Aurelia Butler

WASHINGTON (Reuters) -Federal Reserve Vice Chair for Supervision Michael Barr has sought legal advice to explore his options against any attempts by President-elect Donald Trump to remove him, sources said, the latest sign that a conflict might be looming between the incoming administration and the central bank. Barr, who was tapped to serve as the Fed’s top regulatory official by President Joe Biden, has in recent weeks sought advice from law firm Arnold & Porter in his personal capacity, two of the sources said.The sources said he has sought counsel in a personal capacity because typically individual officials, not their agencies, have legal standing to fight in court attempts to remove them. The Fed declined to comment via a spokesperson. Representatives for Arnold & Porter and the Trump transition did not respond to requests for comment. Barr did not respond to a call or email requesting comment.Barr, whose term overseeing bank supervision expires in July 2026, has told Congress that he intends to serve it out. Reuters could not learn further details about Barr’s discussions with lawyers, including whether he would fight his removal or not. The sources requested anonymity to speak about Barr’s plans.Barr’s move comes after reports in recent months that Trump’s advisers were looking for ways to increase the incoming White House’s sway over the Fed, alarming officials and investors who argue that the central bank’s independence is necessary for it to be able to properly set monetary policy. Fed Chair Jerome Powell — who was appointed to the role by Trump only to be subsequently criticized for his decisions on interest rates — was seen as a target of the incoming president. But Powell said after the November presidential election that Trump would not have the authority to remove him. Trump subsequently said he does not intend to remove Powell.The law establishing the Fed says the president is only allowed to fire Fed governors for cause, but it is silent on whether Trump would have the power to demote Barr from his role as Vice Chair for Supervision. Powell has previously said demoting Fed officials is not permitted under the law.  Barr has earned powerful critics on Wall Street and elsewhere for his tough approach to financial regulation.   Earlier this week, the Wall Street Journal’s conservative editorial page argued Trump should fire him for cause, citing the failures by bank supervisors to address problems ahead of Silicon Valley Bank’s abrupt failure in March 2023.Trump’s advisers and other Republicans have debated pursuing that approach with Barr, according to two of the sources, who were briefed on the matter. Barr’s decision to explore outside legal counsel underscores how seriously he is taking that threat. WALL STREET’S IRE Barr earned the ire of Republicans and the banking industry for his efforts to impose strict new capital rules on the industry via so-called “Basel III Endgame” and other projects.Barr said the sector needed more guardrails against future turmoil, but those efforts were met with intense pushback from banks, who argued they were unjustified and threatened to sue over what they claimed was improper procedure. Barr eventually agreed to pare back those efforts, but a rewritten proposal never advanced due to infighting among U.S. bank regulators.If Barr were to stay, he likely would not be able to advance tough new rules that would require buy-in from other agencies taken over by Trump appointees, but he could stand in the way of regulatory easing sought by big Wall Street banks. While Trump has said little on bank regulation, his campaign has promised to slash “burdensome” regulations. Barr also has a separate 14-year term as Fed governor that runs until 2032, but officials frequently step down from that post before serving the full allotment, particularly if they had previously served in a more senior role.There is no precedent for a president to try to remove a Fed official. But messy succession fights at regulatory agencies are not unfamiliar territory for Trump. In his first term, his administration was challenged in court over his attempts to name new leadership at the Consumer Financial Protection Bureau. There, the agency’s deputy, Leandra English, resisted efforts to install an outside Republican official as leader of the agency, going so far as to challenge the move in court on a personal basis. She eventually dropped that suit and resigned. More

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(Reuters) – Inflation dropped in most economies around the world in 2024, but voters didn’t care. Angered by the hefty ramp-up in prices for everything from eggs to energy over the past few years, they punished incumbent parties at almost every opportunity. The pain of inflation lingers, and ruling parties took the blame in election after election.In the United States, higher costs helped Donald Trump win a second term as president four years after he was voted out of the White House and then falsely claimed election fraud. His supporters failed in their bid to overturn Trump’s defeat by storming the U.S. Capitol on Jan. 6, 2021. This year, they made their voices heard at the ballot box, ushering in a new American leadership likely to test democratic institutions at home and relations abroad.The inflation-driven anti-incumbent sentiment also ushered in new governments in Britain and Botswana, Portugal and Panama. South Korean voters put the opposition into power in its parliament, a check on President Yoon Suk Yeol. In early December, the president imposed martial law, a move the National Assembly quickly reversed. Elections also shook up France and Germany, and Japan and India. One place there was no change: Russia, where Vladimir Putin was re-elected president with 88% of the vote, a record in post-Soviet Russia. Moscow continued to prosecute its war against Ukraine, grinding out notable territorial gains. The big question is what impact Trump’s return to the White House will have on the conflict. He has promised to end the war in a day. Many in Ukraine and elsewhere in Europe fear that will mean siding with Putin and freezing the status quo. In the Middle East, Israel continued its war against Gaza and extended it to Lebanon, where it left Iran-backed Hezbollah damaged and in disarray. In Syria, a well-coordinated collection of rebel groups toppled Bashar al-Assad and now seeks to run the country. In business, companies around the world grappled with how to adapt to artificial intelligence. The dominance of tech companies for investors can be summed up in this simple fact: seven tech firms — the so-called Magnificent Seven — now account for more than one-third of the S&P 500’s market cap. Elon Musk, who runs one of those companies, Tesla (NASDAQ:TSLA), is an adviser and financial backer to President-elect Trump. Looking ahead, that combination of tech bro mojo and political power could well define 2025.  More

WASHINGTON (Reuters) – The Biden administration on Monday announced a last-minute trade investigation into Chinese-made “legacy” semiconductors that could heap more U.S. tariffs on chips from China that power everyday goods from autos to washing machines to telecoms gear.The “Section 301″ probe, launched just four weeks before President-elect Donald Trump takes office on Jan. 20, will be handed over to his administration in January for completion, Biden administration officials said.The effort could offer Trump a ready avenue to begin imposing some of the hefty, 60% tariffs that he has threatened on Chinese imports.Departing President Joe Biden has already imposed a 50% U.S. tariff on Chinese semiconductors that starts on Jan. 1. His administration has tightened export curbs on advanced AI and memory chips and chipmaking equipment to China and also recently increased tariffs to 50% on Chinese solar wafers and polysilicon. The U.S. Trade Representative’s office, which will conduct the new probe, said it is aimed at protecting American and other market-driven chip producers from China’s massive state-driven buildup of domestic chip supply.U.S. Trade Representative Katherine Tai said that the trade agency has found evidence that Beijing is targeting the semiconductor industry for global domination, similar to its buildup in steel, aluminum, solar panels, electric vehicles and critical minerals.”This is enabling its companies to rapidly expand capacity and to offer artificially lower priced chips that threaten to significantly harm and potentially eliminate their market-oriented competition,” she told reporters on a conference call.Legacy chips use older, mature manufacturing processes and are found in a wide range of mass market applications. They do not include advanced chips for use in artificial intelligence applications or sophisticated microprocessors.The Biden administration will begin accepting public comments on the probe on Jan. 6, and has planned a public hearing for March 11-12, according to a Federal Register notice on the probe. It is unclear whether Trump’s choice to lead USTR, Jamieson Greer, a trade lawyer and former USTR chief during Trump’s first administration, will be confirmed by the U.S. Senate by then.The probe is being conducted under Section 301 of the Trade Act of 1974, the same unfair trade practices statute that Trump invoked to impose tariffs of up to 25% on some $370 billion worth of Chinese imports in 2018 and 2019, triggering a nearly three-year trade war with Beijing.If Trump takes up the probe, it needs to be completed within a year from initiation.DOWNSTREAM GOODS PROBED A Biden administration official said in addition to examining the impact of the imported chips themselves, the probe would also look at their incorporation into downstream components and end-use goods for critical industries including defense, automotive products and medical devices.It also will target China’s production of silicon carbide substrates and wafers for semiconductor fabrication. U.S. Commerce Secretary Gina Raimondo said her department’s research shows two-thirds of U.S. products using chips had Chinese legacy chips in them, and half of U.S. companies did not know the origin of their chips including some in the defense industry, findings that were “fairly alarming.”After the COVID-19 pandemic disrupted the supply of semiconductors and temporarily halted production of autos and medical equipment, the U.S. has sought to build its own semiconductor supply chain with $52.7 billion in new subsidies for chip production, research and workforce development.But Raimondo said China’s plans to build more than 60% of the world’s new legacy chip capacity over the next decade were discouraging investment elsewhere and constituted unfair competition.It “undercuts our companies and makes the U.S. dependent on China for the chips that we use every day in so many things,” she told reporters.Despite a bitter presidential campaign, one of the few areas of continuity between Biden’s and Trump’s administrations will be tariffs on China. Biden kept in place all of the duties on Chinese imports imposed by Trump and added to them, including 100% duties on Chinese-made electric vehicles in an effort to keep them out of the U.S. market. More

Incoming centrist prime minister Francois Bayrou has struggled for almost 10 days to put together a government as he looks to stave off a vote of no-confidence in mid-January and ensure parliament agrees on a budget for 2025 in February.”Given the national day of mourning, the (government) announcement will not be before 1800 (1700 GMT),” the presidency said. There are fears that hundreds or even thousands may have been killed by Cyclone Chido in France’s Indian Ocean territory of Mayotte.Bayrou initially sought to broaden his incoming administration to appeal to both the left-wing Socialist party and the conservative Les Republicains, hoping not to suffer the fate of his predecessor Michel Barnier, whose government collapsed after just three months amid opposition to his budget measures.However, Bayrou, who has vowed to name his government before Christmas, has failed in particular to satisfy demands from the left in his quest to secure majority support in a deeply fractured parliament.In a letter seen by Reuters addressed to Les Republicains, which won just 5% of votes in the summer parliamentary election, Bayrou sets out security and budgetary measures in the hope of ensuring it joins the next government. Bayrou is trying to cut a wide budget deficit but is finding consensus as hard to achieve as Barnier. An opinion poll published on Dec. 19 found 64% were dissatisfied with his appointment as prime minister.After a European Parliament election last June in which the far-right Rassemblement National made significant gains, President Emmanuel Macron called a snap parliamentary election that he promised would bring more clarity.Instead, no party or bloc won a majority, leaving parliament divided into three main blocs, and Macron’s nominees for prime minister so far unable to muster the majority support that would enable them to survive an inevitable vote of no-confidence. More

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Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The UK economy failed to grow in the third quarter, in the latest blow to a government already under fire from businesses for its tax-raising Budget.GDP did not register any growth in the three months to September, the Office for National Statistics said on Monday, down from its first estimate of a 0.1 per cent expansion. The economy was held back by the dominant services sector, which stagnated over the quarter. Production output fell 0.4 per cent, offsetting a 0.7 per cent increase in the construction sector.The figures show the economy stalled in the immediate aftermath of Labour’s July election victory, even before chancellor Rachel Reeves’ Budget dented business confidence.Reeves on Monday admitted that the government faced a “huge” challenge but insisted that the Budget had laid the foundations for long-term growth.If growth undershoots forecasts made in the Budget, it raises the prospect that the chancellor may need to deliver spending cuts or higher taxes next year to ensure she continues to meet her borrowing rules.“The challenge we face to fix our economy and properly fund our public finances after 15 years of neglect is huge,” Reeves said. “But this is only fuelling our fire to deliver for working people.”The government has put boosting growth at the heart of its agenda, but now faces the threat that the economy could have contracted in the final quarter of the year.GDP shrank 0.1 per cent in October, the second straight monthly contraction.The ONS also revised its estimate for second-quarter growth down from 0.5 per cent to 0.4 per cent, indicating the economy began slowing earlier than previously thought. Recent figures have pointed to a softening in the jobs market, stubborn inflation and falling business confidence.The Bank of England last week predicted zero expansion in the fourth quarter, down from its previous forecast of 0.3 per cent growth.Economists said the details of Monday’s downwardly revised data contained some bright spots, with consumer spending growing at a healthy pace, business investment picking up and households no longer piling more money into savings. Paul Dales, at the consultancy Capital Economics, said the downward revision in the third quarter was “mainly due to external influences rather than the domestic economy”, including a bigger drag from net trade. But the overall picture was that growth had “ground to a halt”, he said, due to “the lingering drag from higher interest rates, weaker overseas demand and some concerns over the policies in the Budget”.Elliott Jordan-Doak, senior UK economist at the consultancy Pantheon Macroeconomics, said the revision would not change the BoE’s thinking on interest rates, as much of the weakness had been in government spending and would “fade away” next year. Last week Andrew Griffith, shadow business secretary, claimed the UK was heading for a “January of discontent” and the possibility of a recession. He said if there was a recession it would be “made in Downing Street”. More