Aurelia Butler

WASHINGTON (Reuters) -U.S. Treasury Secretary Janet Yellen reiterated on Thursday that she was prepared to take further action to ensure that Americans’ bank deposits stay safe amid turmoil in the banking system.”As I have said, we have used important tools to act quickly to prevent contagion,” Yellen said in remarks to the U.S. House of Representatives Appropriations subcommittee hearing.”These are tools we could use again for an institution of any size if we judged its failure would pose a systemic risk,” she added. Silicon Valley Bank was taken over by federal regulators on March 10, followed days later by Signature Bank (NASDAQ:SBNY). Multiple federal agencies, including the U.S. Department of Justice and the Securities and Exchange Commission, are probing SVB. Global banking markets have been skittish and investors remain fearful of wider economic repercussions.Given that Congress is divided in control, with Republicans holding a majority in the House of Representatives and President Joe Biden’s fellow Democrats leading the Senate, any new legislation in light of the banking crisis would require bipartisan support.House Financial Services Committee Chairman Patrick McHenry, a Republican, said on Wednesday it was too early to tell if new legislation was necessary after the failures of the two banks.Biden said last week the banking crisis has calmed down, and promised Americans that their deposits are safe.On the broader state of the U.S. economy, Yellen said the labor market was “extremely tight,” which was contributing to inflation. However, she also added that supply chain pressures and shipping costs were coming down and were eventually likely to bring down inflation. Separately on the issue of the debt ceiling, the Treasury secretary said that a U.S. debt default would undermine the dollar’s reserve currency status and that a failure to raise the debt ceiling would lead to a recession or worse.Republicans in the U.S. House of Representatives are working on a “term sheet” of conditions they would want Democrats to agree to in exchange for voting to raise the federal government’s $31.4 trillion debt ceiling later this year, House Budget Committee Chairman Jodey Arrington said on Thursday.Yellen also told lawmakers Russia and China have the motivation to try to develop an alternative to the U.S. dollar but it would be “tremendously difficult” for them to do so.”I certainly want to see the dollar remain as the world’s reserve currency and there is a motivation that Russia and China have to try to develop another system that avoids the use of the dollar,” Yellen said. More

TOKYO (Reuters) – Japanese firms see inflation and the chance of worldwide recession as the primary risks they face in fiscal 2023, a Reuters monthly poll showed. Inflation in Japan has rocketed to a four-decade high, driven largely by energy prices, putting pressure on companies to lift wages to compensate for the hit to households.March, which marks the end of the fiscal year for most Japanese companies is a time when they formulate investment and operations strategies for the next period.Of nearly 500 major companies polled, 82% said a continuation of global inflation was a concern for their business in the coming period. In the second most common response, 59% named the risk of a global recession.”The continued rise in input costs and higher electricity charges for our refrigeration units are likely to be major factors in squeezing profits,” said a manager at a wholesaling company, who commented on condition of anonymity. While energy and food prices are surging, the Bank of Japan says it has still not yet met its 2% target for core inflation. Incoming BOJ Governor Kazuo Ueda has pledged to maintain stimulus to achieve that goal.When company managers were asked about their expectations for increases in the consumer price index (CPI), the most common response, at 34%, was for a range of 1.6% to 2.0%. But a total of 43% selected ranges of 2.1% or higher, beyond the BOJ target.After whipsaw moves in currency markets last year that saw the yen weaken to a three-decade low, spurring record intervention by Japan to shore up the currency, companies see more stability in fiscal 2023.Nearly half see the yen trading in a range of 131 to 135 against the dollar. A majority, at 69%, said they preferred mild strengthening in the currency from the 136 level in early March.As slowdowns and curbs from the COVID-19 pandemic fade, 85% of companies said they would increase or leave unchanged capital spending next year. The most common spending target cited was replacement of ageing equipment, at 59%.”In anticipation of a recovery from the corona crisis, we will make the necessary investment in business development,” said a manager in the railway industry.Corporate managers remained dour about the near-term environment, with 80% saying conditions would be “not so good” to “bad” by the end of the next three months, unchanged from the previous survey.The Reuters Corporate Survey, conducted for Reuters by Nikkei Research between March 8 and 17, canvassed 493 big non-financial Japanese firms, comprised of 246 manufacturers and 247 non-manufacturers.They were polled on condition of anonymity, allowing respondents to speak more freely. More

Adding to the perception, last week the company said the Biden administration had demanded TikTok’s owners divest their stakes in the popular video app or face a possible ban.It is unclear how the Biden administration might implement such a ban, if it chose to move forward with a plan, but if history is any guide, a prohibition is unlikely to take effect any time soon. Here is why:TRUMP Citing national security concerns, then-President Donald Trump told reporters he planned to ban TikTok in July 2020, threatening to shut it down if it could not be sold by its Chinese owner Bytedance to a U.S. buyer. In August, he issued two executive orders, one banning the app and another demanding Bytedance sell its U.S. business to U.S. companies. But Trump’s attempt to block TikTok with an executive order derived its power from the International Emergency Economic Powers Act. That act exempts the import or export of “informational materials,” and “personal communication” through the Berman Amendment, which sought to protect speech.”Banning the app – or any like it – would likely still be challenged under the First Amendment. It’s important to keep in mind the Berman Amendment under IEEPA is a proxy for the First Amendment. Even if it’s sidestepped, greater legal questions remain,” said John Costello, who oversaw the creation of the office at the Commerce Department to examine certain foreign technology for national security threats.Meanwhile, the executive order forcing a divestment remains mired in negotiations between TikTok and the Biden administration over a potential national security agreement that could resolve the concerns prompting the ordered sale. HOW A BILL BECOMES A LAWWashington lawmakers have also launched two separate bills aimed at allowing the president to ban apps like TikTok on grounds they pose a risk to U.S. national security. But the bills, one in the House of Representatives and the other in the Senate, still need companion bills in the other chamber, as well as enough support to pass both houses and then President Joe Biden’s signature. The White House supports the Senate bill, known as the RESTRICT Act.Considered the most likely to succeed, the Act would still likely take at least several months before it could garner enough support for a successful vote and the president’s signature. It could also be weakened before it reaches Biden. Even if the RESTRICT Act is passed this year, the Commerce Department has up to six months to begin reviewing transactions with the new authorities, and up to six additional months to complete the reviews and take action.TIKTOK’S DAY IN COURTTikTok is likely to challenge any attempt to ban the app. The company was ultimately successful in quashing Trump’s effort to ban the app in the U.S. “The First Amendment protects Americans’ right to access social media platforms of their choice,” said Jameel Jaffer, the executive director of the Knight First Amendment Institute at Columbia University. “To justify a TikTok ban, the government would have to demonstrate that privacy and security concerns can’t be addressed in narrower ways. The government hasn’t demonstrated this, and we doubt it could. Restricting access to a speech platform that is used by millions of Americans every day would set a dangerous precedent for regulating our digital public sphere more broadly,” More

NEW YORK (Reuters) -Federal Reserve emergency lending to banks, which hit record levels last week, remained high in the latest week, amid continued large scale extensions of credit to the financial system, which now includes official foreign borrowing. The Fed reported that discount window borrowing, its main source of emergency credit to depository institutions, ticked down to $110.2 billion as of Wednesday, from the $152.9 billion reported last week. Last week’s level had surged from $4.6 billion on March 8, shredding the $112 billion record set during the fall of 2008, during the global financial crisis’s most perilous phase.However, as of Wednesday, banks boosted borrowing under the central bank’s newly launched Bank Term Funding Program to $53.7 billion. In its first outing last week, the facility had drawn a smaller than expected $11.9 billion in lending. The facility allows eligible financial firms to borrow against a range of bonds without the penalties normal imposed on this type of credit. Analysts had expected to see some movement from the discount window over to the BTFP. TD Securities said Thursday that when both lending avenues are considered together, “the relatively flat combined usage suggests that banks have already borrowed sufficient funds and are transitioning to the more cost-advantageous BTFP facility.” The Fed also reported lending to foreign central banks and monetary authorities went from nothing on March 15 to $60 billion on Wednesday. Several major central banks announced recently they would draw on Fed dollar liquidity as needed.Joined with a drop in Treasuries the Fed holds for foreign authorities, “it looks like there was a big spike in demand for dollar liquidity from overseas, most likely from Europe in the wake of the Credit Suisse merger with UBS,” analysts at Jefferies said in a report. Borrowing from the Fed caused the size of its overall balance sheet to move to $8.8 trillion from $8.7 trillion the prior week. Last week’s increase set back the Fed’s work since last summer to reduce the size of its stockpile of cash and bonds that topped out at just shy of $9 trillion during the summer, a development the Fed views as having no implications for monetary policy. Fed data also showed the $142.8 billion in credit it had extended to the Federal Deposit Insurance Corporation to deal with the failed California banks rose further and stood at $179.8 billion. BANKS SEEK FED CASHEmergency lending to banks has surged in the wake of the failure of two California banks, which has in turn spurred worries about broader stresses in the financial system in part tied to the aggressive pace of tightening by the Fed to lower inflation. The Fed pressed forward with rate rises on Wednesday but signaled that it is nearly done with rate increases and acknowledged tighter financial conditions created by the banking sector woes and market reaction will likely weigh on the economy. Speaking after the Fed meeting, Federal Reserve chair Jerome Powell said current bank troubles are not a replay of events in 2008. “Our banking system is sound and resilient with strong capital and liquidity” and “all depositors’ savings in the banking system are safe,” he told a media conference. Powell justified the fast-moving response of the central bank by saying “history has shown that isolated banking problems, if left unaddressed, can undermine confidence in healthy banks and threaten the ability of the banking system as a whole.”As Powell expressed confidence in the financial system, money market funds have seen strong inflows. Analysts at investment bank Barclays (LON:BARC) have added a note of caution, however, and said in a note Wednesday “we suspect these more recent flows are rate- rather than fear-driven.” Data from the New York Fed also gave further insight into money market flows. The bank’s reserve repo facility, which allows banks to park cash at the central bank at a return that generally beats what they could earn in the private sector, has seen already massive usage further accelerate over recent days.Inflows have moved toward the $2.554 trillion record set on Jan. 3 and hit $2.233 billion on Thursday after several days of rising usage. More

Good morning. TikTok’s chief executive was grilled today by US lawmakers, who called the Chinese-owned app a “cancer” and tool of surveillance. In a tense hearing, Shou Zi Chew told legislators that the viral-video app will be kept “free from any manipulation by any government”, but he struggled to head off a potential US ban. TikTok has become a flashpoint in rising tensions between the US and China, with Washington concerned that it could be used to steal sensitive US data. Washington has demanded that the US arm of TikTok should be separated from its Chinese owners, but China is unlikely to co-operate. “Forcing the sale of TikTok will seriously damage the confidence of investors from all over the world, including from China, on investing in the United States,” the commerce ministry said before the hearing, adding that it would “firmly” oppose such a move. The other events I will be watching today include:Japan inflation: February consumer price index inflation rate data will be released this morning.UK-Israel meeting: Prime minister Rishi Sunak will host his Israeli counterpart Benjamin Netanyahu in London.Melbourne food and wine festival: The annual festival kicks off today with events in Melbourne and across Victoria. What did you think of today’s FirstFT? Let us know at [email protected]. Thanks for reading.Five more top stories 1. Toshiba’s board has approved a $15bn buyout proposal led by Japan Industrial Partners. The deal, in which the 147-year-old conglomerate will be taken private by a consortium backed by 17 domestic companies and six financial institutions, paves the way for the country’s biggest ever take-private deal. 2. Swiss financial regulator Finma has defended its decision to wipe out a huge swath of risky subordinated bonds as part of the Credit Suisse rescue deal. The move, which rendered SFr16bn ($17bn) of investments worthless, has become one of the most controversial elements of the shotgun marriage between Credit Suisse and UBS.3. The crypto fugitive Do Kwon has been arrested in Montenegro, according to interior minister Filip Adzic. In a statement on Twitter, Adzic said the crypto entrepreneur behind the $40bn implosion of the terraUSD and luna digital tokens had been detained by police at Podgorica Airport with falsified documents.4. Indian opposition figure Rahul Gandhi has been sentenced to two years in jail for remarks he made about Narendra Modi by a court in the prime minister’s home state of Gujarat, raising the temperature of Indian politics a year ahead of a national election. Here’s what else we know about the sentencing of the best-known figure in the Congress party.5. China’s population of super-rich fell more than 14 per cent last year as President Xi Jinping’s zero-Covid policy, regulatory crackdowns and a property collapse took their toll on the nation’s largest fortunes. The number of billionaires in China fell by 164 to 969 compared with a decline of 25 to 691 in the US, according to the 2023 M3M Hurun Global Rich List.How well did you keep up with the news this week? Take our quiz.The Big Read

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The EU wants to make solar power its single biggest source of energy by 2030. That would mean almost tripling its solar power generation capacity over the next seven years. The problem is more than three-quarters of the EU’s solar panel imports in 2021 came from a single country: China.We’re also reading . . . Iran-Russia: Moscow has become Iran’s largest foreign investor over the past year, as the two heavily sanctioned nations have increased co-operation since Russia invaded Ukraine. ‘Sensible’ crypto: It’s not the crypto bros we have to fear, writes Jemima Kelly, but the strait-laced, earnest types that are snake-oil salesmen in sensible clothing.Starbucks in China: The US coffee chain plans to open a store in China every nine hours to reach 9,000 locations by 2025.Chart of the dayThere could hardly be a less auspicious time for US business to attend Beijing’s flagship investment conference. But this weekend Americans including former secretary of state Henry Kissinger and investor Ray Dalio will head to Beijing. Recent earnings calls out of the US show that awareness of the geopolitical landscape is tempered by optimism over the Chinese market.

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Take a break from the newsAs shares of Credit Suisse hover under $1, the price of its memorabilia is on the rise. When the storied Swiss bank ceased to exist practically overnight baseball caps, ski hats and other items bearing its logos were posted on auction sites and racked up bids, as collectors tried to grab pieces of fashion, and financial, history.Additional contributions by Tee Zhuo and Emily Goldberg More