🧳 Welcome back, we're glad you're here! There's lots to unpack from Fed chair Jerome Powell's press conference, plus if you make it to the end we have a big question for you. (Hint: β˜•οΈ + πŸ«’)

So, let's do this. Today's newsletter is 1,084 words, 4.5 minutes.

1 big thing: Powell says deposits are "safe"

Fed chair Jerome Powell. Photo: Alex Wong/Getty Images

Depositors should feel secure keeping cash at banks after the government backstopped all deposits β€” even those exceeding limits on FDIC insurance β€” at two banks that recently collapsed, Fed chair Jerome Powell said yesterday, Matt Phillips writes.

What he's saying: "These actions demonstrate that all depositors' savings in the banking system are safe," Powell said at the central bank's press conference following its decision to lift short-term interest rates another quarter-percentage point.

Why it matters: Powell's statement β€” pretty clear-cut for a central banker β€” on the status of bank deposits comes amid financial strains at regional banks, which have been losing deposits since bank runs cratered Silicon Valley Bank and Signature Bank earlier this month.

The intrigue: While joint efforts by officials to ensure the safety of deposits β€” even above $250,000 β€” were meant to instill confidence, instead it prompted questions about whether other tottering banks would be similarly protected.

  • Many depositors β€” especially corporations and wealthy individuals β€” don't want to wait around and find out.
  • In a note published yesterday, JPMorgan analysts suggest that roughly $500 billion in deposits have fled smaller U.S. banks since the SVB fiasco.

The latest: PacWest Bancorp. β€” a midsized lender based in Los Angeles β€” disclosed that it had lost roughly 20% of its deposit base since the start of the year, Bloomberg reported, sending its shares down more than 15% yesterday.

Between the lines: The ongoing nature of the crisis has gradually pushed policymakers toward making the implicit guarantee of all depositors β€” embedded in the efforts to manage the SVB collapse β€” far more explicit.

  • "Let me be clear," Yellen told the American Bankers Association on Tuesday: "The government’s recent actions have demonstrated our resolute commitment to take the necessary steps to ensure that depositors’ savings and the banking system remain safe."

Yes, but: Such statements may not go far enough for markets, which seem intent on pushing for a more clearly spelled out government guarantee on the deposit issue.

Case in point: Stocks β€” which had been heading for a modest gain after Powell's comments β€” dropped sharply after Yellen seemed to back away from confirming that a fully explicit guarantee for deposits was being considered.

  • "This is not something we have looked at, it's not something we're considering," she said during Senate testimony yesterday afternoon, as Powell held his own press conference.

The bottom line: Regional bank stocks promptly tumbled on Yellen's comments, dragging the overall market lower and underscoring the fact that policymakers haven't yet quashed simmering concerns about the financial system.

2. Charted: Those comments

S&P 500 price
Data: Yahoo Finance; Chart: Axios Visuals

3. Catch up quick

πŸ›‘ SEC warns Coinbase of possible enforcement action and separately goes after more celebrities over crypto claims. (Axios)

✨ TikTok CEO set to testify at the House today, amid rising calls to sell the app. (Axios)

πŸ“ Evergrande announces debt restructuring deal after 2021 collapse. (CNN)

4. Bank crisis could do the Fed's work

Illustration: Lazaro Gamio/Axios

For much of the last year, the Fed has been trying to make money tougher to get ahold of by sharply raising interest rates. Now, the simmering banking crisis may do the same, Axios' Kate Marino writes.

The big picture: The Fed lifted interest rates by just a quarter-point, and set the stage β€” some analysts and investors think β€” for a pause to the rate-hiking campaign that began last year.

  • This is a marked shift from a couple of weeks back when Wall Street consensus called for the Fed to deliver additional large rate hikes to cool the economy and tame inflation that was still too high.

What happened: The biggest U.S. banking crisis since 2008, as the sudden collapse of Silicon Valley Bank set off a scramble among depositors and forced banks to rush to the Fed for cash.

Be smart: Such stresses in the banking system contribute to what financial types refer to as a tightening of credit conditions β€” a somewhat vague term that basically means money gets harder to come by.

  • The logic is pretty simple. When they're worried, bankers and investors cling to their cash rather than lend it freely.
  • The impact of these tighter conditions is not dissimilar to what happens when the Fed raises interest rates. Money gets more expensive, as nervous investors and bankers have to be paid more to part with it.

Between the lines: Some of the comments from Fed chair Powell after the rate decision yesterday suggest that these tightening market conditions could allow the Fed to get away with fewer rate hikes than they previously expected.

  • "We're thinking about [banks tightening credit] as effectively doing the same thing that rate hikes do. So in a way, that substitutes for rate hikes," he said.
  • "Policy has got to be tight enough to bring inflation down to 2% over time, it doesn't all have to come from rate hikes," he added. "It can come from tighter credit conditions."

What we're watching: We don't yet know how significant or long-lasting the credit-tightening will be, Powell acknowledged.

  • Some are already hazarding a guess: Goldman Sachs estimated in a report last week that the crisis would be equivalent to as much as a half-point rate increase.

5. Low-wage workers get big raises

Data: EPI analysis of the Current Population Survey; Chart: Axios Visuals

Pay rose at historically fast rates for low-wage workers in the U.S. between 2019 and 2022, even after adjusting for inflation, according to an analysis from the Economic Policy Institute released this morning, Emily writes.

What happened: The tight labor market and disruptions from the pandemic gave folks at the lowest end of the pay scale unprecedented amounts of leverage over employers.

  • The mass layoffs of 2020 combined with ample relief money from the government, actually put workers in a better position β€” with time away from work and resources to fall back on β€”Β to find new jobs once the market came back.
  • "For so many people, they didn't actually realize that there might be better opportunities out there," said Elise Gould, a senior economist at the progressive think tank, who co-wrote the analysis.

Reality check: These folks are still not making much money.

  • In 2022, the 10th percentile hourly wage, i.e. the workers at the bottom, was $12.57.
  • That's not considered enough for one person to maintain an adequate standard of living anywhere in the U.S., according to EPI's calculations.

Worth noting: Those at the very, very top saw enormous gains.

  • Wages for the top 1% and 0.1% rose 16.1% and 29.2% between 2019 and 2021, according to Social Security Administration data also analyzed by EPI.

β˜•οΈ 1 caffeinated thing: This week, Starbucks started selling olive oil coffee drinks. Seriously. It's coffee with a spoonful of EVOO. And it got me thinking.

  • Last June, when I revealed my preference for the sugary hazelnut creamer my local gas station provides alongside its free mediocre coffee. Many wrote in and said, "gross, Emily, no." (I am paraphrasing.)
  • So now, I'm asking: Is olive oil in your coffee better or worse than that creamer? Just reply to this email and share your thoughts.

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Today's newsletter was edited by Kate Marino and copy edited by Mickey Meece.