Money Rehab with Nicole Lapin - The Chaotic ICBC Hack and How Your Investments Were Affected

Episode Date: November 15, 2023

In this installment of the weekly round-up of the biggest headlines on Wall Street and how they affect your finances, Nicole unpacks the chaotic hack on the Industrial and Commercial Bank of China and how the market reacted, the rocky road for the latest wave of union strikes and the potential shake-up in the housing market. Want to start investing, but don't know where to begin? Go to moneyassistant.com and meet Magnifi, your AI money assistant, designed to help you make a plan for your financial goals. Want one-on-one money coaching from Nicole? Book a meeting with her here: intro.co/moneynewsnetwork 

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To get started, visit bofa.com slash newprosmedia. That's B-O-F-A dot com slash N-E-W pros, P-R-O-S, media. Bofa.com slash newprosmedia. I'm Nicole Lappin, the only financial expert you don't need a dictionary to understand. It's time for some money rehab. Here's your weekly roundup of the biggest headlines on Wall Street and how they affect your finances. Our first story probably didn't impact you directly, but may have had Wall Street Bros. Sweating. The US-based arm of one of the world's largest banks, the Industrial and Commerce Bank of China, or ICBC, was hacked last week. And this was no small-time hack. This was a ransomware attack so devastating that employees couldn't even access their corporate emails. Now, let's step back for a second and talk about

what the heck this bank does, because it's really important to understand why this was such a big deal for global financial markets. I'm sure you already know this by now, but when you log onto your brokerage account and buy a stock, it feels like it happens instantaneously. But multiple steps are happening at the speed of the best financial computers money can buy. The system identifies the price of a stock on the market, matches you with a seller, and creates a deal. Then it sends your cash from your account to the sellers and sends their stock to your brokerage account. Your broker doesn't handle all the parts of this process. There are market makers, exchanges, and other brokerages

involved. Once all of those steps are completed, the trade is considered settled. That's just the process for you to buy one share of, let's say, SPY. Giant funds are trying to buy huge bundles of stocks all at the same time, and banks are also trying to buy large numbers of bonds at once. These kinds of transactions are happening all the time. ICBC's U.S. arm acts as the broker to help institutions and funds settle their trades, and they offer short-term loans backed by U.S. treasuries. They move treasuries all day long on behalf of their clients in borrowers. During the early stages of the ransomware attack, though, other banks and brokers continued to ping them to say, basically, buy, buy, sell, sell, only in code. But ICBC couldn't. It couldn't even see what trades had been done earlier in the day, or who owned what, or the email that someone was microwaving fish in the break room. Like, the system was completely frozen. Bank of New York

Mellon ended up essentially loaning ICBC money during the attack to cover its trades, which were going through BNY's side, not being completed on the ICBC side. In the end, ICBC in the U.S. needed a $9 billion loan from its parent company just to pay back BNY. And it wasn't just the money they needed. Because their systems were infected, other companies disconnected from them, fearing the spread of contagion. So ICBC had to then send over a literal thumb drive to BNY to have its trades manually approved. In the movie version of this, it will probably be some delivery dude on a bike frantically peddling it over to save the bond market. At this time, ICBC is returning to normal functioning. A PR person from the hacker group LockBit, which is claiming responsibility for the attack, told the press

that ICBC paid the ransom and the group unlocked their systems. ICBC has not commented on how they resolved the issue. While the ransomware attack has been resolved, the disruption in the market lingered through the weekend and the early part of the week. Workers at Ford factories in Kentucky have failed to approve their labor deal, which, if approved, would have triggered an increase in prices of Ford vehicles. But the labor issues aren't limited to the automotive industry. They even happen in labor unions themselves. The support staff of one of the largest unions in the U.S., the National Education Association, aka the Teachers Union, their staff has gone on strike. That's right, the union is having a labor dispute themselves. The day-to-day running of the union

is handled by a small staff of 48 who have been without contracts since May of this year. The support staff is now asking for raises to keep pace with inflation. Issues of compensation have been dominating the financial discussion this month as the real estate industry tries to shift through the issues that will result from a ruling out of Kansas City at the end of October, which could limit the amount that agents and mortgage brokers make on home sales. Currently, when you buy a home, the seller pays the fee of both agents, usually between 5 and 6 percent of the sale. So on a million dollar home, the seller pays up to 60 grand,

which both agents split between them. This ruling now says that those high commission rates were a result of a conspiracy between the national agency representing real estate agents and several of the largest brokerages in the country. The new fee structure has yet to be determined and the ruling is expected to be appealed. But even before this case winds its way through the legal system, it's anticipated that agents are going to start lowering their fees, which could provide some much-needed relief in the home buying industry. For today's tip, you can take straight to the

bank. Payment app Zelle has changed their policy and now will reverse charges if you've been hit with an imposter scam. In the past, it was impossible to get your money back. But after congressional pressure, Zelle has changed their policies. They haven't even publicized exactly what those policies are just yet. But if you have been hit with one of those scams, now is the time to vigorously follow up. Money Rehab is a production of Money News Network. I'm your host, Nicole Lappin. Money Rehab's executive producer is Morgan Lavoie. Our researcher is Emily Holmes. Do you need some money rehab? And let's be honest, we all do. So email us your money questions,

moneyrehab at moneynewsnetwork.com to potentially have your questions answered on the show or even have a one-on-one intervention with me. And follow us on Instagram at Money News and TikTok at Money News Network for exclusive video content. And lastly, thank you. No, seriously, thank you. Thank you for listening and for investing in yourself, which is the most important investment you can make.