Author: openjargon

• Fears of a potential banking crisis are on the rise as interest rates stay elevated.
• Interest rates are now at their highest levels since 2001 as the Fed keeps an eye on inflation.
• Markets have already seen 1 regional bank fail this year, according to FDIC data.

Fears of more trouble in the banking sector are on the rise as investors and economists worry that high interest are causing trouble for regional lenders. 

With interest rates at their highest levels since 2001, higher borrowing costs have put pressure on banks' balance sheets as borrowers struggle to pay debts or avoid the credit market altogether. According to Moody's Analytics chief economist Mark Zandi, the longer interest rates stay high, the more the Fed risks damaging the economy. 

"Those rates are corrosive on the economy. They wear the economy down, and at some point, something could break,"  the economist told Yahoo Finance in a recent interview, pointing to the series of bank failures that rocked markets in early 2023. "That's the kind of thing I'm worried about in the context of persistently high interest rates."

High rates have started to impact credit conditions. Bank-financed loans and leases have stagnated over the last year, rising by $226 billion through 2023. That's a snail's pace compared to the prior year when banks tacked on $1.19 trillion in loans and leases. 

Commercial bank loans in late payment rose sharply over the fourth quarter, with the delinquency rate rising to 1.4%, Fed data shows.

Economists are particularly worried about the commercial real estate industry, with nearly a trillion of debt in the sector set to mature by the end of this year. Those loans will likely have to be refinanced at higher rates, which could spark a wave of defaults and stress bank balance sheets. 

Real estate investor Barry Sternlicht said he foresees one bank failure a week if the Fed doesn't lower interest rates soon. 

"The 1.9 trillion of real estate loans, that's a fragile animal right now," Sternlicht said in a recent interview. 

The US has only seen one bank fail so far this year, according to FDIC data. Regulators took over the Philadelphia-based Republic First Bank in April, before selling most of the deposits and assets to regional lender Fulton Bank. 

"You have dozens of small regional banks in America that are exposed to real estate, are writing off loans, and the higher for longer phenomenon is having a direct impact on this second tier of the banking sector in America," Daniel Pinto, CEO of Stanhope Capital said in an interview with Bloomberg this week. "The Fed will very much be aware that if they keep rates at this high level, they may have another banking crisis on their hands."

Amid Russian advances, Ukraine launched its biggest drone attack on Russia since the war started. Russia intercepted over 100 drones on May 17.

Su filindeu, or "threads of God," is the rarest pasta in the world. For a century, it was made by a single family in the Sardinian city of Nuoro for religious celebrations. Today, there are fewer than 10 people there who know the secret to making the pasta as thin as a strand of hair. Secrecy nearly led to the dish’s disappearance, but now, the pasta is finding new customers abroad. We went to Italy to see how the process of making su filindeu is still standing.

• A top OpenAI executive researching safety quit on Tuesday.
• Jan Leike said he reached a "breaking point."
• Adding that Sam Altman's company was prioritizing "shiny products" over safety.

A former top safety executive at OpenAI is laying it all out.

On Tuesday night, Jan Leike, a leader on the artificial intelligence company's superalignment group, announced he was quitting with a blunt post on X: "I resigned."

Now, three days later, Leike shared more about his exit — and said OpenAI isn't taking safety seriously enough.

"Over the past years, safety culture and processes have taken a backseat to shiny products," Leike wrote in a lengthy thread on X on Friday.

In his posts, Leike said he joined OpenAI because he thought it would be the best place in the world to research how to "steer and control" artificial general intelligence (AGI), the kind of AI that can think faster than a human.

"However, I have been disagreeing with OpenAI leadership about the company's core priorities for quite some time, until we finally reached a breaking point," Leike wrote.

The former OpenAI exec said the company should be keeping most of its attention on issues of "security, monitoring, preparedness, safety, adversarial robustness, (super)alignment, confidentiality, societal impact, and related topics."

But Leike said his team — which was working on how to align AI systems with what's best for humanity — was "sailing against the wind" at OpenAI.

"We are long overdue in getting incredibly serious about the implications of AGI," he wrote, adding that, "OpenAI must become a safety-first AGI company."

Leike capped off his thread with a note to OpenAI employees, encouraging them to shift the company's safety culture.

"I am counting on you. The world is counting on you," he said.

Resignations at OpenAI

Both Leike and Ilya Sutskever, the other superalignment team leader, left OpenAI on Tuesday within hours of each other.

In a statement on X, Altman praised Sutskever as "easily one of the greatest minds of our generation, a guiding light of our field, and a dear friend."

"OpenAI would not be what it is without him," Altman wrote. "Although he has something personally meaningful he is going to go work on, I am forever grateful for what he did here and committed to finishing the mission we started together."

Altman didn't comment on Leike's resignation.

On Friday, Wired reported that OpenAI had disbanded the pair's AI risk team. Researchers who were investigating the dangers of AI going rogue will now be absorbed into other parts of the company, according to Wired.

OpenAI didn't respond to requests for comment from Business Insider.

The AI company — which recently debuted a new large language model GPT-4o — has been rocked by high-profile shakeups in the last few weeks.

In addition to Leike and Sutskever's departure, Diane Yoon, vice president of people, and Chris Clark, the head of nonprofit and strategic initiatives, have left, according to The Information. And last week, BI reported that two other researchers working on safety quit the company.

One of those researchers later wrote that he had lost confidence that OpenAI would "behave responsibly around the time of AGI."

• OpenAI's Superalignment team was formed in July 2023 to mitigate AI risks, like "rogue" behavior.
• OpenAI has reportedly disbanded its Superalignment team after its co-leaders resigned.
• One of the former leaders critiqued OpenAI's focus on "shiny" products over safety in a post on X.

In the same week that OpenAI launched GPT-4o, its most human-like AI yet, the company dissolved its Superalignment team, Wired first reported.

OpenAI created its Superalignment team in July 2023, co-led by Ilya Sutskever and Jan Leike. The team was dedicated to mitigating AI risks, such as the possibility of it "going rogue."

The team reportedly disbanded days after its leaders, Ilya Sutskever and Jan Leike, announced their resignations earlier this week. Sutskever said in his post that he felt "confident that OpenAI will build AGI that is both safe and beneficial" under the current leadership.

He also added that he was "excited for what comes next," which he described as a "project that is very personally meaningful" to him. The former OpenAI executive hasn't elaborated on it but said he will share details in time.

Sutskever, a cofounder and former chief scientist at OpenAI, made headlines when he announced his departure. The executive played a role in the ousting of CEO Sam Altman in November. Despite later expressing regret for contributing to Altman's removal, Sutskever's future at OpenAI had been in question since Altman's reinstatement.

Following Sutskever's announcement, Leike posted on X, formerly Twitter, that he was also leaving OpenAI. The former executive published a series of posts on Friday explaining his departure, which he said came after disagreements about the company's core priorities for "quite some time."

Leike said his team has been "sailing against the wind" and struggling to get compute for its research. The mission of the Superalignment team involved using 20% of OpenAI's computing power over the next four years to "build a roughly human-level automated alignment researcher," according to OpenAI's announcement of the team last July.

Leike added "OpenAI must become a safety-first AGI company." He said building generative AI is "an inherently dangerous endeavor" and OpenAI was more concerned with releasing "shiny products" than safety.

Jan Leike did not respond to a request for comment.

The Superalignment team's objective was to "solve the core technical challenges of superintelligence alignment in four years," a goal that the company admitted was "incredibly ambitious." They also added they weren't guaranteed to succeed.

Some of the risks the team worked on included "misuse, economic disruption, disinformation, bias and discrimination, addiction, and overreliance." The company said in its post that the new team's work was in addition to existing work at OpenAI aimed at improving the safety of current models, like ChatGPT.

Some of the team's remaining teammembers have been rolled into other OpenAI teams, Wired reported.

OpenAI didn't respond to a request for comment.

• The Trump hush-money trial has finished its fourth week of testimony.
• Michael Cohen is set to finish on Monday as the prosecution's last direct-case witness.
• Will Trump testify? No one is saying, but if he takes the stand, deliberations would be pushed back.

After one week of jury selection and four weeks of prosecution testimony, Donald Trump's New York hush-money trial is now in its home stretch.

Jurors are on track to start deliberating either right before or right after the four-day Memorial Day weekend, as revealed in a scheduling discussion late Thursday.

That timing now largely depends on two yet-decided things: how much state Supreme Court Justice Juan Merchan will rein in a looming battle of the experts, and whether Trump will take the stand in his own defense.

Trump previously said he would take the stand. Ultimately that decision will be his, not his lawyers, who have no legal power to stop him if he decides to address his jury directly.

But there has been no confirmation either way, and the judge and prosecutors remained in the dark as the trial wrapped up for the week.

Here is how next week is shaping up.

Monday: Cohen steps down, the defense case begins

Monday morning will begin with the final testimony by Michael Cohen, Trump's former all-around "fixer" and the prosecution's star — and final — direct-case witness.

Lead Trump defense lawyer Todd Blanche said Thursday that his cross-examination of Cohen will be done before the morning break, which typically comes around 11 a.m.

Prosecutor Susan Hoffinger said her re-direct of Cohen will be "under an hour."

That gets Cohen off the stand by noon, at which point the prosecution will rest its direct case, and the defense will make a likely failed motion to toss the case on insufficient evidence.

Then, the defense case will begin.

Blanche said Thursday that Trump's side will call at least one witness for their direct case — Bradley A. Smith, commissioner of the Federal Election Commission from 2000-2005.

Prosecutors have alleged that Trump falsified 34 business records to conceal any of three underlying tax and campaign-finance crimes.

The defense hopes Smith can expound at length about federal campaign-finance law, in anticipation of what Blanche on Thursday called "sort of a battle of the experts."

A 'battle of the experts'

Assistant District Attorney Christopher Conroy, the prosecution's election law point man, complained Thursday that a battle of the experts is the last thing the judge should want.

Smith's testimony must be strictly limited. in accordance with Merchan's own previous rulings, Conroy argued. Otherwise, jurors risk being confused by three interpretations of the law — from Smith, a prosecution rebuttal witness, and then the judge himself.

"Your honor, I think 95% of the proffered testimony that was just described flies directly in the face of your extremely clear March 18th Order, which expressly said that Mr. Smith may not testify regarding the interpretation and application of federal campaign finance laws," Conroy told the judge.

Merchan already has set strict limits on Smith, limiting his testimony to general definitions of finance-law terms and the role of the Federal Election Campaign Commission. Commentary on trial evidence and interpretations of the law are expressly forbidden.

Merchan said Thursday that he will spend the weekend re-examining these guardrails in light of a recent defense request that the rules for his testimony be expanded.

But the judge warned of Smith's testimony: "Until you hear differently from me, it's going to be limited to the very, very general definitions and very general background information."

If Trump indeed decides to take the stand, that testimony could also begin on Monday. If not, prosecutors could call their own election-law expert as part of a brief rebuttal case.

Will Trump testify?

As of late Thursday, the defense had yet to tell prosecutors, the judge, or the public if they will be calling Trump to testify.

Blanche had only this to say before court broke for the week: "That's another decision that we need to think through."

Tuesday: Either Trump or closing arguments

It's possible closing arguments will be made Tuesday.

But that would require a short, efficient, Trump-free Monday.

If Smith's testimony drags, and if prosecutors and the defense mount an extensive rebuttal battle, and especially if Trump testifies, that could push summations into the next day of court, Thursday.

"I'm doing everything possible to avoid big breaks between summations, jury charge, jury instructions, and deliberations," Merchan told the parties Thursday.

"I will try not to break up summations, if at all possible," he said.

"And as we discussed in the robing room, the deliberations should follow immediately after the jury charge," he added.

Wednesday: no court

Early Thursday, the judge asked jurors if they could work Wednesday, which is usually a day off for the trial. Merchan uses the day to handle his other cases.

But the jurors asked to keep the day off, "So that's off the table," the judge told the parties during a break in Cohen's testimony.

Trump, meanwhile, is due to appear in court Wednesday for oral arguments in his federal documents case in Florida.

That hearing is for "a very small motion and our intention is to seek permission from Judge Cannon that President Trump be excused," Blanche said of Judge Aileen Cannon.

"In the past, she has agreed," Blanche said.

Thursday: Deliberations could begin

Again, if the trial schedule stars align, deliberations could begin Thursday, the last day before the four-day holiday.

That would have to follow a very productive Monday and Tuesday.

Before deliberations can begin, jurors need to hear the entirety of the defense case — with or without Trump.

They need to hear any rebuttal case, which would likely be centered on the testimony of Smith.

They also need to hear both sides' closing arguments. After that, the judge would have to instruct the jurors on the underlying law and instruct them on the rules of deliberations.

The likelihood of deliberations beginning Thursday increases if Merchan can get the parties, jurors, and court staff to agree to work longer days on Monday, Tuesday, and Thursday.

"I'm going to look into that, and see if we could start early" on Tuesday and Thursday, Merchan told the parties before breaking for the weekend.

"I think that we can work a little bit late on some days," he added.

One of the trial's six alternates can only work until 1 p.m. Thursday, but alternates are typically dismissed at the start of deliberations, so that may not prove a problem.

"We will play it by ear and see how that plays out," Merchan said.

Silicon Valley Bank, Signature Bank, and First Republic are among the largest bank failures in US history. But more banks could fail, according to Fed chair Jerome Powell.