Americans approved of the decision, while 32% were opposed.

Some polling before the ruling had shown even more opposition: 70% of Americans in a recent CBS News/YouGov survey indicated that the Supreme Court should not allow colleges to consider race and ethnicity in admissions.

But perhaps what’s most interesting isn’t how many people are for or against considering race in college admissions. Rather, it’s how many people simply didn’t care enough to pay close attention to the affirmative action case before the Supreme Court.

When explicitly given the option, a majority (55%) said in a May Marquette University Law School poll that they hadn’t heard enough to form an opinion about the case. (Those who had heard enough were against allowing colleges to use race in admissions.)

This is quite different from March 2022, when just 30% of Americans hadn’t heard enough to form an opinion about the court potentially overturning Roe v. Wade, when asked the same question by Marquette but about the abortion case. (A plurality of those who had heard enough didn’t want the court to overturn Roe.)

It’s hard for an issue to galvanize voters when they aren’t paying attention to it.

The same holds true for Biden’s student loan forgiveness plan that the court blocked. A USA Today/Ipsos poll from April indicated that 52% of Americans were familiar with the case and a mere 16% were very familiar with it. (Those who had student loans were more familiar at 71%, though that’s a fairly low percentage for something that could affect them directly.)

Possibly because of that low familiarity, the percentage of Americans who favor or oppose canceling certain student debt differs greatly depending on how the question is worded. When Marquette didn’t mention Biden or the government specifically in its May poll, a majority (63%) said they favored forgiveness of up to $20,000. It was a much lower 47% in the Ipsos poll.

Surveys that did identify the proposal as Biden’s plan tend to be in the same ballpark, with a split public and a sizable percentage unsure.

The ABC News/Ipsos poll showed that 45% approved of the court striking down Biden’s student debt plan, with 40% disapproving. About a sixth (16%) of the public was undecided.

This jibes with polling before the court’s decision was announced. An NBC News poll from last year showed that 43% said Biden’s plan was a good idea compared with 44%, who said it was a bad idea. Just over 10% had no opinion.

The USA Today/Ipsos survey found that 43% of Americans wanted the Supreme Court to allow the government’s student loan forgiveness plan to move forward, while 40% did not. Another 17% had no opinion.

(I should point out that those with student debt were more likely to want government forgiveness in all these surveys, though about 80% of Americans don’t have student loan debt.)

The public was similarly split about the court ruling in favor of the Colorado web designer who refuses to make wedding websites for same-sex couples over religious objections. According to the ABC News/Ipsos poll, 43% of Americans agreed with the court’s decision, 42% disagreed and 14% were undecided.

There was limited polling on this case before the ruling, though none of it indicated massive opposition. A majority (60%) in a Pew poll that specifically mentioned “wedding websites” and “same-sex marriages” indicated they believed business owners should be allowed to refuse services if it violated their religious or personal beliefs.

The polling on Roe v. Wade didn’t look anything like this last year. There were no close splits in opinion. People were consistently against overturning Roe, and they cared a lot about it. This led to a historically strong performance for the party in the White House during the 2022 midterm elections and a major backlash against the Supreme Court.

The current polling on affirmative action in college admissions, Biden’s student loan forgiveness plan and allowing people to opt out of certain services to married LGBTQ couples if they believe it goes against their religion suggests that court’s opinions on those issues aren’t likely to have a similar impact.

This story has been updated with additional information.

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April 12, 2021
Amazon is ‘investing heavily’ in the technology behind ChatGPT | CNN Business

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CNN
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Amazon wants investors to know it won’t be left behind in the latest Big Tech arms race over artificial intelligence.

In a letter to shareholders Thursday, Amazon

(AMZN) CEO Andy Jassy said the company is “investing heavily” in large language models (LLMs) and generative AI, the same technology that underpins ChatGPT and other similar AI chatbots.

“We have been working on our own LLMs for a while now, believe it will transform and improve virtually every customer experience, and will continue to invest substantially in these models across all of our consumer, seller, brand, and creator experiences,” Jassy wrote in his letter to shareholders.

The remarks, which were part of Jassy’s second annual letter to shareholder since taking over as CEO, hint at the pressure that many tech companies feel to explain how they can tap into the rapidly evolving marketplace for AI products. Since ChatGPT was released to the public in late November, Google

(GOOG), Facebook

(FB) and Microsoft

(MSFT) have all talked up their growing focus on generative AI technology, which can create compelling essays, stories and visuals in response to user prompts.

Amazon’s goal, according to Jassy, is to offer less costly machine learning chips so that “small and large companies can afford to train and run their LLMs in production.” Large language models are trained on vast troves of data in order to generate responses to user prompts.

“Most companies want to use these large language models, but the really good ones take billions of dollars to train and many years, most companies don’t want to go through that,” Jassy said in an interview with CNBC on Thursday morning.

“What they want to do is they want to work off of a foundational model that’s big and great already, and then have the ability to customize it for their own purposes,” Jassy told CNBC.

With that in mind, Amazon on Thursday unveiled a new service called Bedrock. It essentially makes foundation models (large models that are pre-trained on vast amounts of data) from AI21 Labs, Anthropic, Stability AI and Amazon accessible to clients via an API, Amazon said in a blog post.

Jassy told CNBC he thinks Bedrock “will change the game for people.”

In his letter to shareholders, Jassy also touted AWS’s CodeWhisperer, another AI-powered tool which he said “revolutionizes developer productivity by generating code suggestions in real time.”

“I could write an entire letter on LLMs and Generative AI as I think they will be that transformative, but I’ll leave that for a future letter,” Jassy wrote. “Let’s just say that LLMs and Generative AI are going to be a big deal for customers, our shareholders, and Amazon.”

In the letter, Jassy also reflected on leading Amazon through “one of the harder macroeconomic years in recent memory,” as the e-commerce giant cut some 27,000 jobs as part of a major bid to rein in costs in recent months.

“There were an unusual number of simultaneous challenges this past year,” Jassy said in the letter, before outlining steps Amazon took to rethink certain free shipping options, abandon some of its physical store concepts and significantly reduce overall headcount.

Amazon disclosed in a securities filing Thursday that Jassy’s pay package last year was valued at some $1.3 million, and that the CEO did not receive any new stock awards in 2022. (When Jassy took over as CEO in 2021, he was awarded a pay package mostly comprised of stock awards that valued his total compensation package at some $212 million.)

Despite the challenges at Amazon, however, Jassy said in his letter that he finds himself “optimistic and energized by what lies ahead.” Jassy added: “I strongly believe that our best days are in front of us.”

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April 12, 2021
States have been on a tax-cutting spree, but revenues are now weakening | CNN Politics

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CNN
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Fueled by surging revenues, states have been slashing taxes for individuals and businesses for the past three years.

But the party is expected to come to an end in the coming fiscal year, which started on Saturday in 46 states. Revenue is projected to decline by 0.7% in fiscal 2024, based on forecasts used in governors’ budgets, after an estimated 0.3% dip this fiscal year, according to a recently released National Association of State Budget Officers survey.

This reversal comes after double-digit percentage increases for the prior two fiscal years. It reflects the impact of slower economic growth, a weaker stock market and a slew of recent tax cuts.

Some 25 states have cut individual income tax rates since 2021, according to the right-leaning Tax Foundation. This includes 22 states that reduced their top marginal rates.

“Most states are viewing tax reform and relief as a chance to, first and foremost, return some of their excess revenue to taxpayers, but to also do that in a way that is simultaneously improving the structure of their tax cuts and make it more conducive to long-term economic growth,” said Katherine Loughead, senior policy analyst at the foundation.

States are also seeking to make themselves more attractive to business investment, as well as to remote and traditional workers, she continued.

In 2023 alone, at least eight states approved rate reductions, according to the Tax Foundation. Arkansas, for instance, is trimming its top individual income tax rate to 4.7%, retroactive to January 1, after reducing it from 5.5% to 4.9% last year.

Likewise, Montana lawmakers approved deepening cuts enacted in 2021. Starting in 2024, the top marginal income tax rate will be 5.9%, instead of 6.5% as originally planned. It was 6.9% in 2021.

In addition, previously scheduled or triggered income tax rate reductions took effect this year in Arizona, Idaho, Iowa, Missouri and North Carolina, as well as for interest and dividend income in New Hampshire, according to the Tax Foundation.

Aside from individual income tax cuts, states have also lowered the levies on purchases and for businesses over the past three years. Two states cut sales tax rates, while 13 reduced corporate income tax rates and others made additional tax changes that benefited companies.

In 2023, Nebraska and Utah adopted corporate income tax rate reductions. The former will phase down its top rate to 3.99% in 2027, accelerating an earlier law’s timetable. If fully implemented as planned, Nebraska will slash its top marginal corporate income tax rate nearly in half over six years, according to the Tax Foundation.

Utah also further reduced its corporate income tax rate to 4.65%, retroactive to January 1. A law passed last year had cut it to 4.85% for 2022, down from 4.95%.

The tax cuts, along with stock market declines and the shaky economy, have taken their toll on states’ revenues, however.

State tax revenue fell in 37 states, after adjusting for inflation, between July 2022 and May 2023, according to Lucy Dadayan, principal research associate at the nonpartisan Tax Policy Center. Some 19 states saw declines before taking inflation into account.

Revenue dropped nearly 12% over the period on an inflation-adjusted basis. All major sources of revenue – personal income, sales and corporate income taxes – declined, though the extent varies widely by state and source. Individual income taxes were the weakest, plummeting more than 22%.

States are in trouble, though there won’t be an immediate crisis, she said. Much depends on factors that remain unknown, such as whether the nation will fall into a recession or whether states will face natural disasters.

The robust revenue of recent years was “artificially boosted” by federal Covid-19 pandemic relief funds and the strong stock market in 2021, she said.

“We knew this is temporary,” Dadayan said. “It would have been better if the states wouldn’t jump and do tax cuts and be more cautious.”

Still, revenues in fiscal 2023 are coming in stronger than initially expected. The current estimates are outperforming earlier forecasts by 6.5%, according to the National Association of State Budget Officers. Most states have also built up big reserves in their rainy day funds in recent years.

Whether states will continue cutting taxes in the coming fiscal year will depend on what happens with revenues.

“A lot of states have done what they can already,” Loughead said. “They will continue to look at how revenues come in and how the rates measure up. If they still are experiencing strong surpluses, I do think they might tweak those rates down even more.”

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April 12, 2021
Chinese star banker Bao Fan detained by country’s top anti-graft body, state media says | CNN Business

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Hong Kong
CNN
—

One of China’s top tech bankers, who went missing in February, has been in the custody of the country’s top anti-graft watchdog since his disappearance and has had his detention extended, according to a state media report.

The Economic Observer, a well regarded financial publication, reported that Bao Fan — founder and CEO of Hong Kong-listed China Renaissance, a boutique investment bank -— was taken away on February 7 by officials from the Central Commission for Discipline Inspection (CCDI) in an investigation into suspected corporate bribery.

It said, citing an unnamed source, that his detention was extended on May 7 for three months.

The mysterious disappearance of Bao has sent a chill through financial markets and China’s tech sector. Shares in China Renaissance had plunged more than 20% until they were suspended from trading in early April. The company also delayed the release of its annual results, because its auditors were unable to reach Bao.

China Renaissance, which was responsible for a string of major Chinese tech deals since it was founded in 2005, didn’t immediately respond to a CNN request for comment.

The CCDI is the top anti-graft body of the ruling Communist Party and is responsible for investigating corruption.

China Renaissance had previously revealed only that Bao was “cooperating in an investigation” being carried out by certain authorities in the country. But it gave no other details.

Bao is known as a veteran dealmaker who worked closely with top tech companies in China. He helped broker the 2015 merger between two of the country’s leading food delivery services, Meituan and Dianping. Today, the combined company’s “super app” platform is ubiquitous in China.

His February disappearance coincided with a sweeping anti-corruption crackdown launched by the ruling Communist Party into the financial sector, which has ensnared more than a dozen senior executives at China’s biggest financial institutions.

Analysts believe the crackdown is a new wave of leader Xi Jinping’s existing anti-graft campaign, through which he is believed to be further consolidating his power amid domestic and external challenges.

The specific agencies handling Bao’s case include the CCDI’s international cooperation bureau and Beijing’s municipal anti-graft authorities, the Economic Observer said.

Bao’s detention was related to another case involving Cong Lin, a former executive at his company, who had previously worked for China’s largest state owned bank for more than two decades, the newspaper added.

Cong Lin, who became president of China Renaissance in July 2020, had previously served in a variety of executive roles at the Industrial and Commercial Bank of China, according to public company records.

Cong has been detained by anti-corruption authorities since September for matters related to his tenure at ICBC Financial Leasing, the Economic Observer said. The details of Cong’s detention were previously reported by several Chinese media outlets.

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April 12, 2021
Britain’s ‘profound economic crisis’ gives Rishi Sunak only unpleasant choices | CNN Business

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London
CNN Business
—

Rishi Sunak, Britain’s third prime minister in seven weeks, took office on Tuesday with a pledge to fix the “mistakes” of predecessor Liz Truss and tackle a “profound economic crisis.”

The task won’t be an easy one, he acknowledged.

“This will mean difficult decisions to come,” Sunak said in his first speech from No. 10 Downing Street.

The United Kingdom was already sliding towards a recession when Truss took office in September, as soaring energy bills ate into spending. Now, Sunak has another headache: He must restore the government’s credibility with investors after Truss’ unfunded tax cuts sparked a bond market revolt, forcing the Bank of England to intervene to prevent a financial meltdown. Borrowing costs, including mortgage rates, shot higher.

Accomplishing this goal will require delivering a detailed plan to put public finances on a more sustainable path. (A government watchdog warned in July that without major action, debt could reach 320% of the UK’s gross domestic product in 50 years.)

The problem? There’s little appetite for government spending cuts after years of austerity in the wake of the 2008 global financial crisis. Plus, failing to help households deal with surging living costs could prove politically devastating and further weigh on the economy.

“It’s not a particularly pleasant economic hand to be dealt [as] a new prime minister,” said Ben Zaranko, a senior research economist at the Institute for Fiscal Studies.

Finance minister Jeremy Hunt got the ball rolling last week when he reversed £32 billion ($37 billion) in tax cuts that formed the bedrock of Truss’ plan to boost growth.

Yet Sunak and Hunt — who will stay in his job — still need to find between £30 billion and £40 billion in savings to bring down public debt as a share of the economy in the next five years, according to calculations by IFS, an influential think tank.

“It is going to be tough,” Hunt said in a tweet. “But protecting the vulnerable — and people’s jobs, mortgages and bills — will be at the front of our minds as we work to restore stability, confidence and long-term growth.”

Sunak and Hunt won’t have the option of going light on the details. If investors don’t buy into their plan and borrowing costs shoot up again, getting the situation under control would only become trickier, as interest payments on government debt rise.

“If markets don’t [see] the plans as credible, then filling the fiscal hole could become even harder,” said Ruth Gregory, senior UK economist at Capital Economics.

One area Sunak may be tempted to tap is the social welfare budget. Questions have swirled about whether the Conservative government may try to avoid boosting state benefits in line with inflation, as is customary. (American recipients of Social Security will receive the biggest cost-of-living adjustment in more than four decades next year.)

Most UK working-age benefits would typically go up by 10.1% next April based on inflation data. But there’s speculation the increase could be linked instead to average earnings, which are growing at a much slower rate than inflation. That could save £7 billion ($8 billion) in 2023-24, according to IFS.

Such a move would prove controversial, however — especially since benefits have not kept up with rampant inflation in 2022.

“I would like to see if we could find a way to increase benefits by inflation, but what I will say is that trade-offs are involved,” former Conservative cabinet minister Sajid Javid told ITV this week.

A more palatable option, at least for households, would be extracting more taxes from corporations.

Hunt has already said that corporate taxes will rise from 19% to 25% next spring. The Financial Times has reported that Hunt could also target earnings from oil and gas companies by extending a windfall tax on profits.

In an interview with the BBC earlier this month, Hunt said he was “not against the principle” of windfall taxes and that “nothing is off the table.” Higher taxes on the financial sector are also under consideration, according to the Financial Times.

Industry groups are already circling the wagons. Banking trade association UK Finance said its members already pay “a higher rate of taxation overall than any other sector,” and urged the government not to “risk the competitiveness of the UK’s banking and finance industry.”

Sunak could also walk back Truss’ commitment to boosting defense spending to 3% of the economy by 2030, though that carries its own political risks given Russia’s war in Ukraine. Other countries in the region, such as Germany, have said they will ramp up military investments, and the United Kingdom may be loath to fall behind, Zaranko said.

Investors and economists expect that the government will announce a mixture of tax increases and spending cuts shortly. Hunt is due to reveal his plans in greater depth on October 31.g

“Despite the fiscal U-turns, the government will still need to show a fiscally credible path next week in the budget to balance the books,” Sonali Punhani, an economist at Credit Suisse, said in a note to clients this week.

That could exacerbate the country’s downturn. The Bank of England has projected that the United Kingdom is already in a recession, and a gauge of business activity in October slumped to its lowest level in 21 months.

“We are seeing quite a dramatic shift in the fiscal outlook from being much looser than we expected just a few weeks ago to being much tighter than we expected,” Gregory of Capital Economics said. “I think the risk is that the recession is deeper or longer than we expect.”

A weaker economy would present its own complications.

No one wants to repeat the errors of the brief Truss era, when her gamble that unfunded tax cuts would jumpstart growth backfired spectacularly.

But business groups are warning that completely abandoning the objective of boosting Britain’s anemic economic growth would create problems, too.

The austerity of the 2010s produced “very low growth, zero productivity and low investment,” Tony Danker, head of the Confederation of British Industry, told the BBC on Tuesday.

“The country could end up in a similar doom loop where all you have to do is keep coming back every year to find more tax rises and more spending cuts, because you’ve got no growth.”

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December 31, 1969