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Sens. Want to Hold Fed Accountable; Sunlight Refis SVB Debt; FDIC Shops Signature’s Loans

By Cole Gottlieb

April 9, 2023

Happy Sunday,

There are signs the job market is finally slowing. Senators from both parties want more Fed transparency. Frank founder faces civil, criminal charges in JPMC fraud case. Sunlight Financial picks Cross River for SVB debt refi. Acorns acquires GoHenry. Greenlight goes B2B. FDIC looks to sell Signature loan portfolio. SoFi acquires Wyndham Capital Mortgage. Community banks stem deposit outflow.

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Is the Job Market Finally Cooling?

There are finally signs the U.S. job market may be cooling. The number of job vacancies in February was revised down to 9.9Mn, making it the first time the metric has been below 10Mn since 2021. The ratio of open roles to unemployed slid to 1.67, which is the lowest since November 2021 (though still substantially above the pre-pandemic level of 1.2).

Image: Bloomberg

Meanwhile, ADP is reporting private payrolls grew by just 145,000 in March, significantly below the consensus estimate of 210,000.

Bipartisan Bill To “Hold the Fed Accountable”

Federal Reserve banks’ obligations to respond to Congressional and public requests for information are back in the spotlight, following SVB and Signature Bank’s failure last month. A bipartisan group of Senators, led by Elizabeth Warren (D-MA) and Thom Tillis (R-NC) have re-introduced a bill that would subject Fed banks to Freedom of Information Act requests and strengthen Congress’ ability to request information from them. The measure would enable some members of Senate and House committees to request access to bank supervisory information. The bill would also make the Inspector General of the Fed a Senate-confirmed position.

Frank Founder Faces Civil, Criminal Charges

Charlie Javice, founder of a student financial aid startup that was acquired by JPMorgan Chase, is seeing her legal problems multiply. Javice was already facing a lawsuit from the bank, which alleges JPMC was tricked into acquiring the company due to fraudulently inflated user numbers.

Now, the SEC has filed a complaint against Javice, alleging that she engaged a data scientist to generate synthetic data so that it would appear Frank had as many as 4.25Mn customers. The SEC complaint charges Javice with violating anti-fraud provisions of the securities law and seeks injunctive relief, an officer and director bar, disgorgement, and civil penalties.

But the SEC and JPMC’s cases aren’t Javice’s only legal problems. The Department of Justice filed criminal charges against the founder. She faces four counts, including conspiracy to commit bank and wire fraud, one count of wire fraud affecting a financial institution, one count of bank fraud, and one count of securities fraud. Three of the charges carry sentences of up to 30 years in prison, each.

Sunlight Financial Refis SVB Debt

Sunlight Financial announced it has secured a term loan from Cross River Bank to refinance its credit facility with SVB. The new term loan matures in September 2025. The $89Mn first-lien term loan and modifications to its warehouse facility extends maturity, decreases costs, and increases financing available. As part of the financing deal, Cross River will also receive penny warrants for approximately 13Mn shares, as well as 1.3Mn shares "every month the New Term Loan remains outstanding for each of the first ten months following the funding of the New Term Loan."

Acorns Acquires GoHenry; Greenlight Goes B2B

Micro-investing app Acorns announced it has reached a deal to acquire Europe-focused kids’ banking app GoHenry. With the acquisition of GoHenry, the combined company will have some 6Mn users in the U.S., U.K., and Europe. Acorns focuses on financial education and investing, and most of its revenue is derived from subscription fees. GoHenry, which offers financial education and banking services, also drives revenue from subscriptions. The acquisition offers both product and geographic synergies. Terms of the deal were not disclosed.

Meanwhile Greenlight, also focused on the “kids banking” segment, is looking to offer its service through partnerships with other banks. With its “Greenlight for Banks” B2B offering, other financial institutions can easily integrate Greenlight’s tools into their existing offerings. Greenlight offers financial literacy tools, kids’ bank accounts/debit cards, and partners with Morgan Stanley to offer a brokerage account.

FDIC Shopping Signature’s Loan Portfolio

The FDIC announced a framework for the disposition of the portion of Signature Bank’s loan portfolio not acquired by New York Community Bancorp. The FDIC retained approximately $60Bn in loans as part of the transaction. The loan book is comprised primarily of commercial real estate loans, commercial loans, and a smaller pool of single-family residential loans. As part of the process, the FDIC is reviewing the commercial real estate loan portfolio, as the agency has a statutory obligation to maximize the preservation of affordable residential real property for low- and moderate-income families.

SoFi Acquires Wyndham Capital Mortgage

SoFi is looking to push further into the mortgage space. The company, best known for its student loan refi product, announced it has acquired Wyndham Capital Mortgage in an all-cash deal. The acquisition is designed to help SoFi scale its mortgage offering and reduce its reliance on third-party partners and processes. The deal adds to a string of acquisitions for SoFi, including core banking platform Technisys and issuer-processor Galileo.

Community Banks Stem Outflow of Deposits

Perhaps the worst is behind us? According to the most recent Fed deposit data, small and mid-sized banks won back about $6Bn in deposits for the week ending March 22. While the gain itself amounts to a modest 0.1%, it may signal the fear that lead to depositors shifting funds to “too big to fail” G-SIBS has passed. In the week that SVB and Signature failed, some $196Bn in deposits fled smaller banks, amid fears of contagion.

In the News:

PYMNTS Intelligence: Governments Around the World Explore BNPL Regulation (PYMNTS, 4/3/2023) BNPL makes up 3.8% of North American and 9% of European eCommerce sales.

Swiss Prosecutors Probe Credit Suisse Deal, Job Cuts Seen (Bloomberg, 4/3/2023) Switzerland's Office of the Attorney General is working to gather info on "numerous aspects" linked to the takeover, ordering national and regional authorities to investigate.

The Meltdown of a Gay Bank (New York Magazine, 3/31/2023) Allegations of inappropriate behavior, fabrications and lawsuits for the niche neobank.

Silicon Valley Bank Pledged $11 Billion in Community Benefits. Now What? (American Banker, 4/2/2023) Advocates worry about the potential loss of the plan, which was set to run through December 2026.

SVB Collapse Complicates Banks’ Efforts to Unload More Than $25 Billion of Junk Debt (Wall Street Journal, 4/2/2023) The unsold debt is tied to LBOs the banks agreed to finance before worsening credit conditions hit investor demand.

The Polarizing Question of Credit Unions Buying Banks (American Banker, 3/31/2023) There were a record-tying 16 deals where credit unions announced plans to buy banks in 2022.

Four Fintechs that have Scored Big Wins Despite the Banking Crisis (American Banker, 3/31/2023) Despite a decline in VC funding and the failure of SVB, some fintechs have continued to report good news.

Jamie Dimon Warns US Banking Crisis Will Be Felt for Years (Bloomberg, 4/4/2023) Dimon warns that the banking crisis is "not yet over" and that authorities shouldn't "overreact" with more rules.

Fintechs are Embedding Tax Prep Help in their Apps. Banks may be Next. (American Banker, 4/3/2023) Software providers April and Column Tax partner with companies to integrate tax prep and filing into their apps.

PayPal Adds Apple Pay to Small-Business Checkout (American Banker, 4/4/2023) On small-business sites, there are now five distinct options for checking out (all major credit card networks, PayPal, Pay Later (PayPal's BNPL), Venmo, and Apple Pay).

Seattle Bank Partners LoanStar for an Embedded Banking Offering (The Paypers, 4/3/2023) Through the partnership, consumers will be able to gain access to loans from Seattle Bank for high-value transactions directly through the merchant.

Toronto-Dominion Becomes Biggest Bank Short With $3.7 Billion on the Line (Bloomberg, 4/4/2023) Analysts point to concerns over TD's exposure to Canada's housing slowdown, its 10% take in Schwab and a planned regional bank acquisition.

Why Santander's Subprime Auto Lender is Expanding to Customers with Higher Credit Scores (American Banker, 4/3/2023) Santander is aligning its U.S. retail bank with its auto lending business.

Lighter Fare:

Only Monkeys With Opposable Thumbs Fell for This Classic Magic Trick (Gizmodo, 4/4/2023) Researchers found the monkeys' gullibility may depend on the structure of their hands.