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Tag: Industry regulation

  • Trump administration delays decision on federal protections for monarch butterflies

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    MADISON, Wis. — President Donald Trump’s administration has delayed a decision on whether to extend federal protections to monarch butterflies indefinitely despite years of warnings from conservationists that populations are shrinking.

    The U.S. Fish and Wildlife Service announced during the waning days of then-President Joe Biden’s term in December 2024 that the agency planned to add the beloved backyard pollinator to the threatened species list by the end of 2025, calling the insect “iconic” and “cherished across North America.”

    But the Trump administration quietly listed the effort as a “long-term action” in a September report on the status of federal regulatory initiatives from the Office of Management and Budget. The designation does not mean the administration has blocked the fish and wildlife service from making the decision, only that it will not come within the year that began in September.

    “The administration remains committed to a regulatory approach that is transparent, predictable and grounded in sound science,” an agency spokesperson wrote in an email to The Associated Press on Friday. “Any listing must follow the (Endangered Species Act’s) statutory requirement that determinations be based on the best scientific and commercial data available. At the same time, the administration continues to emphasize voluntary, locally driven conservation as a proven tool for supporting species and reducing the need for additional federal regulation.”

    No one at the agency immediately returned follow-up emails inquiring about the specific rationale for the delay. The first Trump administration named the monarch a candidate for listing in December 2020. His second administration has made oil and gas production a centerpiece and has been working to strip away environmental regulations that impede development.

    His administration moved in November to roll back blanket protections for threatened animals and plants, requiring government agencies to instead craft species-specific rules, a potentially lengthy process. Other proposals call for bypassing species protections for logging in national forests and on public lands.

    The Center for Biological Diversity and other conservation groups started pushing for federal protections for the butterfly in 2014, petitioning the fish and wildlife service to list the insect. The center sued in 2022 to force the agency to make a listing decision.

    Tierra Curry, the center’s endangered species co-director, said Friday that she’s not surprised the Trump administration has delayed the decision. She said it can take more than a decade to get a species listed. For example, she said, the Miami Blue Butterfly was finally listed as endangered in 2012 after waiting on the candidate list since 1984. The Dakota Skipper butterfly became a candidate in 1984 but was not listed as threatened until 2014, she added.

    The long-term action designation doesn’t mean the end for monarch protections but it does place them in “bureaucratic limbo,” she said.

    “It’s absolutely disappointing because monarchs need all the help they can get,” Curry said.

    Monarchs are found across North America. Known for their distinctive orange-and-black wings, they’re a symbol of sunny summer days.

    But environmentalists have warned that monarch populations are shrinking due to climate change and rural development. Fish and wildlife service experts said when they announced in December 2024 that they planned to list the butterfly that monarchs east of the Rocky Mountains face a 57% to 74% probability of extinction by 2080. Monarchs west of the Rockies have a 95% chance of becoming extinct by then.

    The monarch listing proposal would generally prohibit people from killing or transporting the butterfly. People and farmers could continue to remove milkweed, a key food source for monarch caterpillars, from their gardens, backyards and fields but would be barred from making changes that would make the land permanently unusable for the species.

    People could continue to transport fewer than 250 monarchs and could continue to use them for educational purposes.

    The proposal also would designate as critical habitat 4,395 acres (1,779 hectares) in seven coastal California counties where monarchs west of the Rocky Mountains migrate for winter. The designation would prohibit federal agencies from destroying or modifying that habitat. The designation doesn’t prohibit all development, but landowners who need a federal license or permit for a project would have to work with the wildlife service to mitigate damage.

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  • New England’s shrimp fishery to shut down for long haul

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    Regulators voted Thursday to extend a shutdown preventing New England fishermen from catching shrimp, a historic industry that has recently fallen victim to warming oceans.

    New England fishermen, especially those from Maine, used to catch millions of pounds of the small pink Gulf of Maine northern shrimp, Pandalus borealis, the only locally harvested shrimp in the winter.

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  • Economist says NASCAR owes $364.7M to teams in antitrust case

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    CHARLOTTE, N.C. (AP) — An economist testified in Michael Jordan’s federal antitrust trial against NASCAR that the racing series owes a combined $364.7 million in damages to the two teams suing it over a revenue-sharing dispute.

    Edward Snyder, a professor of economics who worked in the antitrust division of the Department of Justice and has testified in more than 30 cases, including “Deflategate” involving the NFL’s New England Patriots, testified on Monday. He gave three specific reasons NASCAR is a monopoly participating in anticompetitive business practices.

    Using a complex formula applied to profits, a reduction in market revenue, and lost revenue to 23XI Racing and Front Row Motorsports from 2021-24, Snyder came up with his amount of damages owed. Snyder applied a 45% of revenue sharing he alleged Formula 1 gives to its teams in his calculations; Snyder found that NASCAR’s revenue-sharing model when its charter system began in 2016 gave only 25% to the teams.

    The suit is about the 2025 charter agreement, which was presented to teams on a Friday in September 2024 with a same-day deadline to sign the 112-page document. The charter offer came after more than two years of bitter negotiations between NASCAR and its teams, who have called the agreement “a take-it-or-leave-it” ultimatum that they signed with “a gun to their head.”

    A charter is similar to the franchise model in other sports, but in NASCAR it guarantees 36 teams spots in the 40-car field, as well as specific revenue.

    Jordan and three-time Daytona 500 winner Denny Hamlin for 23XI, along with Front Row Motorsports and owner Bob Jenkins, were the only two teams out of 15 to refuse the new charter agreement.

    Snyder’s evaluations found NASCAR was in fact violating antitrust laws in that the privately owned racing series controls all bargaining because “teams don’t have anywhere else to sell their services.” Snyder said NASCAR controls “the tracks, the teams and the cars.”

    Snyder repeatedly cited exclusivity agreements NASCAR entered into with racetracks after the charter system began. The agreements prevent tracks that host NASCAR from holding events with rival racing series. Prior to the long-term agreements, NASCAR operated on one-year contracts with its host racetracks.

    The Florida-based France family founded NASCAR in 1948 and, along with Speedway Motorsports, owns almost all the tracks on the top Cup Series schedule. Snyder’s belief is that NASCAR entered into exclusivity agreements with tracks to stave off any threats of a breakaway startup series. In doing so, he said it eliminated teams’ ability to race stock cars anywhere else, forced them to accept revenue-sharing agreements that are below market value, and damaged their overall evaluations.

    Snyder did his calculations for both teams based on each having two charters — each purchased a third charter in late 2024 — and found 23XI is owed $215.8 million while Front Row is owed $148.9 million. Based on his calculations, Snyder determined NASCAR shorted 36 chartered teams $1.06 billion from 2021-24.

    Snyder noted NASCAR had $2.2 billion in assets, an equity value of $5 billion and an investment-grade credit rating — which Snyder believes positions the France family to be able to pivot and adjust to any threats of a rival series the way the PGA did in response to the LIV Golf league. The PGA, Snyder testified, “got creative” in bringing in new revenue to pay to its golfers to prevent their defections.

    Snyder also testified NASCAR had $250 million in annual earnings from 2021-24 and the France family took $400 million in distributions during that period.

    NASCAR contends Snyder’s estimations are wrong, that the 45% F1 model he used is not correct, and its own two experts “take serious issue” with Snyder’s findings. Defense attorney Lawrence Buterman asked Snyder his opinion on NASCAR’s upcoming expert witnesses and Snyder said they were two of the best economists in the world.

    Slow pace of trial

    Snyder testified for almost the entirety of Monday’s session — the sixth day of the trial — and will continue on Tuesday. The snail’s pace has agitated U.S. District Judge Kenneth Bell, who heard arguments 30 minutes early Monday morning because he was annoyed that objections had been submitted at 2:55 a.m. and then 6:50 a.m.

    He needed an hour to get through the rulings, and testimony resumed 30 minutes behind schedule. When the day concluded, he asked the nine-person jury if they were willing to serve an hour longer each day the rest of the week in an effort to avoid a third full week of trial. He all said all motions must be filed by 10 p.m. each evening moving forward.

    Bell wants plaintiff attorney Jeffrey Kessler to conclude his case by the end of Tuesday, but Kessler told him he still plans to call NASCAR chairman Jim France, NASCAR commissioner Steve Phelps and Hall of Fame team owner Richard Childress, who was the subject of derogatory text messages amongst NASCAR leadership and has said he’s considering legal action.

    NASCAR has a list of 16 potential witnesses and Bell said he wanted the first one on the stand before Tuesday’s session concludes.

    ___

    AP auto racing: https://apnews.com/hub/auto-racing

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  • Takeover bid of parent company means limbo for CNN and some fellow cable networks

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    Paramount Skydance’s hostile takeover bid of Warner Bros. Discovery places CNN and its sister cable networks squarely back into what is likely to be an extended period of management limbo.

    There was some relief at CNN with last Friday’s announcement that Netflix was buying Warner’s studio and streaming businesses, since the cable network would not be a part of that deal. But that quickly changed on Monday with Paramount’s announced bid, which includes the cable assets that Netflix doesn’t want and, if successful, opens the possibility of a combined CNN and CBS News.

    The management uncertainty adds to what is already a challenging time at CNN, where there was no doubt who was in charge before swashbuckling founder Ted Turner sold his company in 1996. “That era might as well be the roaring ‘20s for how long ago it feels,” said Ross Benes, senior analyst at emarketer.com.

    The dueling bids between Paramount and Netflix now “lead to more uncertainty and greater anxiety among the current CNN staff and among those of us who served for many years as leaders of CNN under Ted,” said Tom Johnson, former CNN president in the 1990s.

    Paramount’s bid, which must be approved by shareholders and regulators, could be seen favorably by President Donald Trump, who is closely allied with Paramount Skydance chairman and CEO David Ellison as well as his father, Oracle founder Larry Ellison. But Trump has already expressed anger at the company on social media for Sunday’s “60 Minutes” report on former U.S. Rep. Marjorie Taylor Greene.

    Prior to Friday’s announcement, Warner Bros. Discovery had said it planned to spin off its cable television networks including CNN, Discovery, HGTV, the Food Network and TLC, into a separate company. The growth of streaming has made cable networks an unattractive business.

    CNN’s television ratings have tumbled to the extent that it is firmly the third-rated cable news network behind Fox News Channel and MS NOW, formerly MSNBC. Its CEO, Mark Thompson, has aggressively moved into digital with a new subscription service and said that management of Discovery Global, the spinoff company, has already approved a 2026 budget investing in the plan.

    “I know this strategic review has been a period of inevitable uncertainty across CNN and indeed the whole of WBD,” Thompson told staff in a memo Friday. “Of course, I can’t promise you that the media attention and noise around the sale of our parent will die down overnight. But I do think the path to the successful transformation of this great news enterprise remains open.”

    Thompson had no additional comment on Monday, a spokeswoman said.

    Since Paramount’s takeover of CBS News this past summer, the network has taken steps to appeal to more conservative viewers with the installation of Free Press founder Bari Weiss as editor-in-chief. Weiss is moderating a prime-time discussion this weekend with Erika Kirk, widow of slain conservative activist Charlie Kirk.

    During an appearance on CNBC Monday, Ellison answered, “yeah,” when asked if he would combine CNN’s newsgathering operation with CBS News. What exactly that means is unclear.

    “We want to build a scaled news service that is basically, fundamentally, in the trust business, that is in the truth business, and that speaks to the 70% of Americans that are in the middle,” Ellison said.

    Trump has spoken highly of both Ellison and his billionaire father. But he was clearly angry about Lesley Stahl’s “60 Minutes” interview with former MAGA supporter Greene, who broke with him and recently resigned from Congress. Trump said on Truth Social that his real problem with the show is that the new corporate ownership allowed it to air.

    “THEY ARE NO BETTER THAN THE OLD OWNERSHIP,” Trump said, adding he believed that “60 Minutes” had gotten worse from his perspective since the changeover.

    CNN is not likely to find out soon who its new owners would be. Even before the Paramount bid, experts had predicted the Netflix deal would face more than a year of regulatory hurdles.

    “There is such a need for independent, unbiased news services,” Johnson said. “I so hope that the new CNN owners will see that as their fundamental mission.”

    If Netflix eventually wins, emarketer.com’s Benes predicted it would be likely that the spinoff company, Discovery Global, would be shopped around to other buyers.

    “CNN will be in limbo for a while no matter which bidder purchases CNN,” he said.

    ___

    David Bauder writes about the intersection of media and entertainment for the AP. Follow him at http://x.com/dbauder and https://bsky.app/profile/dbauder.bsky.social.

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  • Airlines adopt software fix for Airbus A320 after plane has sudden altitude drop

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    An aircraft heavily used by commercial airlines around the world needs a software fix to address an issue that contributed to a sudden drop in altitude of a JetBlue plane last month, the manufacturer and European aviation safety regulators said Friday.

    The step may result in some flight delays as U.S. travelers return home from the Thanksgiving holidays.

    Airbus said an analysis of the JetBlue incident revealed intense solar radiation may corrupt data critical to the functioning of flight controls on the A320 family of aircraft.

    The European Union Aviation Safety Agency issued a directive requiring operators of the A320 to address the issue. The agency said this may cause “short-term disruption” to flight schedules.

    American Airlines has about 480 planes from the A320 family, of which 209 are affected. The fix should take about two hours for many aircraft and updates should be completed for the overwhelming majority on Friday, the airline said. A handful will be finished Saturday.

    American Airlines expects some delays but it said it’s focused on limiting cancellations as customers return home from Thanksgiving holiday travel. It said safety would be its overriding priority.

    Delta said it expected the issue to affect less than 50 of its A321neo aircraft. United said six planes in its fleet are affected and it expects minor disruptions to a few flights. Hawaiian Airlines said it wasn’t affected.

    Mike Stengel, a partner with the aerospace industry management consulting firm AeroDynamic Advisory, said the fix could be addressed between flights or on overnight plane checks.

    “Definitely not ideal for this to be happening on a very ubiquitous aircraft on a busy holiday weekend,” Stengel said. “Although again the silver lining being that it only should take a few hours to update the software.”

    At least 15 JetBlue passengers were injured and taken to the hospital after the Oct. 30 incident on board the flight from Cancun, Mexico, to Newark, New Jersey. The plane was diverted to Tampa, Florida.

    Airbus is registered in the Netherlands but has its main headquarters in France.

    It’s one of the world’s biggest airplane manufacturers alongside Boeing.

    The A320 is the primary competitor to Boeing’s 737, Stengel said. Airbus updated its engine in the mid-2010s and planes in this category are called A320neo, he said.

    The A320 is the world’s best-selling single-aisle aircraft family, Airbus’ website said.

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  • What a federal ban on THC-infused drinks and snacks could mean for the hemp industry

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    MINNEAPOLIS (AP) — The production lines at Indeed Brewing moved quickly, the cans filling not with beer, but with THC-infused seltzer. The product, which features the compound that gets cannabis users high, has been a lifeline at Indeed and other craft breweries as alcohol sales have fallen in recent years.

    But that boom looks set to come to a crashing halt. Buried in the bill that ended the federal government shutdown this month was a provision to ban those drinks, along with other impairing beverages and snacks made from hemp, which have proliferated across the country in recent years. Now the $24 billion hemp industry is scrambling to save itself before the provision takes effect in November 2026.

    “It’s a big deal,” said Ryan Bandy, Indeed’s chief business officer. “It would be a mess for our breweries, for our industry, and obviously for a lot of people who like these things.”

    Here’s what to know about the looming ban on impairing products derived from hemp.

    Congress opened the door in 2018

    Marijuana and hemp are the same species. Marijuana is cultivated for high levels of THC in its flowers. Low-THC hemp is grown for its sturdy fibers, food or wellness products. “Rope, not dope” was long the motto of farmers who supported legalizing hemp.

    After states began legalizing marijuana for adult use over a decade ago, hemp advocates saw an opening at the federal level. As part of the 2018 farm bill, Congress legalized the cultivation of industrial hemp to give farmers, including in Republican Sen. Mitch McConnell’s home state of Kentucky, a new cash crop.

    But the way that law defined hemp — as having less than 0.3% of a specific type of THC, called delta-9 — opened a huge loophole. Beverages or bags of snacks could meet that threshold and still contain more than enough THC to get people high. Businesses could further exploit the law by extracting a non-impairing compound, called CBD, and chemically changing it into other types of impairing THC, such as delta-8 or delta-10.

    The result? Vape oil, gummy candies, chips, cookies, sodas and other unregulated, untested products laden with hemp-derived THC spread around the country. In many places, they have been available at gas stations or convenience stores, even to teens. In legal marijuana states, they undercut heavily taxed and regulated products. In others, they evaded the prohibition on recreational use of weed.

    Some states, including Indiana, have reported spikes in calls to poison-control centers for pediatric exposure to THC.

    A patchwork of state regulations

    Dozens of states have since taken steps to regulate or ban impairing hemp products. In October, Democratic California Gov. Gavin Newsom signed a bill banning the sale of intoxicating hemp products outside the state’s legal marijuana system.

    Texas, which has a massive hemp market, is moving to regulate sales of impairing hemp, such as by restricting them to those over 21. In Nebraska, lawmakers have instead considered a bill to criminalize the sale and possession of products containing hemp-based THC.

    Washington state adopted a program to regulate hemp growing. But the number of licensed growers has cratered since the state banned intoxicating hemp products outside of the regulated cannabis market in 2023. Five years ago, there were 220, said Trecia Ehrlich, cannabis program manager with the state agriculture department. This year, there were 42, and with a federal ban looming, she expects that number to drop by about half next year.

    Minnesota made infused beverages and foods legal in 2022 for people 21 and older. The products, which must be derived from legally certified hemp, have become so popular that Target is now offering THC drinks at some of its stores in the state.

    They’ve also been a boon to liquor stores and to small Minneapolis brewers like Indeed, where THC drinks make up close to one-quarter of the business, Bandy said. At Bauhaus Brew Labs, a few blocks away, THC drinks account for 26% of their revenues from distributed products and 11% of revenues at the brewery’s taproom.

    A powerful senator moves to close the loophole

    None of that was what McConnell intended when he helped craft the 2018 farm bill. He finally closed the loophole by inserting a federal hemp THC ban in the measure to end the 43-day federal government shutdown, approved by the Senate on Nov. 10.

    “It will keep these dangerous products out of the hands of children, while preserving the hemp industry for farmers,” McConnell said. “Industrial hemp and CBD will remain legal for industrial applications.”

    Some in the legal marijuana industry celebrated, as the ban would end what they consider unfair competition.

    They were joined by prohibitionists. “There’s really no good argument for allowing these dangerous products to be sold in our country,” said Kevin Sabet, president and CEO of Smart Approaches to Marijuana.

    But the ban doesn’t take effect for a year. That has given the industry hope that there is still time to pass regulations that will improve the hemp THC industry — such as by banning synthetically derived THC, requiring age restrictions on sales, and prohibiting marketing to children — rather than eradicate it.

    “We are very hopeful that cooler heads will prevail,” said Jonathan Miller, general counsel of the industry group U.S. Hemp Roundtable. “If they really thought there was a health emergency, there would be no year-long period.”

    The federal ban would jeopardize more than 300,000 jobs while costing states $1.5 billion in lost tax money, the group says.

    Drew Hurst, president and chief operating officer at Bauhaus Brew Labs, has no doubt his company would be among the casualties.

    “If this goes through as written currently, I don’t see a way at all that Bauhaus could stay in business,” Hurst said.

    What comes next?

    A number of lawmakers say they will push for regulation of the hemp THC industry. Kentucky’s second senator, Republican Rand Paul, introduced an amendment to strip McConnell’s hemp language from the crucial government-funding bill, but it failed on a lopsided 76-24 vote.

    Minnesota’s Democratic U.S. senators, Amy Klobuchar and Tina Smith, are among those strategizing to save the industry. Klobuchar noted at a recent news conference that the ban was inserted into the unrelated shutdown bill without a hearing. She suggested the federal government could allow states to develop their own regulatory frameworks, or that Minnesota’s strict regulations could be used as a national model.

    Kevin Hilliard, co-founder of Insight Brewing in Minneapolis, said the hemp industry needs a solution before planting time next spring.

    “If a farmer has uncertainty, they’re not going to plant,” Hilliard said.

    ___

    Johnson reported from Seattle. AP congressional reporter Kevin Freking contributed from Washington, D.C.

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  • Eel populations are falling, and new protections were defeated. Japan and the US opposed them

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    SCARBOROUGH, Maine — Eels are the stuff of nightmares — slimy, snakelike creatures that lay millions of eggs before dying so their offspring can return home to rivers and streams. They’ve existed since the time of the dinosaurs, and some species are more poorly understood than those ancient animals.

    Yet they’re also valuable seafood fish that are declining all over the world, leading to a new push for restrictions on trade to help stave off extinction.

    Freshwater eels are critically important for the worldwide sushi industry, and some species have declined by more than 90% since the 1980s. The eels have succumbed to a combination of river dams, hydroelectric turbines, pollution, habitat loss, climate change, illegal poaching and overfishing, according to scientists. Some environmental organizations have called for consumers to boycott eel at sushi restaurants.

    The loss of eels motivated the Convention on International Trade in Endangered Species of Wild Fauna and Flora, or CITES, to consider new restrictions to protect the wriggling fish. The members of CITES, an international treaty, met in Uzbekistan this week to determine if the new rules on trade are needed. Member nations voted against the new protections on Thursday.

    Conservation groups said the protections were long overdue, but not everyone was on board. Some fishing groups, seafood industry members and regulatory agencies in the U.S., China and Japan — all countries where eel is economically important — have spoken out against restricting the trade.

    The push for more restrictions is the work of “an international body dominated by volunteer scientists and unelected bureaucrats,” said Mitchell Feigenbaum, one of North America’s largest eel dealers and an advocate for the industry. But several conservation groups countered that the protections were needed.

    “This measure is vital to strengthen trade monitoring, aid fisheries management, and ensure the species’ long-term survival,” said Susan Lieberman, vice president of international policy for Wildlife Conservation Society.

    The eels in question are the eels of the anguilla genus, which spend their lives in freshwater but migrate to the ocean to spawn. They are distinct from the familiar, grinning moray eels, which are popular in aquariums and are mostly marine fish, and the electric eels, which live in South America.

    Anguilla eels, especially baby eels called elvers, are valuable because they are used as seed stock by Asian aquaculture companies that raise them to maturity for use as food. Freshwater eel is known as unagi in Japan, and it’s a key ingredient in numerous sushi dishes. Eel is also culturally significant in Japan, where people have eaten the fish for thousands of years.

    The elvers have become more valuable in the U.S. over the last 15 years because of the steep decline of eels elsewhere in the world. While the population of American eels has fallen, the drop has not been as severe as Japanese and European eels. Attempts to list American eels under the Endangered Species Act in the U.S. have failed.

    Maine is the only U.S. state with a significant fishery for the elvers, and it is heavily regulated. Maine’s baby eels were worth more than $1,200 per pound at the docks in 2024, and they were worth more than $2,000 per pound the year before that.

    CITES, which is one of the world’s largest multinational wildlife agreements, extended protections to European eels in 2009. The organization considered adding more than a dozen more eel species, including the American and Japanese eels, to its list of protected species.

    Adding the eels to the list would mean exporters would need a permit to ship them. Before the permit could be granted, a scientific authority in the home country would have to determine that the export would not be detrimental to the species’ survival and that the eels weren’t taken illegally under national wildlife laws. That is significant because poaching of eels is a major threat, and rare species are often illegally passed off as more common ones, CITES documents state.

    Tightening trade rules “will encourage species-specific trade monitoring and controls and close loopholes that allow illegal trade to persist,” the documents state.

    Fishing groups are not the only organizations to resist expanding protections for eels, as regulatory groups in some countries have argued that national and regional laws are a better way to conserve eels.

    Japan and China have both told CITES that they don’t support listing the eels. And in the U.S., the Atlantic States Marine Fisheries Commission, which regulates the American eel fishery, submitted testimony to CITES opposing the listing.

    The U.S.’s own management of eels is sufficient to protect the species, said Toni Kerns, fisheries policy director with the commission.

    “We don’t feel that the proposal provides enough information on how the black market would be curbed,” Kerns said. “We are very concerned about how it would potentially restrict trade in the United States.”

    A coalition of industry groups in China, Japan, South Korea and Taiwan also submitted a request that the protection be rejected, saying CITES’ assertion that international trade is causing eel populations to decline is “not supported by sufficient evidence.”

    The strong demand for eels is a reason to protect the trade with new rules, said Nastya Timoshyna, office director for Europe with TRAFFIC, a U.K.-based nonprofit that fights wildlife trafficking.

    Illegal shipping is not the only reason the eels are in decline, but working with industry to cut down illegal trade will give the fish a better chance at survival, Timoshyna said.

    Eels might not be universally beloved, but they’re important in part because they’re an indicator species that helps scientists understand the health of the ecosystem around them, Timoshyna said.

    “It’s not about banning it or stopping fishing practices,” Timoshyna said. “It’s about industry being responsible, and there is massive power in industry.”

    ___

    Associated Press writer Michael Casey in Boston contributed to this report.

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  • What to know about federal ban threatening market for THC-infused drinks and snacks

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    MINNEAPOLIS — The production lines at Indeed Brewing moved quickly, the cans filling not with beer, but with THC-infused seltzer. The product, which features the compound that gets cannabis users high, has been a lifeline at Indeed and other craft breweries as alcohol sales have fallen in recent years.

    But that boom looks set to come to a crashing halt. Buried in the bill that ended the federal government shutdown this month was a provision to ban those drinks, along with other impairing beverages and snacks made from hemp, which have proliferated across the country in recent years. Now the $24 billion hemp industry is scrambling to save itself before the provision takes effect in November 2026.

    “It’s a big deal,” said Ryan Bandy, Indeed’s chief business officer. “It would be a mess for our breweries, for our industry, and obviously for a lot of people who like these things.”

    Here’s what to know about the looming ban on impairing products derived from hemp.

    Marijuana and hemp are the same species. Marijuana is cultivated for high levels of THC in its flowers. Low-THC hemp is grown for its sturdy fibers, food or wellness products. “Rope, not dope” was long the motto of farmers who supported legalizing hemp.

    After states began legalizing marijuana for adult use over a decade ago, hemp advocates saw an opening at the federal level. As part of the 2018 farm bill, Congress legalized the cultivation of industrial hemp to give farmers, including in Republican Sen. Mitch McConnell’s home state of Kentucky, a new cash crop.

    But the way that law defined hemp — as having less than 0.3% of a specific type of THC, called delta-9 — opened a huge loophole. Beverages or bags of snacks could meet that threshold and still contain more than enough THC to get people high. Businesses could further exploit the law by extracting a non-impairing compound, called CBD, and chemically changing it into other types of impairing THC, such as delta-8 or delta-10.

    The result? Vape oil, gummy candies, chips, cookies, sodas and other unregulated, untested products laden with hemp-derived THC spread around the country. In many places, they have been available at gas stations or convenience stores, even to teens. In legal marijuana states, they undercut heavily taxed and regulated products. In others, they evaded the prohibition on recreational use of weed.

    Some states, including Indiana, have reported spikes in calls to poison-control centers for pediatric exposure to THC.

    Dozens of states have since taken steps to regulate or ban impairing hemp products. In October, Democratic California Gov. Gavin Newsom signed a bill banning the sale of intoxicating hemp products outside the state’s legal marijuana system.

    Texas, which has a massive hemp market, is moving to regulate sales of impairing hemp, such as by restricting them to those over 21. In Nebraska, lawmakers have instead considered a bill to criminalize the sale and possession of products containing hemp-based THC.

    Washington state adopted a program to regulate hemp growing. But the number of licensed growers has cratered since the state banned intoxicating hemp products outside of the regulated cannabis market in 2023. Five years ago, there were 220, said Trecia Ehrlich, cannabis program manager with the state agriculture department. This year, there were 42, and with a federal ban looming, she expects that number to drop by about half next year.

    Minnesota made infused beverages and foods legal in 2022 for people 21 and older. The products, which must be derived from legally certified hemp, have become so popular that Target is now offering THC drinks at some of its stores in the state.

    They’ve also been a boon to liquor stores and to small Minneapolis brewers like Indeed, where THC drinks make up close to one-quarter of the business, Bandy said. At Bauhaus Brew Labs, a few blocks away, THC drinks account for 26% of their revenues from distributed products and 11% of revenues at the brewery’s taproom.

    None of that was what McConnell intended when he helped craft the 2018 farm bill. He finally closed the loophole by inserting a federal hemp THC ban in the measure to end the 43-day federal government shutdown, approved by the Senate on Nov. 10.

    “It will keep these dangerous products out of the hands of children, while preserving the hemp industry for farmers,” McConnell said. “Industrial hemp and CBD will remain legal for industrial applications.”

    Some in the legal marijuana industry celebrated, as the ban would end what they consider unfair competition.

    They were joined by prohibitionists. “There’s really no good argument for allowing these dangerous products to be sold in our country,” said Kevin Sabet, president and CEO of Smart Approaches to Marijuana.

    But the ban doesn’t take effect for a year. That has given the industry hope that there is still time to pass regulations that will improve the hemp THC industry — such as by banning synthetically derived THC, requiring age restrictions on sales, and prohibiting marketing to children — rather than eradicate it.

    “We are very hopeful that cooler heads will prevail,” said Jonathan Miller, general counsel of the industry group U.S. Hemp Roundtable. “If they really thought there was a health emergency, there would be no year-long period.”

    The federal ban would jeopardize more than 300,000 jobs while costing states $1.5 billion in lost tax money, the group says.

    Drew Hurst, president and chief operating officer at Bauhaus Brew Labs, has no doubt his company would be among the casualties.

    “If this goes through as written currently, I don’t see a way at all that Bauhaus could stay in business,” Hurst said.

    A number of lawmakers say they will push for regulation of the hemp THC industry. Kentucky’s second senator, Republican Rand Paul, introduced an amendment to strip McConnell’s hemp language from the crucial government-funding bill, but it failed on a lopsided 76-24 vote.

    Minnesota’s Democratic U.S. senators, Amy Klobuchar and Tina Smith, are among those strategizing to save the industry. Klobuchar noted at a recent news conference that the ban was inserted into the unrelated shutdown bill without a hearing. She suggested the federal government could allow states to develop their own regulatory frameworks, or that Minnesota’s strict regulations could be used as a national model.

    Kevin Hilliard, co-founder of Insight Brewing in Minneapolis, said the hemp industry needs a solution before planting time next spring.

    “If a farmer has uncertainty, they’re not going to plant,” Hilliard said.

    ___

    Johnson reported from Seattle. AP congressional reporter Kevin Freking contributed from Washington, D.C.

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  • Here’s what to know about the federal ban threatening the market for THC-infused drinks and snacks

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    MINNEAPOLIS — The production lines at Indeed Brewing moved quickly, the cans filling not with beer, but with THC-infused seltzer. The product, which features the compound that gets cannabis users high, has been a lifeline at Indeed and other craft breweries as alcohol sales have fallen in recent years.

    But that boom looks set to come to a crashing halt. Buried in the bill that ended the federal government shutdown this month was a provision to ban those drinks, along with other impairing beverages and snacks made from hemp, which have proliferated across the country in recent years. Now the $24 billion hemp industry is scrambling to save itself before the provision takes effect in November 2026.

    “It’s a big deal,” said Ryan Bandy, Indeed’s chief business officer. “It would be a mess for our breweries, for our industry, and obviously for a lot of people who like these things.”

    Here’s what to know about the looming ban on impairing products derived from hemp.

    Marijuana and hemp are the same species. Marijuana is cultivated for high levels of THC in its flowers. Low-THC hemp is grown for its sturdy fibers, food or wellness products. “Rope, not dope” was long the motto of farmers who supported legalizing hemp.

    After states began legalizing marijuana for adult use over a decade ago, hemp advocates saw an opening at the federal level. As part of the 2018 farm bill, Congress legalized the cultivation of industrial hemp to give farmers, including in Republican Sen. Mitch McConnell’s home state of Kentucky, a new cash crop.

    But the way that law defined hemp — as having less than 0.3% of a specific type of THC, called delta-9 — opened a huge loophole. Beverages or bags of snacks could meet that threshold and still contain more than enough THC to get people high. Businesses could further exploit the law by extracting a non-impairing compound, called CBD, and chemically changing it into other types of impairing THC, such as delta-8 or delta-10.

    The result? Vape oil, gummy candies, chips, cookies, sodas and other unregulated, untested products laden with hemp-derived THC spread around the country. In many places, they have been available at gas stations or convenience stores, even to teens. In legal marijuana states, they undercut heavily taxed and regulated products. In others, they evaded the prohibition on recreational use of weed.

    Some states, including Indiana, have reported spikes in calls to poison-control centers for pediatric exposure to THC.

    Dozens of states have since taken steps to regulate or ban impairing hemp products. In October, Democratic California Gov. Gavin Newsom signed a bill banning the sale of intoxicating hemp products outside the state’s legal marijuana system.

    Texas, which has a massive hemp market, is moving to regulate sales of impairing hemp, such as by restricting them to those over 21. In Nebraska, lawmakers have instead considered a bill to criminalize the sale and possession of products containing hemp-based THC.

    Washington state adopted a program to regulate hemp growing. But the number of licensed growers has cratered since the state banned intoxicating hemp products outside of the regulated cannabis market in 2023. Five years ago, there were 220, said Trecia Ehrlich, cannabis program manager with the state agriculture department. This year, there were 42, and with a federal ban looming, she expects that number to drop by about half next year.

    Minnesota made infused beverages and foods legal in 2022 for people 21 and older. The products, which must be derived from legally certified hemp, have become so popular that Target is now offering THC drinks at some of its stores in the state.

    They’ve also been a boon to liquor stores and to small Minneapolis brewers like Indeed, where THC drinks make up close to one-quarter of the business, Bandy said. At Bauhaus Brew Labs, a few blocks away, THC drinks account for 26% of their revenues from distributed products and 11% of revenues at the brewery’s taproom.

    None of that was what McConnell intended when he helped craft the 2018 farm bill. He finally closed the loophole by inserting a federal hemp THC ban in the measure to end the 43-day federal government shutdown, approved by the Senate on Nov. 10.

    “It will keep these dangerous products out of the hands of children, while preserving the hemp industry for farmers,” McConnell said. “Industrial hemp and CBD will remain legal for industrial applications.”

    Some in the legal marijuana industry celebrated, as the ban would end what they consider unfair competition.

    They were joined by prohibitionists. “There’s really no good argument for allowing these dangerous products to be sold in our country,” said Kevin Sabet, president and CEO of Smart Approaches to Marijuana.

    But the ban doesn’t take effect for a year. That has given the industry hope that there is still time to pass regulations that will improve the hemp THC industry — such as by banning synthetically derived THC, requiring age restrictions on sales, and prohibiting marketing to children — rather than eradicate it.

    “We are very hopeful that cooler heads will prevail,” said Jonathan Miller, general counsel of the industry group U.S. Hemp Roundtable. “If they really thought there was a health emergency, there would be no year-long period.”

    The federal ban would jeopardize more than 300,000 jobs while costing states $1.5 billion in lost tax money, the group says.

    Drew Hurst, president and chief operating officer at Bauhaus Brew Labs, has no doubt his company would be among the casualties.

    “If this goes through as written currently, I don’t see a way at all that Bauhaus could stay in business,” Hurst said.

    A number of lawmakers say they will push for regulation of the hemp THC industry. Kentucky’s second senator, Republican Rand Paul, introduced an amendment to strip McConnell’s hemp language from the crucial government-funding bill, but it failed on a lopsided 76-24 vote.

    Minnesota’s Democratic U.S. senators, Amy Klobuchar and Tina Smith, are among those strategizing to save the industry. Klobuchar noted at a recent news conference that the ban was inserted into the unrelated shutdown bill without a hearing. She suggested the federal government could allow states to develop their own regulatory frameworks, or that Minnesota’s strict regulations could be used as a national model.

    Kevin Hilliard, co-founder of Insight Brewing in Minneapolis, said the hemp industry needs a solution before planting time next spring.

    “If a farmer has uncertainty, they’re not going to plant,” Hilliard said.

    ___

    Johnson reported from Seattle. AP congressional reporter Kevin Freking contributed from Washington, D.C.

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  • RBI Governor: Monitoring for any signs of stress in banking sector

    RBI Governor: Monitoring for any signs of stress in banking sector

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    Shaktikanta Das, the Governor of the Reserve Bank of India, spoke at length about the strict regulation of the NBFC sector, highlighting the RBI's commitment to maintaining India's financial stability.

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  • We should be concerned about U.S. banks and a capital adequacy of 9% is ‘dramatically low’: IDC

    We should be concerned about U.S. banks and a capital adequacy of 9% is ‘dramatically low’: IDC

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    Cyrus Daruwala of IDC Financial Insights says the arguments used by institutions that are pushing against the Bank for International Settlements’ Basel III capital requirements framework could amount to “funny money”.

    03:15

    Wed, Sep 11 202411:57 PM EDT

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  • CFPB cracks down on popular paycheck advance programs. Here’s what that means for workers

    CFPB cracks down on popular paycheck advance programs. Here’s what that means for workers

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    Rohit Chopra, director of the Consumer Financial Protection Bureau, during a House Financial Services Committee hearing on June 13, 2024.

    Tierney L. Cross/Bloomberg via Getty Images

    The Consumer Financial Protection Bureau is cracking down on so-called paycheck advance programs, which have grown popular with workers in recent years.

    Such programs, also known as earned wage access, allow workers to tap their paychecks before payday, often for a fee, according to the CFPB.

    The CFPB proposed an interpretive rule on Thursday saying the programs — both those offered via employers and directly to users via fintech apps — are “consumer loans” subject to the Truth in Lending Act.

    More than 7 million workers accessed about $22 billion in wages before payday in 2022, according to a CFPB analysis of employer-sponsored programs also published Thursday. The number of transactions jumped more than 90% from 2021 to 2022, the agency said.

    Such services aren’t new: Fintech companies debuted them in their earliest form more than 15 years ago. But their use has accelerated recently amid household financial burdens imposed by the Covid-19 pandemic and high inflation, experts said.

    Is it a loan or ‘utilizing an ATM’?

    If finalized as written, the rule would require companies offering paycheck advances to make additional disclosures to users, helping borrowers make more informed decisions, the CFPB said.

    Perhaps most important, costs or fees incurred by consumers to access their paychecks early would need to be expressed as an annual percentage rate, or APR, akin to credit card interest rates, according to legal experts.

    The typical earned-wage-access user pays fees that amount to a 109.5% APR, despite the service often being marketed as a “free or low-cost solution,” according to the CFPB.

    The California Department of Financial Protection and Innovation found such fees to be higher — more than 330% — for the average user, according to an analysis published in 2023.

    Such data has led some consumer advocates to equate earned wage access to high-interest credit like payday loans. By comparison, the average credit card user with a balance paid a 23% APR as of May, a historic high, according to Federal Reserve data.

    “The CFPB’s actions will help workers know what they are getting with these products and prevent race-to-the-bottom business practices,” CFPB Director Rohit Chopra said in a written statement.

    More from Personal Finance:
    Biden may deliver sweeping student loan forgiveness weeks before election
    Medical debt carries less weight on credit reports
    Harvard fellow: CFPB’s ‘buy now, pay later’ regulation isn’t enough

    However, the financial industry, which doesn’t consider such services to be a traditional loan, had been fighting such a label.

    It’s inaccurate to call the service a “loan” or an “advance” since it grants workers access to money they’ve already earned, said Phil Goldfeder, CEO of the American Fintech Council, a trade group representing earned-wage-access providers.

    “I would resemble it closer to utilizing an ATM machine and getting charged a fee,” Goldfeder said. “You can’t utilize a methodology like APR to determine the appropriate costs for a product like this.”

    The CFPB is soliciting comments from the public until Aug. 30. It may revise its proposal based on that feedback.  

    Part of broader ‘junk fee’ crackdown

    The proposal is the latest salvo in an array of CFPB actions aimed at lenders, like one seeking to rein in banks’ overdraft fees and popular buy now, pay later programs.

    It’s also part of a broader Biden administration push to crack down on “junk fees.”

    Consumers may encounter earned wage access under various names, like daily pay, instant pay, accrued wage access, same-day pay and on-demand pay.

    Business-to-business models offered through an employer use payroll and time-sheet records to track users’ accrued earnings. When payday arrives, the employee receives the portion of pay that hasn’t been tapped early.

    Third-party apps are similar but instead issue funds based on estimated or historical earnings and then automatically debit a user’s bank account on payday, experts said.

    Branch, DailyPay, Payactiv, Dave, EarnIn and Brigit are examples of some of the largest providers in the B2B or third-party ecosystems.

    Providers may offer various services for free, and some employers offer programs to employees free of charge.

    The CFPB proposal’s requirements don’t apply in cases when the consumer doesn’t incur a fee, it said.

    However, most users do pay fees, CFPB found in its analysis of employer-sponsored programs.

    More than 90% of workers paid at least one fee in 2022 in instances when employers don’t cover the costs, the agency said. The vast majority were for “expedited” transfers of the funds; such fees range from $1 to $5.99, with an average fee of $3.18, the CFPB said.

    Many are repeat users: Workers made 27 transactions a year and paid $106 in total fees, on average, said CFPB, which cautioned that consumers may “become financially overextended if they simultaneously use multiple earned wage products.”

    CFPB rule wouldn’t prohibit fees

    The CFPB’s proposal marks the first time the agency has said “explicitly” that early paycheck access amounts to a loan, said Mitria Spotser, vice president and federal policy director at the Center for Responsible Lending, a consumer advocacy group.

    “It is a traditional loan: It’s borrowing money at a cost from the provider,” she said.

    Goldfeder, of the American Fintech Council, disagrees.

    “Unlike the provision of credit or a loan, EWA is non-recourse and does not require a credit check, underwriting, base fees on creditworthiness; charge a fee in installments, charge interest, late fees, or penalties; or impact a user’s credit score,” he said in a written statement.

    Payments trends for 2024: 'Buy now, pay later' boom

    The CFPB rule doesn’t prohibit providers from charging fees, Spotser said.

    “It merely requires them to disclose it,” she added. “You have to ask yourself, why is the industry so afraid to disclose that they’re charging these fees?”

    If finalized, the rule would allow the CFPB to bring enforcement actions against companies that don’t make the appropriate disclosures, for example, said Lauren Saunders, associate director of the National Consumer Law Center. States could also sue in court, as could consumers or via arbitration, she said.

    Companies “ignore it at their peril, because it’s the CFPB’s interpretation of what the law is,” Saunders said of the interpretive rule. “They could try to argue to a court that the CFPB is wrong, but they’re on notice.”

    Don’t miss these insights from CNBC PRO

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  • Deutsche Bank criticized by German regulator for financial reporting error

    Deutsche Bank criticized by German regulator for financial reporting error

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    A general meeting of Deutsche Bank

    Arne Dedert | picture alliance | Getty Images

    Deutsche Bank incorrectly disclosed deferred tax assets in its 2019 financial statement which did not meet international accounting standards, the German regulator BaFin said on Tuesday.

    “The declarations on deferred tax assets in the consolidated financial statement were not complete,” the regulator, known formally as the Federal Financial Supervisory Authority, said in a statement translated by CNBC.

    It said that 2.076 billion euros ($2.26 billion) worth of deferred tax assets had not been disclosed separately in the notes for Deutsche Bank’s U.S. business. The bank should have made the disclosure because it recorded several years of losses, it said.

    Additionally, the bank should have explained why it was sure that it would make sufficient profits in the future, which it also did not do, BaFin said.

    The disclosure error was against rules laid out by the International Accounting Standards, BaFin said in a second statement.

    The findings are the outcome of a random sampling examination, which was initially launched by Germany’s now defunct Financial Reporting Enforcement Panel, the regulator noted.

    In a statement to CNBC, Deutsche Bank said the financial statement was still compliant with international reporting standards.

    “There is no suggestion on BaFin’s part that there is any inaccuracy in Deutsche Bank’s 2019 accounts, and no restatement or other action is required. It is Deutsche Bank’s view today, as at the time of publication, that its 2019 financial statements and other disclosures comply fully with IFRS [International Financial Reporting Standards] requirements,” a spokesperson for the bank said in emailed comments.

    Deferred tax assets are figures on a company’s financial statements that effectively reduce its taxable income in the future, for example related to a previous overpayment or advance payment of taxes.

    The disclosure of them is important for transparency about expected future tax implications, BaFin noted.

    Europe-traded shares of Deutsche Bank were last down by 0.9% on Tuesday morning.

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  • Reducing banks’ capital requirements would lead us into the next financial crisis, German regulator warns

    Reducing banks’ capital requirements would lead us into the next financial crisis, German regulator warns

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    Mark Branson, president of the German financial regulatory authority BaFin, discusses changing financial regulation.

    03:06

    2 hours ago

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  • Why hundreds of U.S. banks may be at risk of failure

    Why hundreds of U.S. banks may be at risk of failure

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    Hundreds of small and regional banks across the U.S. are feeling stressed.

    “You could see some banks either fail or at least, you know, dip below their minimum capital requirements,” Christopher Wolfe, managing director and head of North American banks at Fitch Ratings, told CNBC.

    Consulting firm Klaros Group analyzed about 4,000 U.S. banks and found 282 banks face the dual threat of commercial real estate loans and potential losses tied to higher interest rates.

    The majority of those banks are smaller lenders with less than $10 billion in assets.

    “Most of these banks aren’t insolvent or even close to insolvent. They’re just stressed,” Brian Graham, co-founder and partner at Klaros Group, told CNBC. “That means there’ll be fewer bank failures. But it doesn’t mean that communities and customers don’t get hurt by that stress.”

    Graham noted that communities would likely be affected in ways that are more subtle than closures or failures, but by the banks choosing not to invest in such things as new branches, technological innovations or new staff.

    For individuals, the consequences of small bank failures are more indirect.

    “Directly, it’s no consequence if they’re below the insured deposit limits, which are quite high now [at] $250,000,” Sheila Bair, former chair of the U.S. Federal Deposit Insurance Corp., told CNBC.

    If a failing bank is insured by the FDIC, all depositors will be paid “up to at least $250,000 per depositor, per FDIC-insured bank, per ownership category.”

    Watch the video to learn more about the risk of commercial real estate, the role of interest rates on unrealized losses and what it may take to relieve stress on banks — from regulation to mergers and acquisitions.

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  • Why the Fed expects more bank failures

    Why the Fed expects more bank failures

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    Of about 4,000 U.S. banks analyzed by the Klaros Group, 282 banks face stress from commercial real estate exposure and higher interest rates. The majority of those banks are categorized as small banks with less than $10 billion in assets. “Most of these banks aren’t insolvent or even close to insolvent. They’re just stressed,” Brian Graham, Klaros co-founder and partner at Klaros. “That means there’ll be fewer bank failures. But it doesn’t mean that communities and customers don’t get hurt.”

    14:18

    Wed, May 1 202410:05 AM EDT

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  • Big bank CEOs warn that new regulations may severely impact economy

    Big bank CEOs warn that new regulations may severely impact economy

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    NEW YORK — The heads of the nation’s biggest banks say there are reasons to be concerned about the health of U.S. consumers — particularly poor and low-income borrowers — in their annual appearance in front of Congress on Wednesday.

    The CEOs of JPMorgan Chase, Bank of America, Wells Fargo and five other large firms also took the opportunity to impress upon senators that the Biden Administration’s new proposed regulations for the industry may hurt the U.S. economy going into an election year and at a time when a recession is possible.

    Wall Street’s most powerful bankers have regularly appeared in front of Congress going back to the 2008 financial crisis. Among those testifying before the Senate Banking Committee include JPMorgan’s Jamie Dimon, Bank of America’s Brian Moynihan, Jane Fraser of Citigroup and Goldman Sachs’ David Solomon.

    When both houses of Congress were controlled by Democrats, the CEOs would appear in front of both the House Financial Services Committee and the Senate banking panel. Now that Republicans control the House, only the Senate is holding a hearing this year.

    The CEOs are using their appearance in front of the Senate differently this year. Whereas in previous years they used the hearing to highlight the industry’s good deeds, this year they’re warning about the potential dangers of overregulating the industry.

    The banks are adamantly against new regulations proposed by the Biden Administration that could hit their profitability hard, including new rules from the Federal Reserve that would required big banks to hold additional capital on their balance sheets. The industry says the new regulations, known as the Basel Endgame, would hurt lending and bank balance sheets at a time when the industry needs more flexibility.

    “Almost every element of the Basel III Endgame proposal would make lending and other financial activities more expensive, especially for smaller companies and consumers,” Fraser said in her prepared remarks.

    The other seven CEOs were uniform in their comments in their prepared remarks.

    The industry’s opposition has saturated the Washington media market over the last several weeks, which came up in senators’ remarks during the hearing.

    “If you’ve watched the local news in Washington, if you’ve waited at a bus stop in Washington, if you’ve flown out of Washington national airport, you’ve probably seen ads urging people to, quote, ‘Stop Basel Endgame,’” said Sen. Sherrod Brown, the committee chairman.

    “You should stop pouring money into lobbying against efforts to protect the taxpayers who subsidize your entire industry,” Brown later said.

    There are also proposals coming from the Consumer Financial Protection Bureau that would rein in overdraft fees, which have also been a longtime source of revenue for the consumer banks.

    This year has been a tough one for the banking industry, as high interest rates have caused banks and consumers to seek fewer loans and consumers are facing financial pressure from inflation. Three larger banks failed this year — Signature Bank, Silicon Valley Bank and First Republic Bank — after the banks experienced a run on deposits and questions about the health of their balance sheets.

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  • Fed Chair Powell says smaller banks likely will be exempt from higher capital requirements

    Fed Chair Powell says smaller banks likely will be exempt from higher capital requirements

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    Federal Reserve Chairman Jerome Powell prepares to testify during the Senate Banking, Housing and Urban Affairs Committee hearing titled “The Semiannual Monetary Policy Report to the Congress,” in Dirksen Building on Thursday, June 22, 2023.

    Tom Williams | Cq-roll Call, Inc. | Getty Images

    New rules expected to require that banks keep more capital almost certainly won’t apply to smaller institutions, Federal Reserve Chairman Jerome Powell said Thursday.

    Addressing concerns over proposals to tighten the reins on bigger banks, Powell told members of the Senate Banking Committee that the rules are still in draft stage.

    At the same time, he also raised concerns about what impact higher capital requirements would have on lending.

    “More capital means more stable banks and stronger banks, but there’s also a trade-off there,” he said in the second day of his semiannual testimony on monetary policy. “You’ve got to make a judgment about where you draw that line.”

    In Powell’s understanding, banks below $100 billion in assets won’t be impacted by any new requirements. That provided some relief for Republican lawmakers who questioned whether the changes were necessary, as Powell faced multiple questions about the future of regulation and supervision. If that’s the case, the new rules would impact the top 25 or so banks in the U.S.

    The questions, and the move to re-examine regulations, follow the March tumult in the industry, in which Silicon Valley Bank and two other large regionals were shuttered following deposit runs.

    Lawmakers and Biden administration regulators have been pushing for a return to more stringent requirements after larger regionals were given a break in changes made in 2018.

    In separate testimony Thursday, FDIC Chair Martin Gruenberg said the upcoming rules could apply so-called Basel III international standards to banks in the $100 billion to $250 billion asset range. The changes are not expected to be applied until sometime in 2024. Michael Barr, the Fed’s vice chair for supervision, has said they likely will take years to implement fully.

    “The capital requirements will be very, very skewed to the eight largest banks,” Powell said. “There may be some capital increases for other banks. None of this should affect banks under $100 billion.”

    Even with the exemption for smaller institutions, the looming changes represent an adjustment in thinking that Powell previously had supported, specifically that regulations should be tailored for both small- and mid-sized banks. Gruenberg’s comments, for instance, “support our view that banking regulators are biased toward higher capital levels,” Raymond James’ Washington policy analyst Ed Mills said in a client note.

    The American Bankers Association criticized the move toward increase requirements that have been reported to be 20% higher.

    “We have long believed that regulation should be tailored to a bank’s risk and business model,” ABA president Rob Nichols said in a statement. “Arbitrary asset thresholds and changes not justified by rigorous data and evidence are a mistake that will only make it harder for banks of all sizes to meet the needs of their customers, clients and communities while driving financial activity to less-regulated nonbanks.”

    For his part, Powell faced little in the way of hostile questioning despite concerns raised over the SVB failure.

    He did face some grilling from Sen. Elizabeth Warren (D-Mass.), a frequent critic who charged Thursday that Powell is “ultimately responsible for the team of supervisors who fell down on the job” when SVB failed.

    Powell replied that the Fed “learned some lessons” from the episode.

    “The main responsibility I take is to learn the right lessons from this and to undertake to address them so we don’t have a situation like this where we had unexpectedly a large bank fail and spread contagion into the banking system. That’s not supposed to happen, and we need to take appropriate steps to make sure it doesn’t happen again,” he said.

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  • What investors need to know about ‘staking,’ the passive income opportunity at the center of crypto’s latest regulation scare

    What investors need to know about ‘staking,’ the passive income opportunity at the center of crypto’s latest regulation scare

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    Not six months ago, ether led a recovery in cryptocurrency prices ahead of a big tech upgrade that would make something called “staking” available to crypto investors.

    Most people have hardly wrapped their heads around the concept, but now, the price of ether is falling amid mounting fears that the Securities and Exchange Commission could crack down on it.

    On Thursday, Kraken, one of the largest crypto exchanges in the world, closed its staking program in a $30 million settlement with the SEC, which said the company failed to register the offer and sale of its crypto staking-as-a-service program.

    The night before, Coinbase CEO Brian Armstrong warned his Twitter followers that the securities regulator may want more broadly to end staking for U.S. retail customers.

    “This should put everyone on notice in this marketplace,” SEC Chair Gary Gensler told CNBC’s “Squawk Box” Friday morning. “Whether you call it lend, earn, yield, whether you offer an annual percentage yield – that doesn’t matter. If someone is taking [customer] tokens and transferring to their platform, the platform controls it.”

    Staking has widely been seen as a catalyst for mainstream adoption of crypto and a big revenue opportunity for exchanges like Coinbase. A clampdown on staking, and staking services, could have damaging consequences not just for those exchanges, but also Ethereum and other proof-of-stake blockchain networks. To understand why, it helps to have a basic understanding of the activity in question.

    Here’s what you need to know:

    What is staking?

    Staking is a way for investors to earn passive yield on their cryptocurrency holdings by locking tokens up on the network for a period of time. For example, if you decide you want to stake your ether holdings, you would do so on the Ethereum network. The bottom line is it allows investors to put their crypto to work if they’re not planning to sell it anytime soon.

    How does staking work?

    Staking is sometimes referred to as the crypto version of a high-interest savings account, but there’s a major flaw in that comparison: crypto networks are decentralized, and banking institutions are not.

    Earning interest through staking is not the same thing as earning interest from a high annual percentage yield offered by a centralized platform like those that ran into trouble last year, like BlockFi and Celsius, or Gemini just last month. Those offerings really were more akin to a savings account: people would deposit their crypto with centralized entities that lent those funds out and promised rewards to the depositors in interest (of up to 20% in some cases). Rewards vary by network but generally, the more you stake, the more you earn.

    By contrast, when you stake your crypto, you are contributing to the proof-of-stake system that keeps decentralized networks like Ethereum running and secure; you become a “validator” on the blockchain, meaning you verify and process the transactions as they come through, if chosen by the algorithm. The selection is semi-random – the more crypto you stake, the more likely you’ll be chosen as a validator.

    The lock-up of your funds serves as a sort of collateral that can be destroyed if you as a validator act dishonestly or insincerely.

    This is true only for proof-of-stake networks like Ethereum, Solana, Polkadot and Cardano. A proof-of-work network like Bitcoin uses a different process to confirm transactions.

    Staking as a service

    In most cases, investors won’t be staking themselves – the process of validating network transactions is just impractical on both the retail and institutional levels.

    That’s where crypto service providers like Coinbase, and formerly Kraken, come in. Investors can give their crypto to the staking service and the service does the staking on the investors’ behalf. When using a staking service, the lock-up period is determined by the networks (like Ethereum or Solana), and not the third party (like Coinbase or Kraken).

    It’s also where it gets a little murky with the SEC, which said Thursday that Kraken should have registered the offer and sale of the crypto asset staking-as-a-service program with the securities regulator.

    While the SEC hasn’t given formal guidance on what crypto assets it deems securities, it generally sees a red flag if someone makes an investment with a reasonable expectation of profits that would be derived from the work or effort of others.

    Coinbase has about 15% of the market share of Ethereum assets, according to Oppenheimer. The industry’s current retail staking participation rate is 13.7% and growing.

    Proof-of-stake vs. proof-of-work

    Staking works only for proof-of-stake networks like Ethereum, Solana, Polkadot and Cardano. A proof-of-work network, like Bitcoin, uses a different process to confirm transactions.

    The two are simply the protocols used to secure cryptocurrency networks.

    Proof-of-work requires specialized computing equipment, like high-end graphics cards to validate transactions by solving highly complex math problems. Validators gets rewards for each transaction they confirm. This process requires a ton of energy to complete.

    Ethereum’s big migration to proof-of-stake from proof-of-work improved its energy efficiency almost 100%.

    Risks involved

    The source of return in staking is different from traditional markets. There aren’t humans on the other side promising returns, but rather the protocol itself paying investors to run the computational network.

    Despite how far crypto has come, it’s still a young industry filled with technological risks, and potential bugs in the code is a big one. If the system doesn’t work as expected, it’s possible investors could lose some of their staked coins.

    Volatility is and has always been a somewhat attractive feature in crypto but it comes with risks, too. One of the biggest risks investors face in staking is simply a drop in the price. Sometimes a big decline can lead smaller projects to hike their rates to make a potential opportunity more attractive.

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  • Florida lawmakers set to meet on ailing insurance market

    Florida lawmakers set to meet on ailing insurance market

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    TALLAHASSEE, Fla. — The Florida Legislature will meet next week for a special session on property insurance and property tax relief in the wake of damage caused by Hurricane Ian, officials announced Tuesday.

    The leaders of the Florida House and Senate issued the proclamation convening the Legislature from Dec. 12 to 16.

    Lawmakers will be tasked with reforming elements of the state’s troubled property insurance market, providing tax or other financial relief related to damage from Hurricanes Ian and Nicole, and creating a toll credit program for frequent Florida commuters.

    The session comes as Florida’s property insurance market has dealt with billions of dollars in losses, rising prices for consumers and insurer insolvencies, even before the powerful Hurricane Ian slammed into the state in September and caused widespread damage.

    Next week’s special session will be the second time the Florida Legislature met this year to address issues in the property insurance market.

    Lawmakers in May passed legislation creating a $2 billion reinsurance program, offering grants to homeowners who retrofit properties to be less vulnerable to hurricane damage and limiting various attorney fees in some insurance-related lawsuits.

    The legislative package was seen by many in the statehouse as a meaningful first step in repairing the market, though some said it did not do enough to immediately lower rates for homeowners.

    The insurance industry blames overzealous litigation for problems in the market. Florida law allows attorneys to collect high fees in property insurance cases. State insurance regulators say the state accounts for almost 80% percent of the nation’s homeowners’ insurance lawsuits but just 9% of all homeowners insurance claims.

    Attorneys’ groups have argued insurers are also to blame for refusing to pay out claims, saying homeowners file suit as a last resort.

    The turmoil has caused the industry to see two straight years of net underwriting losses exceeding $1 billion each year. A string of property insurers have become insolvent, while others are leaving the state entirely.

    Homeowners unable to get coverage or priced out of plans have flocked to the state’s public insurer of last resort, Citizens Property Insurance, which this summer topped 1 million policies for the first time in almost a decade.

    Citizens Property Insurance was created by the state in 2002 for Floridians unable to find coverage from private insurers.

    Republican Gov. Ron DeSantis in October signed an executive order extending the deadline for property taxes for homes and businesses destroyed or left uninhabitable after Ian and said lawmakers would meet this year to address additional issues related to the storm.

    The governor’s office in a statement Tuesday said DeSantis “expects the legislature to rein in the costs of excessive litigation and ensure the property insurance market in Florida is both attractive to insurers and more competitive for consumers.”

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