To close out this week we have a few must reads on the various options for intervention with First Republic, the AI revolution in addressing Internet rumors and bank runs, and the CFPB faces a privacy breach of its own.
1. What to do/not do on First Republic
With lots of coverage of First Republic, Matt Levine asks whether it makes sense to do anything at this point.
At some point, if the regulators conclude that First Republic is not viable, it is at least, like, embarrassing for them to keep lending it money. In the limit case, if all of First Republic’s deposits fled, you could imagine the Fed lending it $210 billion (up from its current $105 billion of Fed/FHLB money) so it could continue to limp along. But that’s bad! You don’t want a bank out there doing business, making loans, paying executive salaries, that is entirely funded by the Fed. You need some private-sector endorsement of the bank for the Fed to keep supporting it.
The swaying stability of regional banks is one issue, but what about neo-banks?
Given that Revolut last raised $800 million at a $33 billion valuation in mid-2021, it stands to reason that it was likely overvalued at the time — show us a nine-figure startup round from those times that fits neatly against today’s valuation marks and we’ll buy you a smoothie.
But Revolut getting such a sharp valuation cut nearly two years after it was last priced made us sit up and take notice.
2. Stopping the next “Twitter” bank run
Margi Murphy of Bloomberg writes on companies raising $300 Million to keep misinformation from triggering the next bank run.
Alethea Group Inc., one of a handful of cybersecurity startups that wade through the online muck on behalf of companies, nonprofits and governments that want to protect themselves from internet lies and social media manipulation.
In the case of the recent banking chaos, Graphika’s Santiago Lakatos, who tracks finance and markets, used the company’s software to examine what he calls the “extensive map of conspiratorial finance communities.” Like Alethea, he suspected adversaries would use the crisis to destabilize the US.
3. CFPB suffers data breach
In a case of “physician heal thyself,” the CFPB this week fired an employee who absconded with consumer data.
The Consumer Financial Protection Bureau (CFPB) says it has suffered a data breach which saw an employee forward the personal information of more than quarter of a million Americans to a personal email account.
The unnamed staffer - who has been fired - sent spreadsheets with names and transaction-specific account numbers related to 256,000 consumer accounts at a single unnamed institution. He also forwarded confidential supervisory information on 45 financial institutions
So far, the agency hasn’t yet notified the over a quarter million affected consumers.
So it ends for this week. If you’re thinking about jumping on the generative AI boat for your advertising, maybe wait a minute. If you read this far, let us know what you thought at blog@mindspaninc.com, it helps us serve you better.