Blog

Unlock the White House Watch newsletter for free

Your guide to what Trump’s second term means for Washington, business and the world

US regulators have approved the launch of a bank backed by a group of high-profile tech billionaires with ties to Donald Trump’s administration, seeking to fill a gap left by the collapse of Silicon Valley Bank.

The bank, Erebor, was founded this year by Palmer Luckey, co-founder of military contractor Anduril, and Joe Lonsdale, head of venture capital firm 8VC and a co-founder of data analytics firm Palantir. Its early backers also include Peter Thiel’s venture firm Founders Fund and Haun Ventures, a crypto-focused investor.

Like Anduril and Palantir, Erebor’s name is a reference to JRR Tolkien’s The Lord of the Rings. Erebor is the “lonely mountain” whose treasures are reclaimed from the dragon Smaug.

According to its banking charter application, Erebor’s target market will be businesses that are part of the US “innovation economy” — particularly tech companies focused on cryptocurrencies, artificial intelligence, defence and manufacturing. It will also serve individuals who work for, or invest in, these companies.

“We want to be a stable, low-risk, reliable bank doing normal banking things without screwing everyone over with undue risk,” said a person close to Erebor.

Erebor was granted “preliminary and conditional” approval by regulators on Wednesday, just four months after its application for a national bank charter in June — a sign of the Trump administration’s initiative to lower regulatory hurdles and encourage new banking entrants focused on digital assets and services. The administration has encouraged new entrants to the banking sector including from technology groups, prompting a number of fintechs and cryptocurrency companies to seek bank charters this year.

The bank must still meet a number of requirements including checks on its compliance and security systems before it can officially open, which is expected to take several more months.

Luckey and Lonsdale were big donors to Trump in the 2024 presidential election, while Thiel was a backer of vice-president JD Vance. A person close to Erebor said there had been “no special treatment” from the Trump administration in the approvals process, adding that Luckey “had not been asked, nor made a single call in this capacity” to his contacts in the government.

Erebor is backed by $275mn of capital, the bulk of which is regulatory capital held in an account and will not be used for its operations. So far, all of its operations have been funded by Luckey, according to a person close to the matter. Its founders plan to raise more funding in the future to accelerate its expansion.

Its head office will be in Columbus, Ohio, with an additional office in New York, but it will offer digital-only customer service, marketing all of its products and services via a smartphone app and website.

Erebor’s co-founders decided to launch a bank after the collapse of Silicon Valley Bank in 2023. SVB had been the main bank for US tech start-ups and their venture capital backers.

Luckey’s start-up Anduril, which makes drones, sensors and other military technology, banked primarily with SVB prior to its collapse, according to a person close to the start-up.

Cryptocurrencies known as stablecoins, which are pegged to real-life assets such as the dollar, are expected to be a significant part of the bank’s operations. The Trump administration has also reversed a number of rules from the Biden administration limiting banks from stablecoin transactions.

Erebor “getting approval so fast is a reflection of its extremely conservative business plan”, the person close to the launch said. The person added that Erebor was not going to be a “wacky, techno crypto bank”.

It will be run by co-CEOs Jacob Hirshman, who previously worked as an adviser at crypto group Circle, and Owen Rapaport, co-founder and CEO of digital assets software company Aer Compliance. Mike Hagedorn, former senior executive vice-president at New Jersey-based Valley National Bank, will be the bank’s president. Luckey and Lonsdale are not expected to be involved in the day-to-day running of the bank.

After taking the software industry by storm, generative AI is now moving into a broad set of industries, including manufacturing, where it is helping manage unpredictability and support real-time decision-making. Gen AI’s ability to codify, automate, and distribute organizational expertise may eventually reshape work structures from the shop floor to the C-suite. Already some companies are using it to analyze the flood of information generated in factories and to predict problems, simulate complex scenarios, and optimize processes in real time. By working with a wide range of manufacturing industry data—from maintenance manuals and machine automation code to complex diagrams, 3D drawings, and process data—gen AI has the potential to establish new ways for people and machines to collaborate.

Government debt across the world is on course to hit 100% of global gross domestic product (GDP) by 2029, according to analysis by the International Monetary Fund, the highest level since the aftermath of the second world war.

In its Fiscal Monitor report, the IMF said aggregate government debt had risen more rapidly than expected before the Covid pandemic, when policymakers stepped into protect citizens and bail out hard-hit businesses.

It urged governments to switch spending to growth-friendly areas such as infrastructure and education to help bolster the world economy and make debts more sustainable.

A 100% global debt-to-GDP ratio would be the highest since 1948, when the world’s large economies had been devastated by six years of war and the costs of rebuilding their ravaged countries.

The report named the UK as among the G20 countries whose ratio would peak above 100% of GDP on the IMF’s definition in the coming years – alongside France, Japan, Canada, China and the US.

The IMF said there were still upward pressures on spending in many countries – alongside a reluctance to impose tax rises on sceptical voters.

“Looming expenditures on defence, natural disasters, disruptive technologies, demographics, and development add to public spending demands. All these pressures and demands come together with sharp political red lines against tax increases and diminished public awareness of fiscal limits,” it said.

The IMF argued that emerging economies in particular could struggle to manage their debt burdens – even with much lower debt-to-GDP ratios than their developing country peers.

“Many emerging markets and low-income countries face tougher fiscal challenges, despite their relatively low debt,” it said. The IMF added that as many as 55 countries were experiencing debt distress, or at high risk of distress, despite having debt-to-GDP ratios below 60%.

Campaigners have called for the IMF to play a greater role in tackling unsustainable debt, arguing that the current debt restructuring process, known as the Common Framework, is too slow and cumbersome, as well as hard to qualify for.

For the UK, the IMF forecasted total public debt would peak at 105.9% of GDP in 2029, before declining slightly, to 105.4% in 2030. After the chancellor, Rachel Reeves, changed her fiscal rules last year, she now targets a different definition of debt.

At a press briefing in Washington on Tuesday, where policymakers have gathered for the IMF’s annual meetings, its deputy director for monetary and capital markets, Athanasios Vamvakidis, said Britain was in the sights of bond market investors.

“Clearly markets are concerned about the UK economy, and we have seen more volatility in the UK compared to other advanced economies,” he said.