🌍 First Republic Bank gets swept up in Spring sale

🗺️ AROUND THE WORLD

1. 🇺🇿 Uzbekistan: President Shavkat Mirziyoyev has won a referendum to extend his rule for two more seven-year terms. Despite a slew of recent reforms, observers say the Central Asian country remains authoritarian.

2. 🇻🇦 Vatican: Pope Francis has said the Vatican is involved in a secret “peace mission” to help return Ukrainian children from Russia. The Holy See has negotiated prisoner returns in recent months and has sought to establish itself as a reliable mediator in the conflict.

3. 🇵🇭 Philippines: President Ferdinand Marcos Jr. is in the US to meet President Joe Biden as tensions with Beijing escalate in the South China Sea. The latest incident involved a near collision between Philippine and Chinese vessels last month.

4. 🇨🇺 Cuba: Havana cancelled its mass annual parade for International Workers’ Day yesterday (Monday) due to fuel shortages. It’s the first time since the 1959 revolution that Cuba has cancelled the event for economic reasons.

5. 🇳🇪 Niger: The German parliament has approved the deployment of sixty troops to Niger, where they’ll join an EU logistics mission. The development counters a wider regional trend calling for the reduced military presence of European powers.

🏦 US | BANKING CRISIS

Is the US banking crisis over?

Briefly: US regulators seized control of First Republic Bank early yesterday (Monday) and struck a deal to sell the majority of its assets to JP Morgan Chase. That makes First Republic the second-largest bank to collapse in US history.

It also means three of the four largest bank collapses in US history have taken place since March. And like the last two failed banks (Silicon Valley Bank and Signature Bank), First Republic had a pretty niche approach to banking:

1. 💁 It catered to wealthy clients

2. 💰 It often enticed them with huge, cheap mortgages, and

3. 📈 Its wealthy clients often had bank balances that far exceeded the $250K protected by the US government’s deposit insurance agency

It all worked pretty well, until the Fed started raising rates to tame inflation: this triggered the bank failures in March, and led First Republic to start losing money on its cheap mortgages. So its customers fled for fear of losing their uninsured cash, and the bank wasn’t able to cover all their withdrawals.

The final straw was last week, when First Republic disclosed that $102B (more than half its deposits) had fled since late 2022. It was a classic bank run.

Intrigue’s take: The US is home to 4,100 banks, more than the next ~20 countries combined. So the odd collapse does feel inevitable. And when a bank teeters, Washington’s standard options are either:

1. Offer some kind of guarantee to control the damage, but ignite a political firestorm over ‘bailouts’

2. Ask a big bank to buy the ailing bank, but ignite a political firestorm about them getting ‘too big to fail’, or

3. Do neither, but burn the bank’s customers and risk broader contagion.

Washington went with option #1 in March and option #2 this week, and the fallout has been pretty foreseeable so far. Option #3 is politically less likely these days, but if that changes, things can quickly get very volatile and very global.

Also worth noting:

• JP Morgan CEO Jamie Dimon told analysts that “there may be another smaller [bank collapse] but… this part of the crisis is over.”

• The state of North Dakota (population: 775,000) has more banks than Canada (population: 38.2 million).

Today’s briefing is sponsored by monogram

🇵🇾 PARAGUAY | POLITICS

Pro-Taiwan party wins re-election in Paraguay

Briefly: Economist Santiago Peña won Paraguay’s presidential election on Sunday, easily trumping his centre-left competitor. In doing so, he:

• extended his conservative party’s enduring dominance of local politics

• hit pause on the recent ‘pink tide’ that’s washed over Latin America, and

• broke a streak of election losses for incumbent parties in Latin America.

But Peña’s now got quite the presidential in-tray waiting for him:

1. Revive Paraguay’s farm-driven economy

2. Reduce the country’s fiscal deficit, and

3. Tackle corruption (the US just sanctioned his mentor, an ex-president)

Intrigue’s take: Did you notice that soft breeze on Sunday night? It was a collective sigh of relief coming in from Taiwan.

Unlike his main opponent, Peña had promised to maintain Paraguay’s relations with Taiwan, resisting pressure from an influential farming lobby that’s eager to recognise Beijing and tap China’s vast markets.

Also worth noting:

• Paraguay imports more from China than anywhere else.

• Only 13 countries now officially recognise Taiwan. Paraguay is the last one left in South America.

👀 EXTRA INTRIGUE

We’re very online, so you don’t have to be.

• ‘The Godfather of A.I.’ is worried about what he’s built

• As fentanyl crisis grows, U.S.-Mexico divide deepens ($)

• The fugitive princesses of Dubai

• Is Sikh separatism on the rise in India?

• The case for the total liberation of Ukraine ($)

💬 QUOTE OF THE DAY

Rwandan opposition leader Victoire Ingabire was imprisoned for almost a decade while running for president, but that hasn’t stopped her. Victoire shared her remarkable story with us on Spotify, Apple Podcasts, and beyond.

🗳️ POLL TIME!

Yesterday’s poll: Do you think having an oil exec chair the upcoming COP summit is a good idea?

🟨🟨🟨⬜️⬜️⬜️ 💚 Yes, the green transition can't happen without Big Oil (25%)

🟩🟩🟩🟩🟩🟩 🙅 No, the conflict of interest undermines the whole conference (44%)

🟨🟨🟨🟨⬜️⬜️ 🤔 Things are more complicated than that (31%)

⬜️⬜️⬜️⬜️⬜️⬜️ ✍️ Other (write in!) (0.4%)

Your two cents:

• 🙅 T.F: “It’s nothing short of scandalous on an apocalyptic scale. Why not just let Putin run for US president while we're at it.”

• 🤔 G.L: “Having an oil exec as the chair seems like a conflict of interest, but excluding Big Oil from these conferences is also a mistake. Big Oil needs to have a presence in the decision-making without completely dictating the discussion.”