Category: 3. Business

A group of creditors to bankrupt auto-dealership lender PrimaLend cited “grave concerns” over its Chapter 11 filing, especially the exclusion from the process of what they called its “most distressed” entity.

The ad hoc group of holders of $75 million of bonds issued by PrimaLend’s main holding company, which stopped paying interest on the debt several months ago, said the move to leave out the entity was designed to reduce the influence of unsecured creditors like them. It also objected to PrimaLend’s request for court approval to access bankruptcy financing, which sought to force a guaranty and legal releases by the entity, PCAP Holdings.

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The US Federal Reserve has announced plans for a major overhaul of its annual banking stress tests in response to a legal challenge by Wall Street groups against the regulator’s main tool for setting their capital levels.

The changes the Fed announced on Friday, including proposals to disclose and seek feedback on the scenarios and models it uses to test the resilience of banks, will make the exercise much less onerous for the biggest US lenders.

The changes to its stress test models and scenarios “are not expected to materially change capital requirements for firms” the central bank said, estimating they would fall by a “negligible” amount.

It added its revamp “seeks to improve the transparency and public accountability of the supervisory stress test, while ensuring that the stress test remains an effective tool for understanding and assessing risk and retaining appropriate risk sensitivity and risk capture in capital requirements”.

But there was dissent on the Fed board about the changes. Michael Barr, a member of the Fed board of governors, said he could not support the proposals because they would “make the stress test weaker and less credible” by leading to “overly optimistic projections” and opening the process up to “gaming by banks”.

His successor as Fed vice-chair for supervision, Michelle Bowman, called the proposals “excellent”, adding she was disappointed “long-standing issues with the stress testing framework were not addressed proactively, but instead only after a lawsuit became inevitable”.

The move comes as US regulators are planning to rework many of their important rules for banks under pressure from President Donald Trump’s administration to strip back regulation to support growth and investment.

Since the Fed started subjecting the biggest American banks to stress tests in the aftermath of the 2008 financial crisis, the comprehensive capital analysis and review (CCAR) process has become a crucial mechanism for controlling capital requirements in the sector.

However, Wall Street executives have long complained about the Fed’s lack of transparency over the models used in the process and the high volatility in the results each year, which have occasionally required lenders to pare back their dividend payments.

The Fed on Friday said it would reduce the amount of supporting documents and data that banks have to disclose as part of the process by 10,000 pages on average per lender.

In the 2026 test, banks will have to gauge how they perform in a scenario where US unemployment rises to 10 per cent, a fall of nearly a third in nominal home prices and a 40 per cent decline in commercial property prices.

“The stress tests have been the strongest driver of capital requirements for the biggest US banks,” said Douglas Elliott, a partner at consultants Oliver Wyman. “The changes are likely, in practice, to loosen this constraint to some extent.”

The Fed estimated its model and scenario changes would reduce aggregate capital requirements for the biggest US banks by a “negligible” 0.25 percentage points on average compared to the past two years.

It is set to disclose the details of the tests earlier in the process, under Friday’s proposals, and will also publish more comprehensive details of the methodology.

Regulators require banks to have a minimum amount of capital to absorb losses in a crisis, but lenders prefer lower requirements to boost their profitability when measured against total equity capital.

Late last year, a number of banking and business groups filed an unusual lawsuit against the Fed in a federal court in Ohio, arguing its stress tests were illegal because they lacked transparency. That prompted the central bank to commit to reform the process.

The plaintiffs included the Bank Policy Institute, the American Bankers Association, the US Chamber of Commerce, the Ohio Bankers League and the Ohio Chamber of Commerce.

The bond market hasn’t rung false recession alarms for this long in at least half a century.

By Monday, it will be three full years since the market’s movements started suggesting a US downturn was on the horizon. That’s when 3-month Treasury yields first pushed above 10-year ones — inverting the yield curve — as traders anticipated the Federal Reserve’s steep interest-rate hikes would stall the economy.

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Beer’s qualities as a “social lubricant” must play an important role in the debate about the harms of alcohol, the boss of Heineken has said.

Dolf van den Brink said that “in this time of loneliness and a mental health epidemic”, beer’s role in bringing people together was “important to make part of the public debate”.

Public health bodies are hardening their stance against alcohol, prompting the industry to talk up the non-health benefits of drinking such as socialising and to question new research into the dangers of moderate consumption. 

“Beer is one of the oldest, if not the oldest, consumer goods category,” van den Brink told the Financial Times, pointing to early evidence of collective beer drinking in Mesopotamia and ancient Egypt. 

Earlier this year the outgoing US surgeon general said alcoholic beverages should carry cancer warning labels, while the World Health Organization has been stepping up a campaign against moderate drinking.

The Heineken chief said that while the discussion about the effect of moderate alcohol consumption on health was legitimate, it lacked nuance. 

“We do believe that it’s not always reported in a balanced way, telling the full picture, because the relationship between alcohol and health is complex,” van den Brink said, while stressing that the debate needed to start by emphasising the harmful use of alcohol.

“There is a legitimate debate in society now about the effect of moderate consumption of alcohol, including beer, on health. And again, we believe that needs to be a balanced and nuanced discussion.”

Socialising had been at the core of Heineken’s marketing for decades and was “part of the essence of the product”, he said.

Other brewers have also extolled the health benefits of their brews, with the “Guinness is good for you” slogan used for decades to promote the Irish stout.

Heineken, Carlsberg and ABInbev have launched non-alcoholic versions of their beers in a bid to keep drinkers who want to moderate their consumption loyal to their brands. 

On Thursday the Dutch brewer announced a five-year plan to get consumers to buy more beer and boost efficiency at the company, which, like other alcoholic drinks producers, has been hit by weaker consumer demand. 

Van den Brink also warned there would be more brewery closures, but “not at a large scale”. 

Investors have soured on Heineken after two years of weak performance and a string of earnings misses, with shares falling by a fifth from highs in 2023. 

At an investor presentation in Seville on Thursday, the brewer said 80 per cent of its investment would go towards Amstel, Desperados, Moretti, Tiger and Heineken, with a quarter of its 350 brands getting none at all.

Porsche AG suffered its first quarterly loss as a listed company, with the luxury-car manufacturer taking a €3.1 billion ($3.6 billion) hit this year from scaling back its electric ambitions and US tariffs.

The 911 maker reported a €966 million operating loss in the three months through September, after delaying some of its electric-vehicle plans and scrapping a program to build its own batteries. Slumping demand in China has also taken a toll.

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Cody Luongo, a media consultant in Charleston, South Carolina, recently became a full-time freelancer after losing his job. In this new phase of his professional life, Luongo told Business Insider that AI has become his “constant companion,” helping him do everything from drafting press releases to refining client pitches.

“AI accelerates my work enough that I can do exponentially more for my clients with their allotted budgets,” he said.

Luongo is far from the only freelancer using AI technology to leverage their skills and services. While integrating AI can be a smart and lucrative choice on an individual level, its impacts on the wider gig economy are decidedly more mixed.

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A 2023 study by Washington University found that AI tools actually caused a decline in the amount of freelance work available and how much companies were willing to pay for that work. The study found that after ChatGPT’s release in 2022 the number of writing-related freelance jobs declined by 2% and monthly earnings declined by 5.2.%. For image-related workers, the drops were even sharper– AI tools led to a 3.7% decline in jobs and a 9.4% decrease in monthly earnings.

“AI definitely lowers the barrier to entry, so it makes many activities accessible for more people,” Washington University assistant marketing professor Xiang Hui, who worked on the study, told BI. While that may sound like a positive thing, especially for those looking to break into the gig economy, Hui’s research shows it’s actually not.

Even the most experienced freelancers aren’t safe from AI’s influence, Hui says.

“The drop in earnings, if anything, is actually larger for high-quality freelancers in comparison with low-quality freelancers,” he told BI. “High quality doesn’t really protect freelancers.”

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Hui attributes this to the fact that less experienced freelancers are able to punch up with AI. These new freelancers use the technology to refine their output until it’s “good enough,” and then push out passable work at a lower price point. While there’s still a clear difference between this “good enough” work and truly excellent work, the difference is negligible, and more experienced gig workers lose their competitive edge.

There are also worries that AI is stifling genuine creativity, something freelancers are often relied on to provide in a world of homogenized output.

“AI can raise the baseline of creativity, but fewer people are having breakthroughs. You need breakthroughs for innovation,” Shane Schweitzer, assistant professor of management and organizational development at Northeastern University’s D’Amore-McKim School of Business, told BI.

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Erin Hatton, a sociology professor at the State University of New York at Buffalo, agrees. “[AI is] being adopted so broadly that it’s, at least eventually, going to prevent people from getting and using key skills,” she told BI.

Overall, experts who spoke to BI agree that AI is beneficial in that it’s lifted the baseline standard of gig work, increasing overall quality. However, they also note that AI has made it much less likely for gig workers to produce something of truly outstanding quality.

In short, AI is raising the floor and lowering the ceiling. “[AI is] not leveling the playing field necessarily,” Schweitzer says. “It’s just creating slightly more competence.”

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Image: Shutterstock

This article ‘AI Definitely Lowers The Barrier For Entry,’ Gig Economy Workers Wrestle With How To Proceed As The Technology Infiltrates Their Industries originally appeared on Benzinga.com

The US main transportation safety regulator said on Friday it is seeking information from Tesla about a new driver assistance mode dubbed “Mad Max” that operates at higher speeds than other versions.

Some drivers on social media report that Tesla vehicles using the more aggressive version of its full self-driving (FSD) system could operate above posted speed limits.

“NHTSA is in contact with the manufacturer to gather additional information,” the National Highway Traffic Safety Administration (NHTSA) said in a statement. “The human behind the wheel is fully responsible for driving the vehicle and complying with all traffic safety laws.”

NHTSA earlier this month opened an investigation into 2.9m Tesla vehicles equipped with its full self-driving system due to the dozens of reports of traffic-safety violations and crashes.

NHTSA said in opening the investigation it is reviewing 58 reports of issues involving traffic safety violations when using FSD, including 14 crashes and 23 injuries.

Tesla did not immediately respond to a request for comment, but last week reposted a social media post that described Mad Max mode as accelerating and weaving “through traffic at an incredible pace, all while still being super smooth. It drives your car like a sports car. If you are running late, this is the mode for you.”

NHTSA said earlier this month that FSD – an assistance system that requires drivers to pay attention and intervene if needed – has “induced vehicle behavior that violated traffic safety laws”.

The agency said it has six reports in which a Tesla vehicle, operating with full self-driving engaged, “approached an intersection with a red traffic signal, continued to travel into the intersection against the red light and was subsequently involved in a crash with other motor vehicles”.

Tesla says FSD “will drive you almost anywhere with your active supervision, requiring minimal intervention” but does not make the car self-driving.

Tesla’s full self-driving, which is more advanced than its autopilot system, has been under investigation by NHTSA for a year. In October 2024, NHTSA opened an investigation into 2.4m Tesla vehicles with FSD after four collisions in conditions of reduced roadway visibility. The Washington Post had previously reported the agency’s interest in the Mad Max mode.