April 2023 - cypherpunks - lists.cpunks.org

Robert De Niro's Bombing
by professor rat 21 Apr '23

21 Apr '23

Bomb bomb. Assassination attempts In October 2018, De Niro was targeted by an explosive device. The device was found at the Tribeca Grill, which also houses his production company in Manhattan. According to the FBI, similar devices were sent to high-profile politicians including Barack Obama, Hillary Clinton, Joe Biden, former Attorney General Eric Holder, and former CIA Director John Brennan. What a deserving list.

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A key anarchist belief is abolishing the police
by professor rat 21 Apr '23

21 Apr '23

" . . . Another key anarchist belief is one of abolishing the police and prison system. Despite being seemingly one of the more extreme and divisive ideas, it’s also made its way into mainstream conversation in recent years. . . ." FROM https://anarchistnews.org/content/why-young-people-uk-are-returning-anarchi… Reposts not dispatches from a Kingdom of Drear

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Karl Semich committing suicide after discussions with a chatbot, that included the possibility of him killing himself
by professor rat 21 Apr '23

21 Apr '23

What about the first time when some depressed person commits suicide because of, or plausibly because of, interactions that they had with a language model? If you’ve got hundreds of millions or billions of people using these things, then almost any such event you can name, it’s probably going to happen somewhere. [NOTE: This episode was recorded before this story emerged of a man committing suicide after discussions with a language-model-based chatbot, that included discussion of the possibility of him killing himself.] https://axrp.net/episode/2023/04/11/episode-20-reform-ai-alignment-scott-aa… Reposts not detailed instructions for Karl gassing himself painlessly and slipping away peacefully

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CFPB Issues Policy Statement On Abusive Acts Or Practices - Dodd-Frank, Consumer Protection Act - United States
by Gunnar Larson 20 Apr '23

20 Apr '23

United States: CFPB Issues Policy Statement On Abusive Acts Or Practices 18 April 2023 by Jeffrey A Greenbaum (Frankfurt Kurnit Klein Selz) Global Advertising Lawyers Alliance (GALA) Your LinkedIn Connections with the authors The Consumer Financial Protection Bureau just issued a Policy Statement on Abusive Acts or Practices, which sets forth the CFPB's views about what types of practices violate the Consumer Financial Protection Act of 2010's prohibition of "abusive" conduct. As part of the release of the Policy Statement, CFPB Director Rohit Chopra said, "The CFPB issued today's guidance to provide an analytical framework to help federal and state agencies hold companies accountable when they violate the law and take advantage of families." Similar to the FTC's policy statements from decades ago on unfair and deceptive practices, the CFPB's new Policy Statement provides important, detailed (and what will surely be influential) guidance from the agency about abusive practices, and is really a must-read for anyone working on marketing for banks, lenders, and others that are subject to the CFPB's authority. (The guidance doesn't cover CFPB's views on its own authority related to unfair or deceptive practices.) Under the CFPA, an abusive act or practice is one that: (1) materially interferes with the ability of a consumer to understand a term or condition of a consumer financial product or service; or (2) takes unreasonable advantage of a lack of a consumer's lack of understanding, the inability of a consumer to protect the consumer's own interest, or the consumer's reasonable reliance on a covered entity to act in the consumer's interest. Material Interference The Policy Statement explains that the first abusiveness prohibition concerns situations where a covered entity "materially interferes with the ability of a consumer to understand a term or condition of a consumer financial product or service." This can occur when a marketer intends to impede consumers' ability to understand terms and conditions -- such as by using "buried disclosures, physical or digital interference, overshadowing, and various other means of manipulating consumers' understanding." (The Policy Statement goes into detail about how it evaluates each of these types of behavior.) The CFPB highlighted the fact that, "Certain terms of a transaction are so consequential that when they are not conveyed to people prominently or clearly, it may be reasonable to presume that the entity engaged in acts or omissions that materially interfere with consumers' ability to understand." This includes, for example, consumer costs, limitations on the consumer's ability to use or benefit from the product or service, and the consequences of default. Interestingly, the CFPB also said that, even if the terms of a product or service are complicated or function in unexpected ways, the marketer is still responsible for ensuring that the consumer actually understands the terms -- and that if a marketer creates a product or service that consumers just don't understand, that may be an abusive practice itself. The CFPB explained, "an entity's provision of a product or service may interfere with consumers' ability to understand if the product or service is so complicated that material information about it cannot be sufficiently explained or if the entity's business model functions in a manner that is inconsistent with its product's or service's apparent terms." Taking Unreasonable Advantage The Policy Statement explains that the second abusiveness prohibition prohibits covered entities from taking unreasonable advantage of a consumer's lack of understanding, the inability of a consumer to protect the consumer's interests, or the consumer's reasonable reliance. Marketers, then, should not take unreasonable advantage of a lack of understanding on the part of the consumer of the material risks, costs, or conditions of a product or service. Importantly, the Policy Statement explains that -- in what is a departure from how federal consumer protection laws are typically enforced -- the CFPB does not believe that it needs to show that "the consumer's lack of understanding was reasonable to demonstrate abusive conduct." Marketers should also not take unreasonable advantage of an inability of the consumer to protect the interests of the consumer in selecting or using a consumer financial product or service. This is really about where unequal bargaining power prevents consumers from seeking more favorable terms, switching providers, or making other decisions to protect themselves. The Policy Statement explains that this protects not only financial interests, but privacy, reputational, and other non-monetary interests, such as "limiting the amount of time or effort necessary to obtain consumer financial products or services or remedy problems related to those products or services" (including the time spent trying to obtain customer support). In addition, the Policy Statement highlights the fact that consumers may be unable to protect their interests if they face high transaction costs in order to exit a relationship. And, marketers should not take unreasonable advantage of the reasonable reliance by the consumer on the marketer to act in the interests of the consumer. The reasonable reliance prong comes up when consumers rely on an entity to provide them with advice (such as when an entity helps a consumer select providers) or to make decisions for them (such as when an entity communicates that it will act in the consumer's best interest). Request for Public Comment Although the Policy Statement isn't being presented as draft or proposed guidance, the CFPB said that it is accepting public comments on the guidance until July 3, 2023. The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. https://www.mondaq.com/unitedstates/dodd-frank-consumer-protection-act/1305…

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Wells Fargo Fined $97.8 Million For Failing To Identify Sanctions Violations From A Legacy Wachovia Business - Export Controls & Trade & Investment Sanctions - United States
by Gunnar Larson 20 Apr '23

20 Apr '23

United States: Wells Fargo Fined $97.8 Million For Failing To Identify Sanctions Violations From A Legacy Wachovia Business 18 April 2023 by Alan R. Friedman , Darren LaVerne , Michael Martinez , Gary P Naftalis , Paul Schoeman , Jennifer S. Windom and Jessica A. Christy Kramer Levin Naftalis & Frankel LLP Your LinkedIn Connections with the authors On March 30, federal regulators announced that Wells Fargo Bank had entered into settlements in which it agreed to pay $97.8 million in fines for enabling sanctions violations between 2010 and 2015.1 In two separate enforcement decisions, the Department of the Treasury's Office of Foreign Assets Control (OFAC) and the Federal Reserve's Board of Governors found that Wells Fargo provided a financial software platform called Eximbills to an unnamed European bank (Bank A), which then used the software to process 124 transactions, totaling over $530 million, in violation of U.S. sanctions for Iran, Sudan and Syria.2 Regulators concluded that Wells Fargo reasonably should have known that Bank A was using the Eximbills software in this manner and that its failures to promptly identify the apparent violations were attributable to shortcomings in its risk-assessment and oversight mechanisms. Although these settlements did not involve criminal charges or penalties, we note that the aggressive approach to sanctions enforcement is consistent with the priorities articulated by the Department of Justice (DOJ). As we have previously reported, in recent speeches, DOJ officials have repeatedly emphasized a focus on sanctions enforcement, describing sanctions as "the new FCPA."3 Background Eximbills originated with Wells Fargo's predecessor, Wachovia Bank. Prior to its acquisition by Wells Fargo, Wachovia had provided Eximbills to Bank A. Under a 2006 contract with Wachovia, Bank A agreed to screen its Eximbills transactions for sanctions issues and to use its own separate systems to process transactions that could run afoul of U.S. sanctions. But in 2007, Wachovia sought to streamline its provision of services to Bank A. Wachovia, acting at the direction of a mid-level manager, designed a custom version of Eximbills for Bank A to host on its own servers, "in part so that Bank A could use Eximbills to handle international trade finance instruments involving OFAC-sanctioned jurisdictions and persons."4 Bank A began using this software around July 2008. Although Wachovia attempted to distance itself from any transactions involving sanctioned entities, Bank A's custom software "continued to rely on Wachovia's (and then Wells Fargo's) technology infrastructure" at a bank branch in Hong Kong and a data facility in North Carolina.5 In late 2008, Wells Fargo acquired Wachovia, along with its Eximbills software and its relationship with Bank A. According to the OFAC Settlement Agreement, Wells Fargo failed to follow up on warning signs about Bank A's use of Eximbills throughout the acquisition process and for several years thereafter. In 2013, after a number of employees had raised concerns that customers using Eximbills might pose sanctions risks, Wells Fargo formed an internal working group to review its insourcing business. This group included a number of former Wachovia employees who had been involved in its dealings with Bank A — but they did not disclose that Bank A's version of Eximbills had been created in part to permit Bank A to engage in non-OFAC-compliant transactions. The working group concluded that Wells Fargo's relationship with Bank A was relatively low-risk. Although the group recommended some protective measures, Wells Fargo permitted Bank A to continue using Eximbills as before — in part due to the working group's "low-risk" designation — until Wells Fargo completed its broad review of its insourcing business. In late 2015, in the course of this broad review, Wells Fargo discovered that Bank A may have been using Eximbills to process prohibited transactions. Wells Fargo promptly suspended Bank A's access to Eximbills, disclosed its findings to OFAC and began an internal investigation. Allegations and Settlements In its Settlement Agreement with Wells Fargo, OFAC commented that there was no sign that the senior management of either Wachovia or Wells Fargo had actual knowledge that Bank A was using Eximbills to engage in prohibited transactions. Nonetheless, OFAC found that "Wells Fargo's senior management should reasonably have known that Bank A was using the [custom] Eximbills platform to engage in transactions with OFAC-sanctioned jurisdictions and persons," and concluded that these apparent violations constituted an "egregious case."6 However, OFAC credited Wells Fargo for its voluntary self-disclosure once it learned of Bank A's actions. Similarly, the Fed found that Wells Fargo enabled OFAC violations through the shortcomings in its risk management and oversight framework, but noted Wells Fargo's voluntary reporting, full cooperation and remediation of the issue. Under the Fed's Order of Assessment, Wells Fargo agreed to pay a civil penalty of $67,762,500 for engaging in "unsafe or unsound practices" under the Federal Deposit Insurance Act, 12 U.S.C. § 1818(i)(2)(B).7 Under the OFAC Settlement Agreement, Wells Fargo agreed to pay $30 million to the Department of the Treasury in exchange for being discharged, "without any finding of fault, from any and all civil liability in connection with the Apparent Violations arising under the legal authorities that OPAC administers."8 Further, Wells Fargo promised to adhere to a list of compliance commitments for the next five years. These commitments include: Management commitments: Senior management will review and support the work of the company's sanctions compliance program.> Risk assessment: Wells Fargo will implement a program to adequately assess and address sanctions risks. Internal controls: Wells Fargo will maintain, implement and enforce written policies and procedures to ensure sanctions compliance. Testing and audit: Wells Fargo will employ independent auditing and testing functions accountable to senior management and will immediately address any weakness that it encounters in these procedures. Training: Wells Fargo will provide adequate OFAC-related training for its employees, stakeholders, customers, clients and partners, and this training will reflect the products and services that Wells Fargo offers and the geographic regions in which it operates. Annual certification: A senior-level executive or manager will provide annual certification that Wells Fargo is complying with the above commitments. Takeaways These penalties underscore that federal regulators are vigorously pursuing potential sanctions violations — even when such violations are admittedly inadvertent and indirect. Given this focus, companies need to invest in reviewing and, when necessary, strengthening their sanctions procedures. Here, Wells Fargo inherited these issues as part of its Wachovia acquisition. Corporate lawyers have long diligenced in merger transactions corruption risks arising under the FCPA and similar international statutes. The government's focus on sanctions enforcement highlights the need to approach sanctions risks and diligence with the same heightened scrutiny, if bidders and issuers are not already doing so. Footnotes 1. See Board of Governors of the Federal Reserve System, Press Release: Federal Reserve Board fines Wells Fargo $67.8 million for inadequate oversight of sanctions risk at its subsidiary bank (Mar. 30, 2023), https://www.federalreserve.gov/newsevents/pressreleases/enforcement20230330… . 2. See Settlement Agreement with Wells Fargo Bank, N.A., COMPL-2015-562300 (Dep't of the Treasury Mar. 22, 2023), https://home.treasury.gov/system/files/126/20230330_wells_fargo_settlement.…; In the Matter of Wells Fargo & Co., No. 22-011-CMP-HC (Bd. of Governors of Fed. Reserve Sys. Mar. 24, 2022), https://www.federalreserve.gov/newsevents/pressreleases/files/enf20230330a1… . 3. See Kramer Levin, Client Alert, Corporate Governance: 2022 Midyear Review (July 5, 2022), https://www.kramerlevin.com/en/perspectives-search/corporate-governance-202… . 4. Settlement Agreement 2. 5. Id. at 2–3. 6. Id. at 3. 7. Order of Assessment 2–3. 8. Settlement Agreement 5. The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. https://www.mondaq.com/unitedstates/export-controls--trade--investment-sanc…

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ESG And The Growing Interplay With Class Action Lawsuits - Class Actions - United States
by Gunnar Larson 20 Apr '23

20 Apr '23

What does this mean for the United Nations? Gunnar ---- United States: ESG And The Growing Interplay With Class Action Lawsuits 17 April 2023 by Rebecca Green Duane Morris LLP Your LinkedIn Connections with the authors The plaintiffs' class action bar is exceedingly innovative and in constant pursuit of "the next big then" insofar as potential liability is concerned for acts and omissions of Corporate America. Environmental, Social, and Governance – known as "ESG" – each of the verticals within ESG are surely are topics on the mind of leading plaintiffs' class action litigators. As ESG-related issues evolve and become increasingly more important to corporate stakeholders, class action litigation against companies is inevitable and has already begun to take shape. This blog post reviews the current landscape of litigation risks, and underscores how good corporate compliance programs and corporate citizenship are prerequisites to minimizing risk. The Class Action Context: In 2022, the plaintiffs' class action bar filed, litigated, and settled class actions at a breathtaking pace. The aggregate totals of the top ten class action settlements – in areas as diverse as mass torts, consumer fraud, antitrust, civil rights, securities fraud, privacy, and employment-related claims – reached the highest historical totals in the history of American jurisprudence. Class actions and government enforcement litigation spiked to over $63 billion in settlement totals. As analyzed in our Duane Morris Class Action Review https://blogs.duanemorris.com/classactiondefense/2023/01/04/it-is-here-the-…, the totals included $50.32 billion for products liability and mass tort, $8.5 billion for consumer fraud, $3.7 billion for antitrust, $3.25 billion for securities fraud, and $1.3 billion for civil rights. As "success begets success' in this litigation space, the plaintiffs' bar is loaded for bear in 2023, and focused on areas of opportunity for litigation targets. ESG-related areas are a prime area of risk. The ESG Context Corporate ESG programs is in a state of constant evolution. Early iterations were heavily focused on corporate social responsibility (or "CSR"), with companies sponsoring initiatives that were intended to benefit their communities. They entailed things like employee volunteering, youth training, and charitable contributions as well as internal programs like recycling and employee affinity groups. These efforts were not particularly controversial. In recent years, ESG programs have become more extensive and more deeply integrated with companies' core business strategies, including strategies for avoiding risks, such as those presented by employment discrimination claims, the impacts of climate change, supply chain accountability, and cybersecurity and privacy. Companies and studies have increasingly framed ESG programs as contributing to shareholder value. As ESG programs become larger and more integrated into a company's business, so do the risks of attracting attention from regulators and private litigants. And The Lawsuits Begin From All Quarters: While class action litigation can emanate from many sources, four areas in particular are of importance in the ESG space. Shareholders: Lawsuits by shareholders regarding ESG matters are accelerating. Examples include claims that their stock holdings have lost value as a result of false disclosures about issues like sexual harassment allegations involving key executives, cybersecurity incidents, or environmental disasters. Even absent a stock drop, some shareholders have brought successful derivative suits focused on ESG issues. Of recent note, employees of corporations incorporated in Delaware who serve in officer roles may be sued for breach of the duty of oversight in the particular area over which they have responsibility, including oversight over workplace harassment policies. In its ruling https://blogs.duanemorris.com/classactiondefense/2023/01/30/delaware-says-c… in In Re McDonald's Corp. Stockholder Derivative Litigation, No. 2021-CV-324 (Del. Ch. Jan. 25, 2023), the Delaware Court of Chancery determined that like directors, officers are subject to oversight claims. The ruling expands the scope of the rule established in the case of In Re Caremark International Inc. Derivative Litigation, 698 A.2d 959 (Del. Ch. 1996), which recognized the duty of oversight for directors. The decision will likely result in a flurry of litigation activity by the plaintiffs' bar, as new cases will be filed alleging that officers in corporations who were responsible for overseeing human resource functions can be held liable for failing to properly oversee investigations of workplace misconduct such as sexual harassment. Vendors and Business Partners: As companies face increasing demands to address ESG issues in their operations and throughout their supply chains, ESG requirements in commercial contracts are increasing in prevalence. Requirements imposed on vendors, suppliers, and partners – to ensure their operations do not introduce ESG risks (e.g., by using forced or child labor or employing unsustainable environmental practices) are becoming regular staples in a commercial context. In addition, as more companies report greenhouse gas emissions – and may soon be required by the SEC to report on them – they increasingly require companies in their supply chain to provide information about their own emissions. Furthermore, if the SEC's proposed cybersecurity disclosure rules are enacted, companies also may require increased reporting regarding cybersecurity from vendors and others. These actions – and disclosures – provide fodder for "greenwashing" claims, where consumers claim that company statements about environmental or social aspects of their products are false and misleading. The theories in these class actions are expanding by encompassing allegations involving product statements as well as a company's general statements about its commitment to sustainability. State Consumer Protection and Employment Laws: The patchwork quilt of state laws create myriad causes of action for alleged false advertising and other misleading marketing statements. The plaintiffs' bar also has invoked statutes like the Trafficking Victims Protection Reauthorization Act to bring claims against companies for alleged failures to stop alleged human rights violations in their supply chains. These claims typically allege that the existence of company policies and programs aimed at helping end human rights violations are themselves a basis for liability. In making human capital management disclosures a part of ESG efforts (including whether to disclose numeric metrics or targets based on race or gender), companies may find themselves in a difficult place with respect to potential liability stemming from stated commitments to diversity and inclusion. On the one hand, companies that fail to achieve numeric targets they articulate (e.g., a certain percent or increase in diversity among management) may subject themselves to claims of having overpromised when discussing their future plans. Conversely, employers that achieve such targets may face "reverse discrimination" claims alleging that they abandoned race-based or gender-neutral employment practices to hit numbers set forth in their public statements. Government Enforcement Litigation: Federal, state and local government regulators have taken multiple actions against companies based on their alleged contributions to climate change or alleged illegal activities. For instance, in 2019, the U.S. Department of Justice investigated auto companies for possible antitrust violations for agreeing with California to adopt emissions standards more restrictive than those established by federal law. While the investigation did not reveal wrongdoing, it underscores the creativity that proponents and opponents of ESG efforts can employ. Implications For Corporate America: The creation, content, and implementation of ESG programs carries increasing litigation risks for corporations but it is unlikely that ESG progams will diminish is size or scale in the coming years given increased focus by Fortune 100s and 500s and increased regulation at the federal and state levels. Sound planning, comprehensive legal compliance, and systematic auditing of ESG programs should be a key focus and process of all entities beginning or continuing their ESG journey. As more and more companies adopt some level of corporative ESG strategy planning, compliance and auditing are some of the key imperatives in this new world of exposure to diminish and limit one's exposure. Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer. https://www.mondaq.com/unitedstates/class-actions/1305062/esg-and-the-growi…

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Ways cryptoanarchy reduces risk from malign AI
by professor rat 20 Apr '23

20 Apr '23

1) By eliminating the plutocratic class global anarchism reduces the most acute risk from the ' James Bond Villain " scenario. Think of Elon Musk as a Drax-Blofeld-Goldfinger type - he's already trying to gas Mars. We can fix that. 2) Decentralizing command and control of all large systems/ infrastructure. Blockchains and DAO''s help democratize and secure. Cryptoanarchy does this or it does nothing. 3) Global cryptoanarchist UBI helps the poorer individual help themselves - and defend themselves against all enemies. 4) Ubiquitous cryptographic authentication and communication makes it much harder for malign agents of any sort. TL/DR intelligent progress calls for rapid evolution towards globalized cryptoanarchism.

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Coming Soon From the Producers of The Wolf of Wall Street: NFTs
by Gunnar Larson 19 Apr '23

19 Apr '23

The Brody on Wall Street is coming soon .... ----- The 2013 film The Wolf of Wall Street, starring Leonardo DiCaprio as the debauched-stockbroker-turned-felon Jordan Belfort, has achieved cult status on web forums. Thousands of memes and clips circulate on sites such as Discord and Reddit, and countless goods based on the movie—posters, iPhone cases, hoodies—sell on EBay, Etsy and Redbubble. But * Red Granite Pictures*, the production company that owns the rights to Wolf, doesn’t get a cent of that money. So Red Granite is seeking to sell * nonfungible tokens*, or NFTs, to help it monetize the fan base and keep pirates at bay. “This is a way to protect the intellectual property of the film,” says Randy Hermann, Red Granite’s chief financial officer. Coming Soon From the Producers of The Wolf of Wall Street: NFTs https://www.bloomberg.com/news/articles/2023-04-19/-wolf-of-wall-street-pro…

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Rich GOP Donors Want a Trump Alternative. DeSantis Has Them Worried
by Gunnar Larson 19 Apr '23

19 Apr '23

Gunnar Larson! ----- Donald Trump’s surge in the polls after his indictment has sidelined some major Republican donors, who are losing confidence that Florida Governor Ron DeSantis or any other GOP hopeful will displace the former president as the party’s leader. Rich GOP Donors Want a Trump Alternative. DeSantis Has Them Worried https://www.bloomberg.com/news/articles/2023-04-19/trump-desantis-shifting-…

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Liquor Sales Will Be Brisk on Wall Street Ahead of First Republic Bank’s Earnings Report on Monday
by Gunnar Larson 19 Apr '23

19 Apr '23

https://wallstreetonparade.com/2023/04/liquor-sales-will-be-brisk-on-wall-s… By Pam Martens and Russ Martens: April 19, 2023 First Republic Bank, Palm Beach, Florida Branch, 2018 When JPMorgan Chase, Bank of America, Citigroup and Wells Fargo announced on March 16 that they were plunking $5 billion each of their corporate funds as uninsured deposits into the sinking First Republic Bank, they tied their corporate brand and their own bank’s image of safety and soundness to that of a teetering lender. Here’s what happened in short order thereafter: First Republic Bank’s stock closed on Thursday, March 16, the date of the announcement of the big infusion of money during market hours, at $34.27. On Friday, March 17, First Republic’s stock closed at $23.03. On Monday, March 20, the stock closed at $12.18. What the mega banks had hoped would be a vote of confidence in First Republic Bank was viewed by the composite wisdom of the markets as an act of desperation and the market savaged the stock price of First Republic by 64 percent in two trading sessions. (Currently, First Republic’s stock remains down 89.6 percent year-to-date.) On Sunday, March 19, S&P Global downgraded the credit rating of First Republic Bank deeper into junk territory and kept the bank on negative credit watch. Also on Sunday, March 19, the Wall Street Journal reported that First Republic Bank customers “have pulled some $70 billion in deposits.” According to the bank’s annual report for the period ending December 31, 2022, it held deposits at year end of $176.4 billion. If, indeed, it had lost $70 billion in deposits, that would mean that it was down to potentially something in the neighborhood of $106.4 billion in deposits versus a total loan portfolio of $166.9 billion, according to its annual report for the period ending December 31, 2022. Equally troubling, First Republic’s annual report provides this nugget: “Our single family mortgage loans, including HELOCs, were $101.5 billion and represented 61% of total loans at December 31, 2022, compared to $79.4 billion, or 59% of total loans at December 31, 2021.” Adding to First Republic’s toxic mortgage brew, according to reporting at Bloomberg News, First Republic Bank was making interest-only jumbo mortgage loans in the super-wealthy and tony enclaves of Beverly Hills, Malibu, Greenwich, Connecticut, the Hamptons in Long Island, New York and similar locales. This makes the so-called “rescue” of First Republic Bank by the mega banks on Wall Street feel like it was less motivated by a concern for the financial system and more out of a concern for the property values of the richest communities in the U.S. (Not to mention that most of these same banks were underwriting billions of dollars in secondary common stock offerings for First Republic as well as preferred stock, both of which have lost the bulk of their market value.) First Republic’s annual report for the period ending December 31, 2022 provides additional insights on its mortgage loan situation as follows: “Our single family mortgage loans represent over half of our total loan portfolio. Single family mortgage loans primarily consist of hybrid ARMs that will adjust within one to ten years in the future, as well as loans that are currently adjustable rate. Increases in prevailing market interest rates result in increased payments for borrowers who have ARMs, which may increase the possibility of defaults. In addition, a substantial portion of single family mortgage loans have an initial interest-only period of generally ten years. When an interest-only loan converts to fully-amortizing status, monthly payments are subject to change and may increase by a substantial amount. Even without an increase in prevailing market interest rates, borrowers may not be able to afford the increased monthly payments, which may result in higher loan delinquency levels. In addition, real estate values may decline and credit standards may tighten in concert with the higher payment requirements, which may make it difficult for borrowers to sell their homes or refinance their loans to pay off their mortgage obligations. As a result, interest-only loans are considered to have an increased risk of delinquency, default and foreclosure compared to conforming loans and may result in higher levels of realized losses. Furthermore, a substantial portion of our single family loans consists of jumbo loans. The secondary market for jumbo mortgages has historically been less liquid compared to conforming loans, which could impact the amount of loans that we sell in the secondary market. All of these factors related to our single family mortgages could, consequently, adversely affect our business, results of operations or financial condition.” There is one more fascinating aspect to the First Republic saga. JPMorgan Chase, Bank of America, Citigroup and Wells Fargo – the four banks that cumulatively sluiced $20 billion into First Republic’s sagging coffers – all trade publicly. They also own the four largest federally-insured banks in the U.S. That federal deposit insurance is backstopped by the taxpayers of America and is effectively a subsidy to these institutions. Under both SEC regulations and by virtue of that subsidy, these banks need to be accountable. Under SEC rules, when a publicly-traded company enters into “certain material agreements not made in the ordinary course of business,” it must be disclosed within four business days in an 8-K filing with the SEC. The funny thing is, not one of the four banks filed an 8-K disclosing the nature of the agreement it had made with First Republic or the specifics of any guarantees for the return of these deposits by a federal regulator. (If these 8-Ks were filed, they are being withheld by the SEC because they are not in the public section of the SEC’s website.) The banks allowed hedge fund titan Bill Ackman, who has 697,000 followers on Twitter, to Tweet the inference that these mega banks had been assured that their “deposits would be backstopped if it failed” without clarifying to the public what the real story was. The only official word as to what had been agreed to came from First Republic in a press release where it stated that the agreement boiled down to those four banks, along with seven others, placing uninsured deposits into First Republic Bank for “an initial term of 120 days at market rates.” We emailed the press contacts at JPMorgan Chase and Citigroup and asked why the bank didn’t file an 8-K with the SEC explaining the terms of this material agreement. JPMorgan Chase was silent. Citigroup responded: “You can list us as a decline to comment.” We also asked the press contact at the SEC why this unprecedented action would not constitute a material agreement requiring the filing of an 8-K by these publicly-traded banks. We first received no answer from the SEC. We wrote again removing the names of the banks and making it a hypothetical situation where a publicly-traded company makes an infusion of $5 billion into another publicly-traded company – shouldn’t an 8-K be filed to inform shareholders of this material agreement and what form of guarantee the company had received to get this money returned? The SEC finally responded: “We would decline comment on a specific issuer, filing or hypothetical situation.” Another threat to shareholders is reckless co-branding. To summarize what happened above is that without any vote from shareholders, JPMorgan Chase, Bank of America, Citigroup and Wells Fargo decided to align their brands with that of First Republic Bank – a very bad idea indeed. There is a pattern developing here in reckless co-branding: Bankrupt FTX, the customer-looting crypto exchange tried to hide its warts by co-branding with the likes of Tom Brady and the Miami Heat. For years now, shareholders of JPMorgan Chase have allowed the Board of Directors to indelibly tie the scandal-ridden brand of Jamie Dimon, its Chairman and CEO, to the JPMorgan Chase brand. The Board even paid Dimon $50 million in stock options after the bank’s fourth and fifth felony count to stay on for another five years. Yesterday, we reported on the decision by Apple to further hitch its wagon to the likes of Goldman Sachs – a perennial target of protest by young folks who call it “Government Sachs,” for good reason. Add all of this to the fact that the Swiss government recently stripped shareholders of both UBS and Credit Suisse of the right to vote on the shotgun marriage of the two and there is a very real feeling that kleptocracy is rapidly replacing free markets. First Republic Bank is scheduled to report its earnings and update on its situation after the market closes on Monday, April 24. Expect a lot of hangovers and sweaty palms at the mega banks during the trading day on Monday.

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