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☆ Debt ceiling worries deepen as early June U.S. default reinforced
▼ + stars: | 2023-05-12 | by ( Richard Cowan | ) www.reuters.com time to read: +6 min

The U.S. Congressional Budget Office report, issued Friday morning, confirms Treasury Secretary Janet Yellen's earlier warnings that a default could come as early as June 1. Congress' budget scorekeeper also noted that the federal government's debt payments "will remain uncertain throughout May, even if the Treasury ultimately runs out of funds in early June." She also said she remained optimistic that the debt limit problem would be resolved. A senior Treasury official told Reuters she would do that with board members of the Bank Policy Institute lobby group. Democratic Representative Abigail Spanberger said members of the U.S. Congress ought to have their paychecks withheld until the debt limit problem is resolved.

Summary Biden warns of U.S. recession unless ceiling raised quicklyChina's slowing inflation adds to global recession fearsG7 finance leaders kick off meeting in Niigata, JapanNIIGATA, Japan, May 11 (Reuters) - A standoff over raising the U.S. debt ceiling overshadowed a meeting of Group of Seven (G7) finance leaders set to begin on Thursday, heightening U.S. recession fears as central banks seek a soft landing for the global economy. The U.S. debt crisis is a headache for Japan, which is this year's G7 chair and the world's biggest holder of U.S. debt. Japan's top financial diplomat, Masato Kanda, said on Tuesday the G7 finance leaders might discuss the U.S. debt ceiling but likely would not explicitly mention it in a joint statement at the end of the meeting on Saturday. Past U.S. debt ceiling fights have typically ended with a hastily arranged agreement in the final hours of negotiations, avoiding an unprecedented default. Back then, the G7 finance leaders said in a statement that they were "committed to addressing the tensions stemming from the current challenges on our fiscal deficits, debt and growth."

☆ Yellen, at G7, to underscore U.S. commitment to Ukraine for 'as long as it takes'
▼ + stars: | 2023-05-11 | by ( Andrea Shalal | ) www.reuters.com time to read: +3 min

REUTERS/Issei KatoNIIGATA, Japan, May 11 (Reuters) - Treasury Secretary Janet Yellen on Thursday will underscore the United States' commitment to continue supporting Ukraine for as long as needed, while working with other rich nations to degrade Russia's ability to wage war against its neighbor. "I look forward to coordinating with other G7 members to support Ukraine and degrade Russia’s ability to wage war," she said in the remarks released by Treasury as the war approaches its 450th day. "Since Day One, our countries have stood united to support the Ukrainian people as they have mounted a fierce resistance," she said. Yellen also said caps on the price of Russian oil and oil products, discussed by G7 finance ministers for the first time just a year ago, were clearly working just a few months after its implementation in December and February, respectively. While the price cap coalition was moving to phase out all imports of Russian oil, officials were urging developing countries "to save on their oil costs by taking advantage of the price cap to negotiate steep bargains on Russian oil," she said.

She will warn about "the global impact of this standoff and highlight the need to avoid default," a senior Treasury official said. It will lead to a freeze in global financial markets," said Muehleisen, now a fellow with the Atlantic Council. G7 counterparts will question Yellen "about the financial stability risks in the U.S., the regional banks' exposure to commercial real estate. Real risks that are not manufactured for political posturing," said Stephanie Segal, a former U.S. Treasury official who is a senior fellow at the Center for Strategic and International Studies in Washington. The far more complicated "Pillar 1" plan to allow countries to tax global technology giants and other highly profitable corporations on their local sales is still under negotiation.

☆ Yellen says pressures remain on some U.S. regional bank stocks but system sound
▼ + stars: | 2023-05-09 | by ( ) www.reuters.com time to read: +1 min

[1/2] U.S. Treasury Secretary Janet Yellen discusses "U.S.-China Economic Relationship" during a forum hosted by the Johns Hopkins University at the Nitze Building in Washington, U.S., April 20, 2023. REUTERS/Sarah SilbigerWASHINGTON, May 8 (Reuters) - U.S. Treasury Secretary Janet Yellen said on Monday that some regional bank stock prices remained under pressure, but deposits had stabilized and regulators stood ready to use the same tools used in recent bank rescues if more contagion fears arose. Yellen told CNBC in a live interview that some of the selling of bank shares was due to earnings strain, but added that the "bar is pretty high" for imposing any controls on short selling of bank stocks. But short selling more broadly, the bar is pretty high to put controls on," Yellen said. Reporting by David Lawder and Andrea Shalal; Editing by Jamie FreedOur Standards: The Thomson Reuters Trust Principles.

"There are a variety of different options, but there are no good options. "The only option that really leaves our economy in good shape - and our financial system - is raising the debt ceiling." "It's trusted, and it is the ultimate safe asset and a failure to raise the debt ceiling, impairing the U.S. credit rating, would put that at risk. Yellen told lawmakers last week that Treasury will likely be unable to pay all the government's bills as early as June 1 without an increase in the federal debt limit. Because the government spends more than it takes in, lawmakers must periodically raise the debt ceiling.

☆ Yellen is calling CEOs personally to warn on US debt ceiling, sources say
▼ + stars: | 2023-05-08 | by ( Andrea Shalal | ) www.reuters.com time to read: +2 min

The Treasury secretary is having one-on-one conversations with individual CEOs to warn them about the "dangerous consequences of the current brinkmanship," one of the sources said. While the sources did not spell out her purpose, Biden administration officials have been speaking to business owners about pressuring Republicans to raise the debt ceiling without conditions. Yellen is now slated to leave for Japan this week and will hold a news conference in Niigata, Japan, on Thursday before the G7 meeting. President Joe Biden insists that Congress has a constitutional duty to raise the debt ceiling, which reflects previously spent federal money, without conditions. Because the government spends more than it takes in, lawmakers must periodically raise the debt ceiling.

☆ U.S. bankers urge SEC to probe short sales, reduce 'abusive' trading
▼ + stars: | 2023-05-05 | by ( Andrea Shalal | ) www.reuters.com time to read: +3 min

"We urge the SEC to consider all its existing tools and to take measures to reduce the avenues for abusive trading practices and restore investor confidence," the group said. "These measures include, at a minimum, a clear message and appropriate enforcement actions against market manipulation and other abusive short selling practices." Short sellers raked in $378.9 million in paper profits on Thursday alone from betting against certain regional banks, according to analytics firm Ortex. ABA President and CEO Rob Nichols told Gensler that short selling could be a legitimate financial tool, but his group was "unalterably opposed to short selling practices that distort the markets through manipulation and abuse." He called on Gensler to send a clear message to market players and take appropriate enforcement action against market manipulation and other abusive short selling practices.

WASHINGTON, May 5 (Reuters) - U.S. President Joe Biden picked a senior aide, Neera Tanden, to replace Susan Rice as his domestic policy adviser, the White House said in a statement. As Biden's staff secretary, Tanden already played a major role in the West Wing, controlling the schedules, briefing books and other paperwork that reach the president's desk. Stefanie Feldman, an aide to Rice who has long been a top policy mind in Biden's orbit, will replace Tanden as staff secretary. "Neera oversaw decision-making processes across my domestic, economic and national security teams," Biden said in a statement touting 25 years of public policy experience. Tanden's predecessor at the domestic policy council, Susan Rice, departed after a two-year term that included wrangling over tense issues from immigration to healthcare, guns and police reform.

☆ US proposes new checks on land sales to foreigners near military bases
▼ + stars: | 2023-05-05 | by ( ) www.reuters.com time to read: +1 min

WASHINGTON, May 5 (Reuters) - Buying land near eight U.S. military bases could become more difficult for foreign companies and citizens under a Treasury Department rule proposed by the Biden administration on Friday. Grand Forks Air Force Base houses air and space operations and includes a unit that operates military drones. The Air Force, Republican senators and community members voiced opposition to the real estate deal. The Grand Forks City Council in February voted to terminate its development agreement with Fufeng, preventing it from building the mill. North Dakota Senator Kevin Cramer welcomed news of the proposed rule, which could have blocked the land sale to Fufeng.

☆ U.S. SEC says focused on prosecuting misconduct that might threaten investors, markets
▼ + stars: | 2023-05-04 | by ( ) www.reuters.com time to read: 1 min

NEW YORK, May 4 (Reuters) - The U.S. Securities and Exchange Commission is focused on identifying and prosecuting any form of misconduct that might threaten investors, capital formation or markets more broadly, SEC Chair Gary Gensler told Reuters on Thursday. Gensler made the comment in a written response when asked about a Reuters report that federal and state regulators were assessing the possibility of "market manipulation" behind big moves in banking share prices in recent days. "As I’ve said, in times of increased volatility and uncertainty, the SEC is particularly focused on identifying and prosecuting any form of misconduct that might threaten investors, capital formation, or the markets more broadly,” he said. Reporting by Chris Prentice, writing by Andrea ShalalOur Standards: The Thomson Reuters Trust Principles.

☆ Treasury: US banks have 'substantial' liquidity, deposit flows are stable
▼ + stars: | 2023-05-04 | by ( ) www.reuters.com time to read: +1 min

WASHINGTON, May 4 (Reuters) - The U.S. Treasury Department on Thursday said it was continuing to monitor market developments amid sharp drops in the shares of regional lenders PacWest Bancorp <PACW.O and Western Alliance Bancorp (WAL.N), but deposit flows were stable. "We continue to closely monitor market developments," a Treasury official said. "The banking system has substantial liquidity and deposit flows are stable." Western Alliance's stock was down 58.2%, despite a statement from the bank saying it had no unusual deposit outflows and had adequate liquidity. First Republic was the third major casualty of the biggest crisis to hit the U.S. banking sector since 2008.

☆ Pressure grows for US regulatory intervention as bank rout deepens
▼ + stars: | 2023-05-04 | by ( ) www.reuters.com time to read: +4 min

"Investors are clearly continuing to focus on remaining players that are deemed the weakest," wrote UBS banking analyst Erika Najarian on Thursday. The Federal Deposit Insurance Corp. did not respond to a request for comment. Critics say increasing deposit insurance could encourage risk-taking, and note regulators have fewer tools to rescue banks following the 2008 financial crisis. The latest crisis began in March when runs on Silicon Valley Bank and Signature Bank led to their abrupt closures, leading depositors to move their cash to bigger banks. To stem the contagion, regulators took emergency steps to reimburse all customers at the two banks, while the Fed offered lenders additional liquidity.

☆ US Treasury's top international official heads to Europe, Asia for talks on economy
▼ + stars: | 2023-05-04 | by ( ) www.reuters.com time to read: +1 min

WASHINGTON, May 4 (Reuters) - The U.S. Treasury Department's top international official is heading to Europe and Asia this week for talks on current macroeconomic trends and events, and a G7 finance officials meeting, Treasury said in a statement on Thursday. Treasury Undersecretary for International Affairs Jay Shambaugh will attend meetings of the Organization for Economic Cooperation and Development in Paris on Friday, before traveling on to Singapore and Japan, Treasury said. The meeting takes place a month after the International Monetary Fund trimmed its 2023 global growth outlook slightly and warned that a severe flare-up of financial system turmoil could slash output to near recessionary levels. Shambaugh will join U.S. Treasury Secretary Janet Yellen at the G7 meeting in Niigata, Treasury said. Reporting by Andrea Shalal; Editing by Kirsten DonovanOur Standards: The Thomson Reuters Trust Principles.

BRASILIA/BUENOS AIRES, May 4 (Reuters) - Argentina is seeking new easing of targets in its $44 billion deal with the International Monetary Fund and faster payouts, and is pushing to get key IMF members the United States and Brazil to support it, government officials said. It has ramped up pressure on Argentina and the IMF to revamp the debt program, the largest extended to any country worldwide. The ministry official said backing from the United States and Brazil was key for the IMF talks, and was "positive" about it given the countries' broader support for Argentina's economy. The U.S. Treasury and White House did not comment on record about potential support for Argentina's talks with the IMF. Argentina would need to reach a technical deal with IMF staff before any agreement went to the board for approval.

☆ White House report: Debt limit default could cost 8.3 mln U.S. jobs
▼ + stars: | 2023-05-03 | by ( ) www.reuters.com time to read: 1 min

May 3 (Reuters) - A protracted default on U.S. payment obligations could result in the loss of 8.3 million jobs and a 6.1% reduction in economic output, according to an analysis by the White House Council of Economic Advisers released on Wednesday. Such an unprecedented default "would likely lead to severe damage to the economy, with job growth swinging from its current pace of robust gains to losses numbering in the millions," the council said in the report. Even a more modest, "short" default scenario that is quickly resolved could lead to a loss of 500,000 jobs and a 0.6% reduction in real GDP, the council said. Reporting by David Lawder and Andrea Shalal in Washington; and Leslie AdlerOur Standards: The Thomson Reuters Trust Principles.

The election came after World Bank board members interviewed Banga for four hours on Monday. Biden congratulated Banga on his "resounding approval" to run the World Bank, which he described as "one of humanity’s most critical institutions to reduce poverty and expand prosperity around the globe." "Ajay Banga will be a transformative leader, bringing expertise, experience, and innovation to the position of World Bank President," Biden said. "The Board looks forward to working with Mr. Banga on the World Bank Group Evolution process, as discussed at the April 2023 Spring Meetings, and on all the World Bank Group’s ambitions and efforts aimed at tackling the toughest development challenges facing developing countries," the bank said. The World Bank has been led by an American since its founding at the end of World War Two, while the International Monetary Fund has been led by a European.

Banga, 63, was nominated for the post by U.S. President Joe Biden in late February and was the sole contender to replace departing World Bank chief David Malpass, an economist and former U.S. Treasury official during the Trump administration. Sources familiar with the process said they expect Banga to win the board's approval handily after several meetings with board members in recent weeks and a formal interview on Monday. One of the sources said Banga had impressed World Bank shareholders in recent weeks as a "true change maker" who will help accelerate reforms at the global development bank. The World Bank has been led by an American since its founding at the end of World War Two, while the International Monetary Fund has been led by a European. Banga, who was born in India and spent his early career there, has been a U.S. citizen since 2007.

☆ White House report: Debt limit default could cost 8.3 million US jobs
▼ + stars: | 2023-05-03 | by ( ) www.reuters.com time to read: 1 min

Biden called Republican House Speaker Kevin McCarthy in Jerusalem, where he is on a diplomatic trip, to invite him to a May 9 White House meeting. Biden also extended invitations to House Democratic leader Hakeem Jeffries, Senate Majority Leader Chuck Schumer and Republican leader Mitch McConnell. Biden has steadfastly said he will not negotiate over the debt ceiling increase, but will discuss budget cuts after a new limit is passed. A White House official said Biden, who had previously said he wouldn't meet McCarthy at all to discuss the debt limit, would "stress that Congress must take action to avoid default without conditions" on May 9. The bill has no chance of passing the Democrat-controlled Senate and the White House has said Biden would veto the legislation if it did.

WASHINGTON, May 2 (Reuters) - President Joe Biden will not negotiate over the debt ceiling during his meeting with four top congressional leaders on May 9, but he will discuss starting "a separate budget process" to talk about spending priorities, the White House said on Tuesday. "He is not going to negotiate on the debt ceiling," White House press secretary Karine Jean-Pierre said. The White House and Biden have previously asked Republicans for a clean debt ceiling hike and offered to discuss spending once the risk of default is off the table. The White House knew Yellen's letter would be released on Monday, Jean-Pierre said. Biden called Republican House Speaker Kevin McCarthy in Jerusalem, where he is on a diplomatic trip, to invite him to the May 9 White House meeting.

☆ White House's Boushey: Fed interest rates having negative effect on banking sector
▼ + stars: | 2023-05-02 | by ( Andrea Shalal | ) www.reuters.com time to read: +1 min

WASHINGTON, May 2 (Reuters) - A top White House economist on Tuesday said Federal Reserve interest rate hikes aimed at curbing inflation were having a negative impact on the banking sector, and warned Republicans against worsening the situation with their debt ceiling threats. Heather Boushey, a member of the White House Council of Economic Advisers, told Reuters that Republicans should not be "playing games" with the U.S. economy. "The Fed is raising interest rates in the hope of reducing inflation. That is having this negative effect on the banking sector. Boushey said Congress could easily remove the risk of default by raising the debt ceiling, while the broader issue of interest rates and their impact on bank assets was a far more complicated question that no single entity had the power to solve.

House Republicans passed a bill to raise the debt limit last week that includes steep spending cuts which the Democratic-controlled Senate and Biden say they will not approve. Biden has steadfastly said he will not negotiate over the debt ceiling increase, but will discuss budget cuts after a new limit is passed. In 2011, a similar debt ceiling fight took the country to the brink of default and prompted a downgrade of the country's top-notch credit rating. The Republican bill would implement $4.5 trillion in spending cuts - or about 22% - in exchange for a $1.5 trillion increase in the U.S. debt limit. It has no chance of passing the Democrat-controlled Senate and the White House has said Biden would veto the legislation.

WASHINGTON, May 1 (Reuters) - JPMorgan Chase & Co's (JPM.N) deal to buy First Republic Bank pushed the Biden administration into a corner, leaving officials scrambling to explain how their stance against mergers squared with allowing the largest U.S. bank to get even bigger. At a White House event on small business on Monday, President Joe Biden hailed the sale of the troubled San Francisco-based lender, saying it would protect all depositors and avert a government bailout. "A poorly supervised bank was snapped up by an even bigger bank — ultimately taxpayers will be on the hook," Warren tweeted. "No recent administration has done more to promote competition, address (the) concentration process across industries," she told a White House briefing. Jean-Pierre added that Biden administration officials valued the fact that community banks offer services to those who might not otherwise have banking access.

After hitting the $31.4 trillion borrowing cap on Jan. 19, Treasury Secretary Janet Yellen previously told Congress Treasury would keep up payments on debt, federal benefits and make other outlays at using cash receipts and extraordinary cash management measures. The Republican bill would implement $4.5 trillion in spending cuts - or about 22% - in exchange for a $1.5 trillion increase in the U.S. debt limit. It has no chance of passing the Democrat-controlled Senate and the White House has said President Joe Biden would veto the legislation. The White House has asked Congress to raise the debt limit without conditions; administration officials are already making plans to negotiate with Republicans over the president's 2024 budget plan. What we can’t see is that the debt limit be used by a part of Congress to hold an entire agenda of unrelated items hostage to this threat of default," she said.

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