Aurelia Butler

Global banks have had to come up with perks like higher pay and bonuses to attract and retain talent as the economy recovers and people look to shift around.”Hiring has been very competitive across the business,” Citigroup Inc Chief Financial Officer Mark Mason said on a call with reporters. That’s being seen at the entry levels as well, he said. “We have seen some pressure in what one has to pay to attract talent,” said Mason. “So yes, you’ve even seen it at some of the lower levels, I should say entry levels in the organization.” That included analysts or associate bankers, Mason said, adding there was a “lot of competitive pressure on wages.” JPMorgan CFO Jeremy Barnum told reporters on a call that they are facing pressures.”It is true that labor markets are tight, that there’s a little bit of labor inflation and it’s important for us to attract and retain the best talent and pay competitively for performance,” Barnum said.CEO Jamie Dimon added to that, saying the bank wants to be “very, very competitive on pay” and “if that squeezes margins, so be it.” Wells Fargo (NYSE:WFC) CEO Charlie Scharf also said that hiring and retaining bankers was competitive. “We never want to lose good people, but it happens,” said Scharf. “But it’s not something we worry about hurting the franchise at this point.”“It’s a very, very competitive workplace,” Scharf said, adding that the bank’s top leadership is not currently worried about the bankers who have left over recent months. “We are very knowledgeable about attrition happening at the company. We feel good about the people that are here and we are going to work hard to keep the people here.”Wells is expecting a $300-million increase in 2022 in expenses related to paying commissions and bonuses for workers in its wealth and investment management and investment banking businesses.However, overall, personnel expenses decreased at the bank 2%, in part because the headcount declined 7% year over year.The comments came as the banks reported their earnings. More

WASHINGTON (Reuters) – U.S. President Joe Biden’s decision to nominate Sarah Bloom Raskin to lead regulation and supervision at the Federal Reserve will put a progressive in the most powerful role overseeing Wall Street’s biggest banks.Raskin, a former Fed governor and Treasury official under former President Barack Obama, will replace Randal Quarles who was appointed the Fed’s vice chair for supervision by Republican former President Donald Trump in 2017, the White House said on Friday. Quarles stepped down from the role in October and left the central bank at the end of December. The bank supervision role is the most consequential of several vacancies on the Fed’s seven-member Board of Governors available to be filled by Biden, giving the first-term Democrat an opportunity to steer the direction of both Wall Street oversight and monetary policy for years to come. Biden also picked economists Lisa Cook and Philip Jefferson to help fill out the Fed board.Raskin is expected to take a much tougher stance on Wall Street than Quarles, who riled progressives with an industry-friendly approach that included easing several rules introduced following the 2007-2009 global financial crisis. She would drive policy on thorny issues including climate change financial risks, community lending rules, and financial technology companies, and would likely review several of Quarles’ rule changes which spanned rules on banks’ speculative investments, derivatives trading, liquidity and capital. Biden has already decided to renominate Fed Chair Jerome Powell to a second term and Governor Lael Brainard to the Fed’s other vice chair slot, which is focused on the Fed’s economic and monetary policy agenda. As with those two appointments, Raskin would have to be confirmed by the thinly divided Senate where she might face a highly partisan reception. Raskin has been confirmed twice before, but those votes predated the current partisan rancor that pervades Capitol Hill. Those who have worked with her say she is able to build consensus.”Sarah is an incredibly collaborative individual,” said Kathleen Murphy, CEO of the Massachusetts Bankers Association. “She listens to everybody.”As the former CEO of the Maryland Bankers Association, Murphy worked closely with Raskin to navigate the global financial crisis when she was commissioner of financial regulation for Maryland from 2007-2010. Together, they dealt with the first bank failure in Maryland in 40 years.”Everyone felt like they had a voice at the table. They may not have agreed with her … but they felt that their views were heard.”A Harvard-trained lawyer with an undergraduate degree in economics from Amherst College, Raskin served on the Fed Board from 2010 to 2014 before moving to Treasury as deputy secretary.While her role then did not specifically involve bank oversight, Raskin took a tough stance on key elements of the Fed’s post-crisis reform agenda. For instance, she slammed proprietary trading as of “low or no real economic value.” She also pushed for a strict interpretation of the “Volcker Rule,” a major reform curbing speculative investments which Quarles has eased over the past four years.Quarles said he tailored that and other rules to banks’ risks and that the industry’s stellar performance amid the pandemic’s economic crisis shows he did not weaken the system.Powell, who like Quarles is a former partner at private equity giant Carlyle Group (NASDAQ:CG), backed Quarles’ changes, but has said he will allow the new supervision chief to take the lead on regulation issues. “Raskin is a tough and thoughtful financial regulator with decades of experience at both the state and federal levels,” Democratic Senator Elizabeth Warren said in a statement on Friday. “In the important role of vice chair for supervision, she brings a commitment to protect the American people that has been sorely missing from the Fed board for years.” DEREGULATION REDUXIf confirmed, Raskin faces a dilemma: how much time and political capital to expend revisiting Quarles’ Wall Street giveaways versus focusing on novel issues like climate change, cryptocurrencies and fintech.A major effort to overhaul Quarles’ work would suck up the resources and political oxygen needed to address other Democratic priorities, and might be opposed by fellow regulators and even some centrist Democratic lawmakers, Reuters reported. As a Fed board governor, Raskin would also have a vote on monetary policy. If confirmed, she will arrive at the Fed at a critical juncture for the central bank’s stewardship of the U.S. economy and its recovery from the COVID-19 pandemic that triggered a short but historically deep recession in 2020.The Fed in late 2021 shifted its policy stance in the face of an inflation rate that is running at nearly three times the central bank’s 2% flexible annual target. The surge in prices for consumer goods and services, initially dismissed as a coronavirus pandemic-oriented overhang that would be “transitory,” has grown into a substantial political issue and headache for both Biden and the Fed. More

WASHINGTON (Reuters) – The election of Donald Trump threw Federal Reserve officials into a scramble to determine what it meant for the American economy, the world, and the U.S. central bank’s own standing, according to transcripts of Fed meetings from 2016.At the Fed’s policy meeting a month after Trump’s Nov. 8, 2016 victory, there were jokes about the unexpected outcome, warnings of the deep fissures it showed in the U.S. economy and the challenges it might pose to the central bank’s independence.”According to some interpretations of the Book of Revelations, when three unusual events occur together, they may be a sign that the apocalypse is near. Let’s take stock,” St. Louis Fed President James Bullard joked, referring to the final book in the Bible’s New Testament and placing Trump’s victory in a category with the Chicago Cubs long-awaited World Series victory that year and folk singer Bob Dylan’s Nobel Prize.”Does the recent election usher in a regime change with respect to growth prospects for the U.S. economy? The short answer to this is ‘maybe,’ and we are treating this as an upside risk,” he said, according to one of the transcripts, which were released by the Fed on Friday.Fed staff promptly tried to build best guesses about whether the Republican businessman would follow through with tax cuts and fiscal spending, tariffs on trading partners or new immigration rules. The market reaction – a jump in stock prices – took some at the central bank by surprise, while others noted that their business contacts “used words like ‘exuberance’ and ‘euphoria,'” because they expected lighter regulation and lower taxes, said Jeffrey Lacker, president of the Richmond Fed at the time. The transcripts, which are released after a five-year lag, provide a window beyond the more scripted official statements of the day into how central bank policymakers grappled with a political event they understood from the outset could effect their work and potentially the Fed as an institution in fundamental ways.FED INDEPENDENCETrump, even before his inauguration, showed an unorthodox approach to the presidency. His comments about federal contracts on Twitter (NYSE:TWTR), for example, slammed the stock prices of companies like Boeing (NYSE:BA).At its Dec. 13-14, 2016 meeting, the Fed raised interest rates after a year of concern that the U.S. economy was slowing, and it followed up with more hikes in 2017 and 2018 as Trump’s tax cuts and fiscal policies led to higher-than-expected growth. The wind came out of the sails in 2019 as Trump’s trade policies slowed global growth, validating some of the concerns noted by Fed officials in the aftermath of his victory over Democratic presidential nominee Hillary Clinton.”If the incoming Administration changes economic policy in several areas as radically as promised during the election campaign, we will, in retrospect, view today’s interest rate decision as the last of an era,” then-Fed Vice Chair Stanley Fischer said.”There will likely … be challenges to the current operating procedures of the Federal Reserve and to its independence. We will be operating, too, in an environment in which many of the assumptions about the role of the United States in global affairs more generally that have held for more than 70 years may need to be adjusted,” Fischer said, according to the meeting transcript.Trump, after elevating then-Fed Governor Jerome Powell to the Fed chair position in 2018, would sour on his pick, publicly berating the former investment banker for raising rates, and his administration explored whether Powell could be fired.Dennis Lockhart, who was the Atlanta Fed’s president at the time, turned the gaze inward, and noted Trump’s victory, with overwhelming support among white voters in rural areas, seemed rooted in economic divisions he felt the central bank needed to better understand. “It seems to me that a lesson of the recent electoral cycle … is the public’s differential experiencing of the economy across geography, the urban–rural spectrum, and cohorts defined by educational attainment,” Lockhart said. Noting that staff had added briefings on unemployment gaps by race to Fed board presentations, Lockhart said “it strikes me this reporting can go further.” More

Both policy makers made clear in the year’s January meeting of the Federal Open Market Committee they believed the balance of risks for the U.S. economy had turned to the downside. They each supported a change in the committee’s statement signaling to investors that rate increases might get put on hold.Powell expressed plenty of uncertainty in his own views over whether the U.S. economy faced a coming recession, according to the 2016 transcripts published Friday with the customary five-year lag. Projections then for several interest-rate increases in 2016 bore some resemblance to the outlook at the start of 2022.“Of course, there’s no way to know,” he said in January 2016. “We’re not good at predicting these downturns, and we’ll have to simply wait and see. It’s a plausible, if premature, story for a weakening economy.”Brainard was more forthright in expressing her view — which she had already expressed publicly — that the FOMC shouldn’t ignore international conditions. She also made clear in the January meeting that she was unlikely to support a rate hike at the next meeting, in March.And by April, with the panel still on hold, she was taking a modest victory lap for her views on international linkages, which had not been widely accepted when first aired in 2015.‘Feedback Loop’“Developments in the first three months of the year serve to highlight the significant feedback loop that connects U.S. policy expectations and exchange rate movements to China’s currency management and economic growth challenges,” she said during the April meeting.Powell, a governor since 2012 who was promoted to Fed chair in 2018 by President Donald Trump, was recently renominated for a second four-year term by Joe Biden.Brainard has been a governor since 2014. She has been nominated by Biden to a four-year term as the central bank’s vice chair.In some ways, there are parallels to 2016 in how the Fed entered 2022. In both cases, policy makers anticipated multiple interest-rate hikes — four in 2016 and three in 2022 — while worries percolated over growth prospects in China.Plans for increases in 2016 were soon derailed as fears of a slowdown in China, in part provoked by a strengthening U.S. dollar, spooked global equity markets and tightened financial conditions worldwide. The Fed ended up hiking only once in 2016, in December, and the episode underscored how interconnected global financial markets had become.The difference today is that central bankers in the U.S. and other developed markets are fighting a bout of high inflation provoked by the Covid-19 pandemic and a massive fiscal and monetary response. The Consumer Price Index rose in the U.S. by 7% in 2021, compared with 0.7% in 2015.Back in 2016, transcripts show that after financial markets calmed, discussion of when to resume rate hikes began again in earnest by September.Urging PatienceAt that point, Powell still urged patience, while worrying about getting behind the curve on inflation.“We’re making progress toward 2% inflation, and my baseline case” is that the Fed “can continue to do that,” he said in September. “But let’s face it, it’s happening at a snail’s pace. So, for me, the balance of risks continues to call for patience and a gradual path of rate increases.”Brainard was again more dovish, and argued against a hasty resumption of rate increases in ways that foreshadowed the policy framework changes the FOMC eventually embraced in August 2020 under Powell’s chairmanship.She noted then-recent research pointing to the weakened ability of low unemployment to trigger higher inflation. In September she also highlighted racial disparities in unemployment measures rather than focusing on the overall unemployment rate.The committee, she said, ought to keep that in mind “as we try to figure out where we are with regard to remaining slack and where that remaining slack may be.”Powell wasn’t far behind in his dovishness, also airing views on inflation in November 2016 that later became enshrined in the new framework. “With inflation having run below our 2% inflation objective every single month since I joined the board 4 1/2 years ago, I do not expect to feel alarmed if inflation moves modestly above 2%,” he said.©2022 Bloomberg L.P. More

The UK and EU on Friday agreed to intensify talks to try to reach a compromise on contentious post-Brexit trading arrangements for Northern Ireland that have soured relations between the two sides.UK foreign secretary Liz Truss and European Brexit commissioner Maros Sefcovic issued a joint statement praising the “cordial atmosphere” after their first face to face talks at her grace and favour mansion at Chevening in Kent.The tone was very different to last year. Lord David Frost, the UK Brexit negotiator who resigned in December, often focused on differences between the two sides and made regular threats to suspend the Northern Ireland protocol, the part of Britain’s withdrawal agreement with the EU that governs trade between Great Britain and the region.The UK is demanding a sweeping overhaul of the protocol on the grounds it is impeding the flow of goods to Northern Ireland as well as causing political unrest in the region.Truss and Sefcovic said UK and EU officials would hold “intensified talks” next week, with the British foreign secretary and European Brexit commissioner then meeting on January 24.“What I want is a negotiated solution, I think there is a deal to be done,” said Truss, who assumed responsibility for UK negotiations with the EU on the Northern Ireland protocol after Frost’s resignation. “We have had constructive talks.”Truss has previously said she could trigger Article 16 of the protocol to suspend several of its provisions, but she has also placed more emphasis than Frost on reaching a compromise with the EU.“Clearly, if we don’t make sufficient progress, we will have to look at the alternatives but my absolute desire is to get a deal that works for people,” she added.People close to the talks between Truss and Sefcovic said officials did not engage in technical level discussions on the substantial issues at stake. Sefcovic said on Twitter: “Now it’s time to start taking issues off the table.”Under the UK withdrawal agreement, Northern Ireland stayed in the EU single market for goods to avoid a hard border on the island of Ireland and preserve the peace process enshrined in the 1998 Good Friday Agreement.The Northern Ireland protocol instead placed a border in the Irish Sea, and requires customs and regulatory checks on goods going from Great Britain to Northern Ireland.To try to strike a compromise on the protocol, the European Commission in October proposed to cut up to 80 per cent of checks on animal and plant-based products, and halve the customs paperwork.But the UK has said it should be as easy to send something from Liverpool to Belfast as Liverpool to Birmingham.EU officials said the current talks involving Truss and Sefcovic represented a step forward after the process had stalled under Frost.Simon Coveney, Ireland’s foreign minister, called for a compromise to be reached on the Northern Ireland protocol soon, well ahead of the dissolution of the region’s devolved assembly in March and elections scheduled for May 5.“My understanding is that both sides really simply outlined their positions,” he told RTÉ radio. “There wasn’t any real progress on trying to find landing zones at this stage, but I don’t think that was the purpose of this meeting.”He added: “We would like to have, if possible, these issues resolved by the end of February.” More

The eurozone’s economic powerhouse is stuttering. Courtesy of the FT’s Frankfurt bureau chief Martin Arnold this morning: The German economy shrank as much as 1 per cent in the final three months of last year, as the latest coronavirus restrictions and supply chain bottlenecks kept output below pre-pandemic levels. The Federal Statistical Office on Friday published initial estimates showing Europe’s largest economy managed growth of 2.7 per cent last year, despite fourth-quarter output falling between 0.5 and 1 per cent from the previous quarter.Meanwhile, inflation for the year to December came in at 5.3 per cent. Unlike the UK, the US, and euro area counterparts such as France, Germany’s GDP remains below its pre-pandemic levels. That’s despite the country, in terms of pandemic-related health outcomes, faring better than the other three. Economists agree that most of the blame for its lacklustre performance lies with supply chain bottlenecks. Germany’s manufacturing prowess means that an awful lot of value added comes from its automotive industry, for instance, which has been hit particularly hard by the chip shortage. Economists, however, are less united on what comes next. Take ING Bank’s Carsten Brzeski, who is positive that — after a dismal first quarter characterised by supply chain snags, high energy prices and an Omicron wave — we’ll see a strong rebound in output as the weather warms: The upside to a disappointingly weak growth performance in 2021 is that the economy is fundamentally healthy and once pandemic-related restrictions are lifted and global supply chain frictions abate, industrial activity and with it, the entire economy will lift off again.Andrew Kenningham of research outfit Capital Economics is less convinced the source of the economy’s troubles will dissipate any time soon: Prospects for 2022 depend largely on the pandemic and supply chain problems. Omicron is sure to keep consumer expenditure subdued in the near term even though Germany has not yet suffered infections on the scale seen elsewhere. Meanwhile, there is little evidence that supply problems are easing in Germany and indeed the Statistics office said supply bottlenecks would continue for a while. However, improvements in the UK and US are encouraging so we assume that the problems will ease gradually.Our own view is that the bottlenecks which are hindering German growth, and triggering inflation, will take a long time to clear. Take the impact of the chips shortage on used car prices. Some chipmakers began to report excess stock towards the back end of last year, so the picture might — on the face of it — look rosier now than it did a few months ago. But cars require dozens of different sorts of semiconductor chips, not all of which may be readily available just yet. Carmakers are compensating by offering new vehicles that lack some of the features they usually offer. Customers, desperate for a car they’ve been waiting upwards of a year for, might take them. But they might not. Even if chips do become readily available, or customers settle for a vehicle short of a mod con or two, there are substantial backlogs. Order books will take a couple of quarters to fulfil, leaving those who are not on the waiting list having to settle for a used vehicle. Anyone hoping for a good deal on an old Five Series will almost certainly be waiting a while yet. Of course, automobiles are not the entire German economy. Weak consumption also weighed on growth. Once the Omicron wave passes, we will no doubt see higher spending on services. That will lift the mood. Still, manufacturing matters far more here for elsewhere — both for output, and even more so for growth. The real risk is that, if we get towards the back end of this year and bottlenecks (and therefore price pressures) endure, then companies are going to come under a lot of pressure to pass on the costs to their customers and pay their employees more. In the process, higher inflation risks becoming entrenched, denting the country’s longer term prospects. For now, the workers of the eurozone — including in Germany — have not seen the sort of pay growth that their counterparts on the other side of the Atlantic have. Indeed, negotiated salaries (an important part of the wage bargaining process here) have yet to be impacted by inflation at all. Chart below courtesy of @OliverRakau:

The relationship between labour and capital in Germany is relatively harmonious and collaborative. Unions’ preference for benefits that offer a better work-life balance over higher pay has kept a lid on wage growth too. The longer the supply chain snags remain an issue, the lower the chance this trend holds. And the greater the likelihood that this once short-term shock begins to have deeper ramifications. More