Fed Faults Silicon Valley Bank Execs, Itself in Bank Failure

The Federal Reserve blamed last month’s collapse of Silicon Valley Bank on poor management, watered-down regulations and lax oversight by its own staffers, and it said the industry needs stricter policing on multiple fronts to prevent future bank failures. 

The Fed was highly critical of its own role in the bank’s failure in a report released Friday. The report, compiled by Michael Barr, the Fed’s top regulator, said bank supervisors were slow to recognize blossoming problems at Silicon Valley Bank as it quickly grew in size in the years leading up to its collapse. The report also pointed out underlying cultural issues at the Fed, where supervisors were unwilling to be hard on bank management when they saw growing problems. 

Those cultural issues stemmed from legislation passed in 2018 that sought to lighten regulation for banks with less than $250 billion in assets, the report concluded. The Fed also weakened its own rules the following year, which exempted banks below that threshold from stress tests and other regulations. Both Silicon Valley Bank and New York-based Signature Bank, which also failed last month, had assets below that level. 

The changes increased the burden on regulators to justify the need for supervisory action, the report said. “In some cases, the changes also led to slower action by supervisory staff and a reluctance to escalate issues.” 

Separate reports also released Friday by the Federal Deposit Insurance Corp. and the Government Accountability Office, the investigative arm of Congress, also faulted the Fed and other regulators for a lack of urgency regarding Silicon Valley’s deficiencies. About 95% of the bank’s deposits exceeded the FDIC’s insurance cap and the deposits were concentrated in the technology industry, making the bank vulnerable to a panic. 

The Fed also said it planned to reexamine how it regulates larger regional banks such as Silicon Valley Bank, which had more than $200 billion in assets when it failed, although less than the $250 billion threshold for greater regulation. 

“While higher supervisory and regulatory requirements may not have prevented the firm’s failure, they would likely have bolstered the resilience of Silicon Valley Bank,” the report said. 

Tighter regulation seen

Banking policy analysts said the trio of critical reports made it more likely regulation would be tightened, though the Fed acknowledged it could take years for proposals to be implemented. 

The reports “provide a clear path for a tougher and more costly regulatory regime for banks with at least $100 billion of assets,” said Jaret Seiberg, an analyst at TD Cowen. “We would expect the Fed to advance proposals in the coming months.” 

Alexa Philo, a former bank examiner for the Federal Reserve Bank of New York and senior policy analyst at Americans for Financial Reform, said the Fed could adopt stricter rules on its own, without relying on Congress. 

“It is long past time to roll back the dangerous deregulation under the last administration to the greatest extent possible and pay close attention to the largest banks so this crisis does not worsen,” she said. 

The Fed also criticized Silicon Valley Bank for tying executive compensation too closely to short-term profits and the company’s stock price. From 2018 to 2021, profit at SVB Financial, Silicon Valley Bank’s parent, doubled and the stock nearly tripled. 

The report also pointed out that there were no pay incentives at the bank tied to risk management. Silicon Valley Bank notably had no chief risk officer at the firm for roughly a year, during a time when the bank was growing quickly. 

The Fed’s report, which included the release of internal reports and Fed communications, is a rare look into how the central bank supervises individual banks as one of the nation’s bank regulators. Typically, such processes are rarely seen by the public, but the Fed chose to release these reports to show how the bank was managed up to its failure. 

Bartlett Collins Naylor, financial policy advocate at Congress Watch, a division of Public Citizen, was surprised at the degree to which the Fed blamed itself for the bank failure. 

“I don’t know that I expected the Fed to say ‘mea culpa’ — but I find that adds a lot of credibility” to Federal Reserve leadership, Naylor said. 

Silicon Valley Bank was the go-to bank for venture capital firms and technology startups for years, but failed spectacularly in March, setting off a crisis of confidence for the banking industry. Federal regulators seized Silicon Valley Bank on March 10 after customers withdrew tens of billions of dollars in deposits in a matter of hours. 

Two days later, they seized Signature Bank. Although regulators guaranteed all the banks’ deposits, customers at other midsize regional banks rushed to pull out their money — often with a few taps on a mobile device — and move it to the perceived safety of big money center banks such as JPMorgan Chase.

Although the withdrawals have abated at many banks, First Republic Bank in San Francisco appears to be in peril, even after receiving a $30 billion infusion of deposits from 11 major banks in March. The bank’s shares plunged 70% this week after it revealed the extent to which customers pulled their deposits in the days after Silicon Valley Bank failed.

UK Blocks Microsoft-Activision Gaming Deal, Biggest in Tech

British antitrust regulators on Wednesday blocked Microsoft’s $69 billion purchase of video game maker Activision Blizzard, thwarting the biggest tech deal in history over worries that it would stifle competition for popular titles like Call of Duty in the fast-growing cloud gaming market.

The Competition and Markets Authority said in its final report that “the only effective remedy” to the substantial loss of competition “is to prohibit the Merger.” The companies have vowed to appeal.

The all-cash deal faced stiff opposition from rival Sony, which makes the PlayStation gaming system, and also was being scrutinized by regulators in the U.S. and Europe over fears that it would give Microsoft and its Xbox console control of hit franchises like Call of Duty and World of Warcraft.

The U.K. watchdog’s concerns centered on how the deal would affect cloud gaming, which streams to tablets, phones and other devices and frees players from buying expensive consoles and gaming computers. Gamers can keep playing major Activision titles, including mobile games like Candy Crush, on the platforms they typically use.

Cloud gaming has the potential to change the industry by giving people more choice over how and where they play, said Martin Colman, chair of the Competition and Markets Authority’s independent expert panel investigating the deal.

“This means that it is vital that we protect competition in this emerging and exciting market,” he said.

The decision underscores Europe’s reputation as the global leader in efforts to rein in the power of Big Tech companies. A day earlier, the U.K. government unveiled draft legislation that would give regulators more power to protect consumers from online scams and fake reviews and boost digital competition.

The U.K. decision further dashes Microsoft’s hopes that a favorable outcome could help it resolve a lawsuit brought by the U.S. Federal Trade Commission. A trial before FTC’s in-house judge is set to begin Aug. 2. The European Union’s decision, meanwhile, is due May 22.

Activision lashed out, portraying the watchdog’s decision as a bad signal to international investors in the United Kingdom at a time when the British economy faces severe challenges.

The game maker said it would “work aggressively” with Microsoft to appeal, asserting that the move “contradicts the ambitions of the U.K.” to be an attractive place for tech companies.

“We will reassess our growth plans for the U.K. Global innovators large and small will take note that — despite all its rhetoric — the U.K. is clearly closed for business,” Activision said.

Redmond, Washington-based Microsoft also signaled it wasn’t ready to give up.

“We remain fully committed to this acquisition and will appeal,” President Brad Smith said in a statement. The decision “rejects a pragmatic path to address competition concerns” and discourages tech innovation and investment in Britain, he said.

“We’re especially disappointed that after lengthy deliberations, this decision appears to reflect a flawed understanding of this market and the way the relevant cloud technology actually works,” Smith said.

It’s not the first time British regulators have flexed their antitrust muscles on a Big Tech deal. They previously blocked Facebook parent Meta’s purchase of Giphy over fears it would limit innovation and competition. The social media giant appealed the decision to a tribunal but lost and was forced to sell off the GIF sharing platform.

When it comes to gaming, Microsoft already has a strong position in the cloud computing market, and regulators concluded that if the deal went through, it would reinforce the company’s advantage by giving it control of key game titles.

In an attempt to ease concerns, Microsoft struck deals with Nintendo and some cloud gaming providers to license Activision titles like Call of Duty for 10 years — offering the same to Sony.

The watchdog said it reviewed Microsoft’s remedies “in considerable depth” but found they would require its oversight, whereas preventing the merger would allow cloud gaming to develop without intervention.

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Study Details Differences Between Deep Interiors of Mars and Earth

Mars is Earth’s next-door neighbor in the solar system — two rocky worlds with differences down to their very core, literally.

A new study based on seismic data obtained by NASA’s robotic InSight lander is offering a fuller understanding of the Martian deep interior and fresh details about dissimilarities between Earth, the third planet from the sun, and Mars, the fourth.

The research, informed by the first detection of seismic waves traveling through the core of a planet other than Earth, showed that the innermost layer of Mars is slightly smaller and denser than previously known. It also provided the best assessment to date of the composition of the Martian core.

Both planets possess cores comprised primarily of liquid iron. But about 20% of the Martian core is made up of elements lighter than iron — mostly sulfur, but also oxygen, carbon and a dash of hydrogen, the study found. That is about double the percentage of such elements in Earth’s core, meaning the Martian core is considerably less dense than our planet’s core — though more dense than a 2021 estimate based on a different type of data from the now-retired InSight.

“The deepest regions of Earth and Mars have different compositions —  likely a product both of the conditions and processes at work when the planets formed and of the material they are made from,” said seismologist Jessica Irving of the University of Bristol in England, lead author of the study published this week in the journal Proceedings of the National Academy of Sciences.

The study also refined the size of the Martian core, finding it has a diameter of about 2,212-2,249 miles (3,560-3,620 km), approximately 12-31 miles (20-50 km) smaller than previously estimated. The Martian core makes up a slightly smaller percentage of the planet’s diameter than does Earth’s core.

The nature of the core can play a role in governing whether a rocky planet or moon could harbor life. The core, for instance, is instrumental in generating Earth’s magnetic field that shields the planet from harmful solar and cosmic particle radiation.

“On planets and moons like Earth, there are silicate — rocky — outer layers and an iron-dominated metallic core. One of the most important ways a core can impact habitability is to generate a planetary dynamo,” Irving said.

“Earth’s core does this but Mars’ core does not — though it used to, billions of years ago. Mars’ core likely no longer has the energetic, turbulent motion which is needed to generate such a field,” Irving added.

Mars has a diameter of about 4,212 miles (6,779 km), compared to Earth’s diameter of about 7,918 miles (12,742 km), and Earth is almost seven times larger in total volume.

The behavior of seismic waves traveling through a planet can reveal details about its interior structure. The new findings stem from two seismic events that occurred on the opposite side of Mars from where the InSight lander — and specifically its seismometer device — sat on the planet’s surface.

The first was an August 2021 marsquake centered close to Valles Marineris, the solar system’s largest canyon. The second was a September 2021 meteorite impact that left a crater of about 425 feet (130 meters).

The U.S. space agency formally retired InSight in December after four years of operations, with an accumulation of dust preventing its solar-powered batteries from recharging.

“The InSight mission has been fantastically successful in helping us decipher the structure and conditions of the planet’s interior,” University of Maryland geophysicist and study co-author Vedran Lekic said. “Deploying a network of seismometers on Mars would lead to even more discoveries and help us understand the planet as a system, which we cannot do by just looking at its surface from orbit.”

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У Римі відбудеться Конференція з відновлення України – Шмигаль

Напередодні МЗС Італії анонсувало Конференцію з відновлення України як захід за участі представників бізнесу та міжнародних фінансових установ

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Greece Welcomes Return of Chinese Travelers 

With the peak tourism season setting in, Greece is bracing for a record number of arrivals and is welcoming back Chinese tourists. The warm feelings follow a period of discontent due to COVID-19 pandemic restrictions placed on travelers from China for the past three years, and other issues.

On the cobblestone streets of Athens, tavern owner Spiros Bairaktaris opens his arms wide open, welcoming news of what is already called the Chinese return.

He says, “We await them with great love, from the bottom of our hearts. We want to host them, to feed them, to offer all our services.”

All restaurants here, he says, are aching for their return.

While groups of Chinese travelers are just starting to trickle in, Greece expects the number to surge through the summer, exceeding the roughly 200,000 who visited the country ahead of the COVID-19 pandemic.

In recent months, a flurry of meetings between Greek and Chinese officials has helped ease visa restrictions. Direct flights have resumed, but also increased in number and locations in a strategy to boost inflows of travelers from China,

Tourism accounts for more than a quarter of Greece’s economic earnings. And with forecasts predicting more than 30 million travelers this summer, business and officials here say that the Chinese return will help stoke the engines of this country’s lackluster economy after a decade-long recession and the pandemic.

“In the past, we have seen that average spending from our friends from China was even double [that of] European travelers to Greece,” said Sofia Zacharaki, the deputy tourism minister.

Such sweeping feelings of welcome and enthusiasm are new.

Just five years ago and ahead of the pandemic, many businesses and locals said they upset with what they called an over-saturation of Chinese travelers. Greeks pointed to what they say was an over-commercialization of mass Chinese weddings against iconic sunsets on popular islands like Santorini.

They also say that on Santorini and other islands, law enforcement, garbage collection and other services were overstretched… due to the influx of mainly Chinese visitors. Concerns were also raised about reckless construction as the host islands sought to accommodate the visitors.

And many locals began fearing that Chinese and other visitors were posing threats to social cohesion.

Whether such deep-rooted concerns will creep up again remains unclear.

For now, though, restaurant menus are being translated into Mandarin, shops are being festooned with Chinese flags and hotel employees, are learning Mandarin.

 

 

German Government, Unions Reach Pay Deal for Public Workers 

German government officials and labor unions have reached a pay deal for more than 2.5 million public-sector workers, ending a lengthy dispute and heading off the possibility of disruptive all-out strikes.

The ver.di union had pressed for hefty raises as Germany, like many other countries, grapples with high inflation. Interior Minister Nancy Faeser said as the deal was announced around midnight Sunday that “we accommodated the unions as far as we could responsibly do in a difficult budget situation.”

The deal entails tax-free one-time payments totaling 3,000 euros ($3,300) per employee, with the first 1,240 euros coming in June and monthly payments of 220 euros following until February. In March, regular monthly pay for all will be increased by 200 euros, followed by a salary increase of 5.5% — with a minimum raise of 340 euros per month assured. The deal runs through to the end of 2024.

Ver.di originally sought a one-year deal with a raise of 10.5%. The deal was reached on the basis of a proposal by arbitrators who were called in after talks broke down last month.

Ver.di chair Frank Werneke said that “we went to our pain threshold with the decision to make this compromise.” He said that the raises in regular pay next year will amount to an increase of over 11% for most employees of federal and municipal governments.

The union has staged frequent walkouts over recent months to underline its demands, with local transport, hospitals and other public services hit.

Germany’s annual inflation rate has declined from the levels it reached late last year but is still high. It stood at 7.4% in March.

The past few months have seen plenty of other tense pay negotiations in Europe’s biggest economy, some of which have yet to be concluded. In a joint show of strength, ver.di and the EVG union — which represents many railway workers — staged a one-day strike last month that paralyzed much of the country’s transport network.

EVG, whose members walked off the job again on Friday, is seeking a 12% raise and has rejected the idea of negotiating a deal based on the arbitration proposal that helped resolve the public workers’ dispute. The next round of talks is set for Tuesday.

And ver.di is still in a dispute with Germany’s airport security companies association over pay and conditions for security staff. In the latest of a string of walkouts, it has called on security workers at Berlin Airport to walk out on Monday. The airport says there will no departures all day.

Twitter Begins Removing Blue Checks From Users Who Don’t Pay

This time it’s for real. 

Many of Twitter’s high-profile users are losing the blue check marks that helped verify their identities and distinguish them from impostors on the Elon Musk-owned social media platform. 

After several false starts, Twitter began making good on its promise Thursday to remove the blue checks from accounts that don’t each pay a monthly fee to keep them. Twitter had about 300,000 verified users under the original blue-check system—many of them journalists, athletes and public figures. The checks began disappearing from these users’ profiles late morning Pacific time. 

High-profile users who lost their blue checks Thursday included Beyonce, Pope Francis and former President Donald Trump.

The costs of keeping the marks range from $8 a month for individual web users to a starting price of $1,000 monthly to verify an organization, plus $50 monthly for each affiliate or employee account. Twitter does not verify the individual accounts to ensure the users are who they say they are, as was the case with the previous blue check doled out during the platform’s pre-Musk administration. 

Celebrity users, from basketball star LeBron James to “Star Trek’s” William Shatner, have balked at joining — although on Thursday, James’ blue check indicated that the account paid for verification. “Seinfeld” actor Jason Alexander pledged to leave the platform if Musk took his blue check away. 

‘Anyone could be me’

“The way Twitter is going anyone could be me now. The verification system is an absolute mess,” Dionne Warwick tweeted Tuesday. She had earlier vowed not to pay for Twitter Blue, saying the monthly fee “could [and will] be going toward my extra hot lattes.” 

On Thursday, Warwick lost her blue check. 

After buying Twitter for $44 billion in October, Musk has been trying to boost the struggling platform’s revenue by pushing more people to pay for premium subscriptions. But his move also reflects his assertion that the blue verification marks have become undeserved or “corrupt” status symbols for elite personalities, news reporters and others granted verification for free by Twitter’s previous leadership. 

Twitter began tagging profiles with blue check marks about 14 years ago. One main reason for doing so was to provide an extra tool to curb misinformation coming from accounts impersonating people. Most “legacy blue checks,” including the accounts of politicians, activists and people who suddenly find themselves in the news, as well as little-known journalists at small publications around the globe, are not household names. 

One of Musk’s first product moves after taking over Twitter was to launch a service granting a blue check to anyone willing to pay $8 a month. But it was quickly inundated by impostor accounts, including those impersonating Nintendo, pharmaceutical company Eli Lilly and Musk’s businesses Tesla and SpaceX, so Twitter had to suspend the service days after its launch. 

The relaunched service costs $8 a month for web users and $11 a month for users of Twitter’s iPhone or Android apps. Subscribers are supposed to see fewer ads, be able to post longer videos and have their tweets featured more prominently. 

Trade Envoy Tai: US Not Seeking to ‘Decouple’ From China

Washington is not seeking to decouple the American economy from China’s, U.S. Trade Representative Katherine Tai said Thursday while on a visit to Tokyo.

Tai, who is on her fourth visit to Japan after being appointed the top U.S. trade envoy, said all members of President Joe Biden’s administration have been “very clear that it is not the intention to decouple” China’s economy.

U.S. trade sanctions against China are “narrowly targeted,” she said.

Given its huge size and importance, unraveling the ties with China that keep the world economy running is “not a goal or achievable,” Tai said in a news conference at the Foreign Correspondent’s Club of Japan.

Chinese officials have often lashed out at the U.S. over trade sanctions and other restrictions on sharing of advanced technology with China, accusing Washington of trying to “contain” China and hinder its path toward greater affluence.

Tai said that regular trade work between the U.S. and China was continuing and she was “completely open to engaging with my counterparts in Beijing,” though she has no immediate plans to visit China.

At the same time, the United States is seeking to strengthen and expand economic security cooperation with its Asian allies and partners in response to China’s growing assertiveness and its dominance in many manufacturing industries.

Security and stability of supply chains is an issue that has gained urgency after disruptions caused by the pandemic and controls imposed to try to fight outbreaks of COVID-19 resulted in shortages of computer chips and other goods.

A recent agreement on trade in critical minerals will allow electric vehicles using metals sourced or processed in Japan to qualify for tax breaks under the Inflation Reduction Act. That deal is evidence of the U.S. commitment to “building collective resilience and security,” Tai said.

“We have all experienced the fragility of our dispersed supply chains in recent years, especially through the pandemic and Russia’s brutal, unjustified attack on Ukraine,” Tai said. “And we’ve become too reliant, we have discovered, on certain countries for the supply of critical minerals needed to fuel our clean energy future.”

A new approach

The Biden administration has been adopting a new approach to global trade, arguing that America’s traditional reliance on promoting free trade pacts failed to anticipate China’s brand of capitalism and the possibility that a major power like Russia would go to war against one of its trading partners.

Tai recently gave a speech at American University, where she spoke of “friend-shoring” — building up supply chains among allied countries and reducing dependence on geopolitical rivals such as China.

Tai pointed to a new trade partnership with Japan that she said has brought “tangible results for our workers, small businesses, and producers on both sides of the Pacific.” That includes an agreement to lift limits on U.S. exports of beef to Japan and a new biofuels policy to facilitate exports of more ethanol to Japan, she said.

Tai also reviewed the status of negotiations on the Indo-Pacific Economic Framework, or IPEF, a new trade pact proposed by Washington.

She said a third round of negotiations on the accord was planned in two weeks’ time in Singapore.

The framework has 13 members, including the U.S., that account for 40% of global gross domestic product: Australia, Brunei, India, Indonesia, Japan, South Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand and Vietnam.

Efforts to fortify relationships

The U.S. has stepped up diplomacy across the region, with Secretary of State Antony Blinken stopping over the weekend in Vietnam, which Washington sees as a key component of its strategy for the region given the country’s traditional rivalry with its much larger neighbor China.

Tai’s Tokyo visit follows a trip to the Philippine capital, Manila, to help fortify trade relations among the three countries as they build both economic and defense ties.

During her stay in Japan, Tai met with Japanese Foreign Minister Yoshimasa Hayashi and discussed making supply chains more resilient and secure, the Japanese Foreign Ministry said in a statement.

She also met with the Minister of Economy, Trade and Industry Yasutoshi Nishimura. The trade ministry said the two also spoke about strengthening supply chains—an issue that gained urgency amid shortages of computer chips and other goods during the pandemic. They also discussed ways to cooperate in the protection of human rights in business, the ministry said.

Japan and the United States have set up a task force that aims to eliminate human rights violations in international supply chains and to ban use of materials from suppliers that subject their workers to inhumane conditions.

To highlight such efforts, Tai toured an outlet of outdoor equipment and clothing retailer Patagonia in Tokyo’s popular Shibuya shopping and business district.

Apple Inc Bets Big on India as It Opens First Flagship Store

Apple Inc. opened its first flagship store in India in a much-anticipated launch Tuesday that highlights the company’s growing aspirations to expand in the country it also hopes to turn into a potential manufacturing hub.

The company’s CEO Tim Cook posed for photos with a few of the 100 or so Apple fans who had lined up outside the sprawling 20,000-square-foot store in India’s financial capital, Mumbai, its design inspired by the iconic black-and-yellow cabs unique to the city. A second store will open Thursday in the national capital, New Delhi.

“India has such a beautiful culture and an incredible energy, and we’re excited to build on our long-standing history,” Cook said in a statement earlier.

The tech giant has been operating in India for more than 25 years, selling its products through authorized retailers and the website it launched a few years ago. But regulatory hurdles and the pandemic delayed its plans to open a flagship store.

The new stores are a clear signal of the company’s commitment to invest in India, the second-largest smartphone market in the world where iPhone sales have been ticking up steadily, said Jayanth Kolla, analyst at Convergence Catalyst, a tech consultancy. The stores show “how much India matters to the present and the future of the company,” he added.

For the Cupertino, California-based company, India’s sheer size makes the market especially encouraging.

About 600 million of India’s 1.4 billion people have smartphones, “which means the market is still under-penetrated and the growth prospect is huge,” said Neil Shah, vice president of research at technology market research firm Counterpoint Research.

Between 2020 and 2022, the Silicon Valley company has gained some ground in the smartphone market in the country, going from just about 2% to capturing 6%, according to Counterpoint data.

Still, the iPhone’s hefty price tag puts it out of reach for the majority of Indians.

Instead, iPhone sales in the country have thrived among the sliver of upper-middle-class and rich Indians with disposable incomes, a segment of buyers that Shah says is rising. According to Counterpoint data, Apple has captured 65% of the “premium” smartphone market, where prices range up from 30,000 rupees ($360).

In September, Apple announced it would start making its iPhone 14 in India. The news was hailed as a win for Prime Minister Narendra Modi’s government, which has pushed for ramping up local manufacturing ever since he came to power in 2014.

Apple first began manufacturing from India in 2017 with its iPhone SE and has since continued to assemble a number of iPhone models from the country.

Most of Apple’s smartphones and tablets are assembled by contractors with factories in China, but the company started looking at potentially moving some production to Southeast Asia or other places after repeated shutdowns to fight COVID-19 disrupted its global flow of products.

“Big companies got a jolt, they realized they needed a backup strategy outside of China — they couldn’t risk another lockdown or any geopolitical rift affecting their business,” said Kolla.

Currently, India makes close to 13 million iPhones every year, up from less than 5 million three years ago, according to Counterpoint Research. This is about 6% of iPhones made globally — and only a small slice in comparison to China, which still produces around 90% of them.

Last week, India’s Commerce Minister Piyush Goyal said the government was in regular touch with Apple to support their business here and that the company had plans to have 25% of their global production come out of India in the next five years.

The challenge for Apple, according to Shah of Counterpoint, is that the raw materials are still coming from outside India so the tech company will need to either find a local supplier or bring their suppliers, based in countries like China, Japan and Taiwan, closer to drive up production.

Still, he’s optimistic this target could be met, especially with labor costs being lower in India and the government wooing companies with attractive subsidies to boost local manufacturing.

“For Apple, everything is about timing. They don’t enter a market with full flow until they feel confident about their prospects. They can see the opportunity here today — it’s a win-win situation,” Shah said.

Elon Musk Says He Will Launch Rival to Microsoft-backed ChatGPT

Billionaire Elon Musk said on Monday he will launch an artificial intelligence (AI) platform that he calls “TruthGPT” to challenge the offerings from Microsoft and Google.

He criticized Microsoft-backed OpenAI, the firm behind chatbot sensation ChatGPT, of “training the AI to lie” and said OpenAI has now become a “closed source,” “for-profit” organization “closely allied with Microsoft.”

He also accused Larry Page, co-founder of Google, of not taking AI safety seriously.

“I’m going to start something which I call ‘TruthGPT’, or a maximum truth-seeking AI that tries to understand the nature of the universe,” Musk said in an interview with Fox News Channel’s Tucker Carlson aired on Monday.

He said TruthGPT “might be the best path to safety” that would be “unlikely to annihilate humans.”

“It’s simply starting late. But I will try to create a third option,” Musk said.

Musk, OpenAI, Microsoft and Page did not immediately respond to Reuters’ requests for comment.

Musk has been poaching AI researchers from Alphabet Inc’s Google to launch a startup to rival OpenAI, people familiar with the matter told Reuters.

Musk last month registered a firm named X.AI Corp, incorporated in Nevada, according to a state filing. The firm listed Musk as the sole director and Jared Birchall, the managing director of Musk’s family office, as a secretary.

‘Civilizational destruction’

The move came even after Musk and a group of artificial intelligence experts and industry executives called for a six-month pause in developing systems more powerful than OpenAI’s newly launched GPT-4, citing potential risks to society.

Musk also reiterated his warnings about AI during the interview with Carlson, saying “AI is more dangerous than, say, mismanaged aircraft design or production maintenance or bad car production” according to the excerpts.

“It has the potential of civilizational destruction,” he said.

He said, for example, that a super intelligent AI can write incredibly well and potentially manipulate public opinions.

He tweeted over the weekend that he had met with former U.S. President Barack Obama when he was president and told him that Washington needed to “encourage AI regulation.”

Musk co-founded OpenAI in 2015, but he stepped down from the company’s board in 2018. In 2019, he tweeted that he left OpenAI because he had to focus on Tesla and SpaceX.

He also tweeted at that time that other reasons for his departure from OpenAI were, “Tesla was competing for some of the same people as OpenAI & I didn’t agree with some of what OpenAI team wanted to do.”

Musk, CEO of Tesla and SpaceX, has also become CEO of Twitter, a social media platform he bought for $44 billion last year.

In the interview with Fox News, Musk said he recently valued Twitter at “less than half” of the acquisition price.

In January, Microsoft Corp announced a further multi-billion dollar investment in OpenAI, intensifying competition with rival Google and fueling the race to attract AI funding in Silicon Valley.

China’s GDP Grew by 4.5% in Quarter, Boosted by Consumption

China’s gross domestic product grew 4.5% in the first quarter of the year, boosted by increased consumption and retail sales, after authorities abruptly abandoned the stringent “zero-COVID” strategy. 

The growth in the world’s No. 2 economy from January to March compared to the same period in 2022 was the fastest in the past year, and outpaced the 2.9% growth in the previous quarter, according to government data released Tuesday. 

The growth in GDP comes amid a rebound in consumption, as people flocked to shopping malls and restaurants after harsh COVID-19 restrictions were removed. 

In March, total retail sales of consumer goods went up by 10.6% year on year and grew 7.1 percentage points compared to the first two months of the year. 

Industrial production output, which measures activity in the manufacturing, mining and utilities sectors, grew by 3.9% in March compared to the same time last year. 

Fixed-asset investment — in which China invests in infrastructure and other projects to drive growth — rose by 5.1% in the first three months of 2023 compared to the same period last year. 

Investors are expected to scrutinize China’s first-quarter economic data for indicators of recovery following years of harsh lockdowns and a crackdown on the industries such as technology and real estate. 

Earlier this year, China’s government set this year’s economic growth target at “around 5%.” Last year’s growth in the economy fell to 3%, hampered by anti-virus controls that caused snap lockdowns and kept millions at home, sometimes for weeks on end. 

On Monday, China’s central bank kept rates on its one-year policy loans unchanged. Last week, it had vowed to step up support for the economy and maintain ample liquidity to support growth.  

House Speaker McCarthy: Republicans Will Raise US Debt Ceiling

U.S. House Speaker Kevin McCarthy pledged Monday that the narrow Republican majority in the House of Representatives will vote to raise the country’s debt ceiling to avert a default on the government’s financial obligations in the coming months, but will also stipulate that future spending increases be capped at 1%.

The White House strongly criticized the announcement.

McCarthy, in a speech at the New York Stock Exchange, called the country’s nearly $31.7 trillion debt a “ticking time bomb” and assailed Democratic President Joe Biden as “missing in action” in resolving the contentious issue before the government runs out of money to pay its bills, which could be as soon as June.

Any resulting default on the government’s financial obligations would be a U.S. first and could roil the world economy, plunge stock values and force widespread layoffs.

Biden and White House officials have called on Congress to approve a debt ceiling increase without conditions, as has often been done in the past, including during Republican administrations. But McCarthy said, “Since the president continues to hide, House Republicans will take action.”

McCarthy, who has had trouble in getting his 222-seat majority in the 435-member House to agree on a package of spending cuts to present to Biden, nonetheless told Wall Street leaders that the Republican caucus would pass legislation that would raise the debt ceiling for one year, pushing the issue next year into the midst of the 2024 presidential election campaign.

In addition, McCarthy said Republicans would roll back federal spending to fiscal 2022 levels and curb future spending boosts to no more than 1%. Republicans are also hoping to cut federal spending for social safety net programs for poorer Americans.

The White House, in a statement, said that McCarthy was breaking with the politically bipartisan norm in approving a debt ceiling increase without conditions, as happened twice during former President Donald Trump’s tenure. Biden has said he is willing to discuss future spending separately, aside from increasing the debt ceiling to authorize government borrowing to pay debts already incurred.

The White House said the Republican House leader “again failed to clearly outline what House Republicans are proposing and will vote on.” The White House contended Republicans would “increase costs for hard-working families, take food assistance and health care away from millions of Americans, and yet would enlarge the deficit when combined with House Republican proposals for tax giveaways skewed to the super-rich, special interests, and profitable companies.”

Biden and McCarthy met in early February about the debt ceiling but not since.

Senegal Gas Deal Drives Locals to Desperation, Prostitution

When the gas rig arrived off the coast of Saint-Louis, residents of this seaside Senegalese town found reason to hope. Fishing has long been the community’s lifeblood, but the industry was struggling with climate change and COVID-19. Officials promised the drilling would soon bring thousands of jobs and diversification of the economy.

Instead, residents say, the rig has brought only a wave of problems, unemployment and more poverty. And it’s forced some women to turn to prostitution to support their families, they told The Associated Press in interviews.

To make way for the drilling of some 15 trillion cubic feet of natural gas (425 billion cubic meters) discovered off the coasts of Senegal and neighboring Mauritania in West Africa in 2015, access to fertile fishing waters was cut off, with the creation of an exclusion zone that prevents fishermen from working in the area.

At first, the restricted areas were small, but they expanded to 1.6 square kilometers (0.62 square miles), roughly the size of 300 football fields, with construction of the platform that looms about 6 miles (10 kilometers) offshore.

Soon the work was overtaking the diattara, a word in the local Wolof language for the fertile fishing ground that lies on the ocean floor beneath the platform. With 90% of the town’s 250,000 people relying on fishing for income, the catch — and paychecks — were shrinking. Boxes of fish turned into small buckets, then nothing at all.

Saint-Louis, Senegal’s historic center for fishing, has faced many troubles over the past decade. Sea erosion from climate change washed away homes, forcing moves. Thousands of foreign industrial trawlers, many of them illegal, snapped up vast amounts of fish, and local men in small wooden boats couldn’t compete. The COVID-19 pandemic shut down market sales of the tiny hauls they could manage.

The rig was the final straw for Saint-Louis, pushing it to the brink of economic disaster, according to locals, officials and advocates. The benefits promised from the initial discovery of energy off the coast haven’t materialized. Production for the liquified natural gas deal — planned by a partnership among global gas and oil giants BP and Kosmos Energy and Senegal and Mauritania’s state-owned oil companies — has yet to begin.

Traditionally, many women make a living processing fish, while the men catch it; sons, husbands and fathers spend weeks at sea. But with the restrictions, families couldn’t feed their children or pay rent. They begged for leftovers from neighbors. Some were evicted.

Senegalese officials and the gas companies say people should be patient, as jobs and benefits from the gas deal will materialize. But locals say they’ve been stripped of their livelihoods and provided with no alternatives. That’s driven some women to prostitution, an industry that’s been legal in Senegal for five decades but still brings shame for those who break cultural and religious norms.

For them, prostitution is faster and more reliable than working in a shop or restaurant — jobs that don’t pay well and can be hard to find.

Four women who have started having sex with men for money since the rig came to town shared their stories with the AP on condition of anonymity because of the shame they associate with the work. They’ve hidden it from their husbands and families. They say they know many others like them.

The women explain the influx of cash as loans from friends and relatives. They know prostitution is legal but won’t register with Senegalese officials. That would mean a health screening and an official ID to carry with them.

They’re unwilling to legitimize work they say has been forced upon them.

For one family of seven, hitting bottom came when they were evicted. The father, a 45-year-old fisherman, lost his job. There wasn’t enough food to feed the five children, ages 2 to 11.

The mother tried washing clothes and other jobs, but at less than $10 a day, it wasn’t enough. The family moved in with relatives and she had nothing to feed the children before school each morning.

“I’m obliged to find money through prostitution,” she told the AP, her shoulders hunched and voice weary in a hotel room where she wouldn’t be seen by her husband or friends.

“When we use the money, when my children eat the food I cook from that money, it’s hard,” she said.

The family and others in Saint-Louis learned of the gas discovery shortly after it was announced in 2015. Two years later, energy companies BP and Kosmos established a presence in both Senegal and Mauritania and partnered with Petrosen and SMHPM, the state-owned companies, respectively.

The Greater Tortue Ahmeyim project, as the overall deal is called, is expected to produce around 2.3 million tons (2.08 million metric tons) of liquified natural gas a year, enough to support production for more than 20 years, according to the gas companies. Total cost for the first and second phases is nearly $5 billion, according to a report by Environmental Action Germany and Urgewald, a German-based environmental and human rights organization. The energy companies say phase one of the project is a multibillion-dollar investment, but didn’t specify the amount.

Completion of phase one is expected by the end of this year, when gas production should start, the companies said.

As early as 2018, Saint-Louis residents say, they were warned they would lose access to some of their favored fishing waters. Installation of the breakwater, the area where the platform sits, began by 2020.

BP is the operator and investor, owning nearly 60% of the project in Senegal and Mauritania. The deal promises to create thousands of jobs and provide electricity to a nation where approximately 30% of its 17 million people live without power.

The AP asked BP and Kosmos officials via email to comment for this story. The AP also sought comment about the companies’ efforts to mitigate effects of lost income in the community, their response to the women who say they’ve turned to prostitution, and other matters related to the deal.

In a statement to the AP, spokesman Thomas Golembeski said Kosmos had worked to build community relationships and that its employees visit Saint-Louis regularly to inform people of operations and act on feedback. Golembeski emphasized the project will provide a source of low-cost natural gas and expand access to reliable, affordable and cleaner energy. He also cited access to a micro-finance credit fund established for the fishing community.

He referred other questions to BP, as operator of the project.

BP sent prepared statements in response to the AP’s inquires. BP said it is engaging with the fishing communities in Senegal and Mauritania and trying to benefit the wider economy by locally sourcing products, developing the workforce and supporting sustainable development. More than 3,000 jobs in some 350 local companies have been generated in Senegal and Mauritania, according to the company. BP also cited its work to renovate the maternity unit at the Saint-Louis hospital and its help of 1,000 patients with a mobile clinic operating in remote areas.

But local officials, advocates and residents say they haven’t seen many jobs or other options to combat the economic loss.

BP did not respond to follow-up questions. Neither BP nor Kosmos addressed the AP’s questions about women who say they’ve been driven to prostitution.

When locals talk about the hardships stemming from the gas project, they use just one word: Fuel. To them, it encompasses all they feel has gone wrong in the community.

The rig looms in the background off the coast. Easy to spot on a clear day, the lights on the platform shine at night and resemble a cruise ship docked offshore. The smell of fish still permeates Saint-Louis, as pirogues — small wooden boats — line the shores and horse-drawn carts carry the diminishing catch to town.

Seasoned fishermen who’ve weathered past storms and changes to the industry say the gas deal poses problems on a different scale, largely thanks to the exclusion zone. Smaller boats aren’t equipped to venture past it, creating overcrowding in other fishing areas and depleting stocks for fishermen.

“Going to the diattara now is like going to hell,” said Aminou Kane, vice president for the Association of Fishermen Anglers of Saint-Louis.

Since the area became inaccessible, fishermen are quitting, risking their lives migrating to Europe, or fishing illegally in neighboring Mauritania where they face arrest, he said.

Kane, 46, is in the last group. He used to earn more than $1,000 a week fishing in Senegal and now makes roughly half that fishing secretly across the border, he said.

The mother who described turning to prostitution said her husband, too, tried to fish in Mauritanian waters. He left home to seek work there one year ago and she hasn’t heard from him since.

Despite money coming in from prostitution, the women who spoke to the AP said they and others struggle to feed and shelter their families. Some have pulled children out of private school because they can’t pay tuition.

The women can earn about $40 per client. Most work several times per week, in hotels or at the men’s homes when wives are away. The women describe most clients as well-off Senegalese men, including business leaders and government officials, though some are from neighboring or Western countries.

They find the clients through local contacts. In some cases, the men are family friends to whom the women initially turned to for money or loans. But they say the men eventually insisted upon sex in return for the cash. Some of the men paid well at first, but not as much anymore.

In other cases, women go through intermediaries with established networks of men looking for prostitutes.

A woman who spoke to the AP on condition of anonymity said she’s been running a business in Saint-Louis connecting men with prostitutes for seven years. She uses the name Coumbista in her work to protect her identity from her family and said she’s seen her clientele drop in recent years, with young fishermen seeing a loss of income due to the gas project.

Simultaneously, she said, the number of women seeking sex work spiked, increasing her roster by half. She knows of nearly 30 women who started sex work because of gas-related financial woes, and because of general poverty. Most then do the work secretly, she said.

A 29-year-old who turned to her for help last year after her husband stopped fishing sneaks out of the house several times a week after putting their three children to bed. She tells her husband she’s going to see friends or family.

“I am always afraid that I’ll be seen by people who know me,” she told the AP in the backseat of a car turning onto a quiet downtown street as she pointed to a nondescript building, one of two hotels where she has had sex with more than 20 men since she started. “I never thought that one day I would be doing this.”

The local government admits there has been an increase in illegal prostitution in recent years in Saint-Louis. Officials attribute the rise not directly to the energy deal, but to economic troubles overall.

“It’s not only the fishermen population or the traders, but it’s poverty in general that forces women into prostitution,” said Lamine Ndiaye, deputy to the Saint-Louis mayor.

People’s grievances about the rig are overblown and the community needs to be patient as it will take time to see the dividends, at least until after production, he said.

 Fossil fuel extraction hits communities particularly hard when the local economy depends on natural resources, according to environmental experts.

“If the land or sea that farmers or fishers rely on is poisoned and out of bounds, then their jobs and access to food have been robbed, and their communities can fall apart,” said Dr. Aliou Ba, head of Greenpeace Africa’s oceans campaign and a Senegalese resident. “That has happened in several countries in Africa, including in the Niger Delta. Oil and gas came in, contaminated the water, killed the fish and ruined many fishers’ way of life.”

He said the process is already playing out in Saint-Louis, and the community is suffering: “If the authorities let this spread along our coast, hundreds of thousands of fisheries jobs will be at risk, and the millions of people in this region who depend on fish for protein will be threatened.”

Shortly after the gas deal was signed, the companies noted there could be problems in Saint-Louis. A 2019 environmental and social impact assessment by BP and its partners said there were “a lot of uncertainties around the consequences for Saint-Louis fishermen of losing access to potential fishing grounds.” Still, it considered the intensity of the impact low, according to the report.

To mitigate economic consequences, the gas companies are evaluating options for a sustainable artificial reef project in Senegal and supporting 47 national apprentice technicians on a multiyear training program in preparation to work offshore and create jobs and supply chain opportunities, BP said in statements.

The technicians have been provided with 16 months of university training at Scotland’s Glasgow Caledonian University and will gain internationally recognized qualifications, BP said.

BP did not respond to questions about whether it stood by the company’s initial risk assessment.

Papa Samba Ba, director of hydrocarbons for Senegal’s gas and energy ministry, said the objective is that by 2035 half of all gas projects will go to local jobs, companies and services.

Phase one of the project will invest about 8.5% of the gas into Senegal; however, the local gas market isn’t set up yet and could take up to two years to be operational, he said.

There’s also concern among industry experts that because Senegal doesn’t have a history of oil and gas drilling, it won’t have enough skilled laborers, despite the training.

Fossil liquified natural gas infrastructure provides few direct jobs, and those often go to experts from outside the community, not locals, said Andy Gheorghiu, a climate consultant and co-founder of the Climate Alliance against LNG, a German-based organization focused on the environment.

Some experts point to scenarios that have played out in the U.S. In the fishing village of Cameron in Louisiana, which operates gas export terminals, people haven’t benefited from promised jobs and fishermen have been displaced from the community, according to locals.

“If you drive around Cameron Parish, home of three of these export terminals, you would not believe that these terminals have benefited the community in any way,” said James Hiatt, who lives close to Cameron and is director of For a Better Bayou, an environmental organization. The gas companies promised a new marina, restaurant and fishing pier, none of which have opened, he said.

The AP emailed Venture Global, the gas terminal operator that residents say made the promises, multiple times but received no response.

Environmental watchdogs say it would make more sense to invest in renewable energy. Senegal could create more than five times as many jobs in that sector yearly until 2030, compared with jobs in the fossil fuel industry, according to the Climate Action Tracker, an independent project that tracks government climate action.

But despite the suffering the community attributes to the gas, most say they don’t want the companies to leave. What they want is for the situation to change.

“When I think of my former life and my life today, it’s hard,” said one 40-year-old woman, wiping away tears.

The mother of three said she had to resort to prostitution last year after her husband left the city and cut contact. She’s pulled two of her children out of private school and sent them to public school, where the teachers sometimes don’t show up for days.

“I hope someone can help me out of this situation,” she said. “One in which no one would ever want to live.”