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    U.S. and Japan Reach Deal on Battery Minerals

    While the terms of the deal are limited, the agreement appears to provide a model for resolving recent trade spats between the United States and some of its closest allies.WASHINGTON — The United States and Japan have reached an agreement over supplies of the critical minerals used to make car batteries, a deal that will likely put to rest a contentious issue in the relationship with Japan and could be a model for resolving similar disputes with other trading partners.The agreement provides a potential workaround for the Biden administration in its disagreement not only with Japan, but with the European Union and other allies over the terms of its new climate legislation. The Inflation Reduction Act, which invests $370 billion to transition the United States to cleaner cars and energy sources, has angered some allies who were excluded from its benefits.While the scope of the agreement is limited, the Biden administration has also promoted the deal as the beginning of a new framework that the United States and its allies hope to build with like-minded countries to develop more stable supply chains for electric vehicles that do not rely as heavily on China. American officials have argued that China’s dominance of the global car battery industry, including the processing of the minerals needed to make the batteries, leaves the United States highly vulnerable.According to a fact sheet distributed by the Office of the United States Trade Representative late Monday, the United States and Japan promised to encourage higher labor and environmental standards for minerals that are key to powering electric vehicles, like lithium, cobalt and nickel. The countries said they would also promote more efficient use of resources and confer on how they reviewed investments from foreign entities in the sector, among other pledges.Katherine Tai, the United States trade representative, was expected to sign the agreement Tuesday alongside Koji Tomita, the Japanese ambassador to the United States. The United States and Europe are separately negotiating a similar agreement..css-1v2n82w{max-width:600px;width:calc(100% – 40px);margin-top:20px;margin-bottom:25px;height:auto;margin-left:auto;margin-right:auto;font-family:nyt-franklin;color:var(–color-content-secondary,#363636);}@media only screen and (max-width:480px){.css-1v2n82w{margin-left:20px;margin-right:20px;}}@media only screen and (min-width:1024px){.css-1v2n82w{width:600px;}}.css-161d8zr{width:40px;margin-bottom:18px;text-align:left;margin-left:0;color:var(–color-content-primary,#121212);border:1px solid var(–color-content-primary,#121212);}@media only screen and (max-width:480px){.css-161d8zr{width:30px;margin-bottom:15px;}}.css-tjtq43{line-height:25px;}@media only screen and (max-width:480px){.css-tjtq43{line-height:24px;}}.css-x1k33h{font-family:nyt-cheltenham;font-size:19px;font-weight:700;line-height:25px;}.css-1hvpcve{font-size:17px;font-weight:300;line-height:25px;}.css-1hvpcve em{font-style:italic;}.css-1hvpcve strong{font-weight:bold;}.css-1hvpcve a{font-weight:500;color:var(–color-content-secondary,#363636);}.css-1c013uz{margin-top:18px;margin-bottom:22px;}@media only screen and (max-width:480px){.css-1c013uz{font-size:14px;margin-top:15px;margin-bottom:20px;}}.css-1c013uz a{color:var(–color-signal-editorial,#326891);-webkit-text-decoration:underline;text-decoration:underline;font-weight:500;font-size:16px;}@media only screen and (max-width:480px){.css-1c013uz a{font-size:13px;}}.css-1c013uz a:hover{-webkit-text-decoration:none;text-decoration:none;}How Times reporters cover politics. We rely on our journalists to be independent observers. So while Times staff members may vote, they are not allowed to endorse or campaign for candidates or political causes. This includes participating in marches or rallies in support of a movement or giving money to, or raising money for, any political candidate or election cause.Learn more about our process.Ms. Tai said the announcement was “proof of President Biden’s commitment to building resilient and secure supply chains.” She added that “Japan is one of our most valued trading partners, and this agreement will enable us to deepen our existing bilateral relationship.”The deal appears to be aimed at expanding certain provisions of the climate legislation, which offers generous tax incentives for electric vehicles that are built in North America or source the material for their batteries from the United States or countries with which the United States has a free-trade agreement. The United States has free-trade agreements with 20 countries but not the European Union or Japan, and foreign allies have complained that the legislation will disadvantage their companies and lure investment away from them.But since the Inflation Reduction Act does not technically define what constitutes a “free-trade agreement,” American officials have found what they believe to be a workaround. They are arguing that countries will be able to meet the requirement by signing a more limited trade deal instead. Later this week, the Treasury Department is expected to issue a proposed rule clarifying the law’s provisions.President Biden and the European Commission president, Ursula von der Leyen, announced after a meeting earlier this month that their governments were pursuing a similar deal. But European officials said that arrangement could take more time to finalize, since the European Union must submit such agreements to its member states for their approval.While the administration argued that key members of Congress always intended American allies to be included in the law’s benefits, some lawmakers have protested these arrangements, saying the Biden administration is sidestepping Congress’s authority over new trade deals.“The executive branch, in my view, has begun to embrace a go-it-alone trade policy,” Senator Ron Wyden of Oregon, the Democratic chairman of the Senate Finance Committee, said last week, as Ms. Tai testified before the committee. Congress’s role in U.S. trade policy “is black-letter law, colleagues, and it’s unacceptable to even offer the argument otherwise,” he added. More

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    Fed Vice Chair Calls Silicon Valley Bank a ‘Textbook Case of Mismanagement’

    The Federal Reserve’s top bank cop blamed Silicon Valley Bank’s leaders, while previewing the cental bank’s review of its faulty oversight.WASHINGTON — The Federal Reserve’s vice chair for supervision blamed Silicon Valley Bank’s demise on poor internal management and excessive risk-taking and detailed the steps that Fed supervisors took to address the snowballing problems that ultimately killed the company, according to prepared remarks ahead of a congressional hearing on Tuesday.The vice chair, Michael Barr, who will appear at a Senate Banking Committee hearing along with other regulators, also acknowledged in his written testimony that bank supervision and regulation might need to change in the wake of the collapse.Silicon Valley Bank’s collapse this month sent shock-waves across the global banking system, prompting many depositors to pull their cash out of regional and smaller banks over concerns they could lose their money. The tumult prompted a sweeping response from the government, which pledged to make sure that even big and uninsured depositors at Silicon Valley Bank and another failed bank — Signature — were paid back. The Fed itself set up an emergency lending program to help banks who needed to raise cash in a pinch.But as the upheaval shows tentative signs of calming, lawmakers are demanding to know what went wrong.Mr. Barr will testify alongside Martin Gruenberg, chairman of the Federal Deposit Insurance Corporation, and Nellie Liang, the Treasury’s under secretary for domestic finance.Mr. Gruenberg suggested in his prepared remarks, which were also released on Monday afternoon, that the F.D.I.C. would review both its oversight of Signature bank and the suitability of America’s deposit insurance system — including coverage levels, which now cap at $250,000 — in the wake of the debacle. The F.D.I.C. will release the results of its review by May 1.Silicon Valley Bank’s collapse sent shock-waves across the global banking system, prompting many depositors to pull their cash out of regional and smaller banks.Ian C. Bates for The New York TimesThe Fed was Silicon Valley Bank’s primary regulator, and it too was reviewing why it had failed to stop risks that were in plain sight. Silicon Valley Bank had grown rapidly. Its depositors were heavily concentrated in the volatile technology industry. Many of them had more than $250,000 in their accounts, meaning that their deposits were past the federal insurance limit and that they were more prone to run at the first sign of trouble. The bank’s leaders had made a bad bet that interest rates would stabilize or fall, and the bank faced big losses when rates instead rose in 2022.Mr. Barr was expected to face questions about why those glaring issues had not been stopped — and he laid out an early defense in his speech text.“SVB’s failure is a textbook case of mismanagement,” he said, while adding that the “failure demands a thorough review of what happened, including the Federal Reserve’s oversight of the bank.”He noted that Fed supervisors spotted a range of problems in late 2021 and throughout 2022, even rating the bank’s management as deficient, which barred it from growing by acquiring other companies. And he said that supervisors told board officials in mid-February that they were actively engaged with SVB on its interest rate risk.“As it turned out, the full extent of the bank’s vulnerability was not apparent until the unexpected bank run on March 9,” Mr. Barr added. “In our review, we are focusing on whether the Federal Reserve’s supervision was appropriate for the rapid growth and vulnerabilities of the bank.”Yet Mr. Barr was also likely to face questions — especially from Democrats — about whether changes to Fed regulation and supervision in recent years could have paved the way for the implosion. Congress passed a law that made midsize bank oversight less onerous in 2018, and Mr. Barr’s predecessor, Randal K. Quarles, an appointee of President Donald J. Trump, had carried out and in some cases built upon those changes in 2019.Mr. Barr, a Biden appointee, started in his role in mid-2022. He has been carrying out what the Fed calls a “holistic review” of bank capital standards, but that has yet to be completed.And questions could arise about issues that Mr. Barr did not address in his remarks. For instance, while he pointed out that supervisors were aware of risks at Silicon Valley Bank, he did not note that the group of Fed Board staff members and supervisors overseeing the bank gave it a satisfactory rating when it came to liquidity in 2022 — even after a range of problems, including some with liquidity risk management, had already been flagged.Mr. Barr did suggest that the Fed’s internal review, which he is leading and is set to conclude by May 1, was assessing whether supervisors could “distinguish risks that pose a material threat to a bank’s safety and soundness” and whether “supervisors have the tools to mitigate threats.”But that may be too little to satisfy lawmakers, many of whom are calling for an independent review of what went wrong. Several had sent letters to the Fed requesting a thorough release of materials related to how Silicon Valley Bank was overseen.Ms. Liang said in prepared remarks that the Biden administration was closely monitoring the banking sector and the broader financial system for signs of weakness and defended the handling of the bank failures.“These actions have helped to stabilize deposits throughout the country and provided depositors with confidence that their funds are safe,” she said.Echoing remarks made by Treasury Secretary Janet L. Yellen last week, Ms. Liang indicated that the Biden administration was prepared to take additional actions.“They are tools we would use again if warranted to ensure that Americans’ deposits are safe,” she said.Mr. Gruenberg suggested that the widespread problems caused by the failure of two banks that were not considered systemic under existing regulatory rules indicated that regulators needed to pay more attention to banks of their size.“Given the financial stability risks caused by the two failed banks, the methods for planning and carrying out a resolution of banks with assets of $100 billion or more also merit special attention,” he said.He said the F.D.I.C. had already begun investigating how senior leaders at both banks contributed to losses through bad management, adding, in what seemed like a roundabout reference to President Biden’s call for new legislation on clawbacks from failed bank executives’ stock sales, that the regulator had the power to hold individual executives accountable.Mr. Gruenberg also seemed to nod to community bank lobbyists’ recent protesting of having to pay for making uninsured depositors at Signature and Silicon Valley Bank whole by participating in a special assessment by the F.D.I.C. to replenish the deposit insurance fund.“The law provides the F.D.I.C. authority, in implementing the assessment, to consider ‘the types of entities that benefit from any action taken or assistance provided,’” Mr. Gruenberg said. 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    Global Economy May Be in a ‘Lost Decade,’ World Bank Warns

    Adding to crises like the pandemic, recent stress in the banking system is a new threat to world growth, experts at the organization said.WASHINGTON — The World Bank warned on Monday that the coronavirus pandemic and Russia’s war in Ukraine had contributed to a decline in the global economy’s long-term growth potential, leading to what could be a “lost decade” that would mean more poverty and fewer resources to combat the impact of climate change.The warning comes as the world deals with overlapping crises — a pandemic that crippled economies and strained public health systems and Russia’s invasion of Ukraine, which disrupted global supply chains and hurt international trade ties. The threat of a more protracted slump coincides with new signs of stress in the world’s financial system as a series of banking crises threaten to undermine economic growth.The World Bank projected in a new report that average potential global output is poised to fall to a 30-year low of 2.2 percent per year between 2023 and 2030. That would be a sharp decline from 3.5 percent per year during the first decade of this century.The falloff will be even more pronounced for developing economies, which grew at an average annual rate of 6 percent from 2000 to 2010; that rate could decline to 4 percent this decade.“A lost decade could be in the making for the global economy,” said Indermit Gill, the World Bank’s chief economist and senior vice president for development economics. “The ongoing decline in potential growth has serious implications for the world’s ability to tackle the expanding array of challenges unique to our times — stubborn poverty, diverging incomes and climate change.”Officials at the World Bank said the “golden era” of development appeared to be coming to an end. They warned that policymakers would need to get more creative as they tried to address global challenges without being able to rely on the rapid economic expansions of countries such as China, which has long been an engine of worldwide growth.They suggested that international monetary and fiscal policy frameworks should be more closely aligned, and that world leaders needed to find ways to reduce trade costs and increase their labor force participation. A return to faster growth, they said, will not be easy.Kristalina Georgieva, the managing director of the International Monetary Fund, said on Sunday that “risks to financial stability have increased.”Jing Xu/Reuters“It will take a herculean collective policy effort to restore growth in the next decade to the average of the previous one,” the World Bank said in the report.The increasing frequency of global crises continues to weigh on output even as signs of an economic rebound emerge. Efforts by central banks to tame inflation by raising interest rates have fueled turmoil in the banking sector, leading to the failures of Silicon Valley Bank and Signature Bank in the United States this month and the rescue of Credit Suisse by UBS.Top economic officials have been watching to see if the strain on the banking system will become a significant economic headwind that could tip the United States into a recession.“It definitely brings us closer right now,” Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, said of a recession on the CBS program “Face the Nation” on Sunday. “What’s unclear for us is how much of these banking stresses are leading to a widespread credit crunch.”Kristalina Georgieva, the managing director of the International Monetary Fund, said on Sunday that “risks to financial stability have increased” and that given high levels of uncertainty, policymakers must remain vigilant. She noted that the recent turmoil could have implications for the I.M.F.’s global economic outlook and financial stability report, which will be released in the next few weeks.“At a time of higher debt levels, the rapid transition from a prolonged period of low interest rates to much higher rates — necessary to fight inflation — inevitably generates stresses and vulnerabilities, as evidenced by recent developments in the banking sector in some advanced economies,” Ms. Georgieva said at the China Development Forum.The I.M.F. said in January that it believed a global recession could be avoided as growth began to rebound later this year. At the time, it projected that output would be more resilient than previously anticipated, and it upgraded its growth projections for 2023 and 2024, but it did warn that “financial stability risks remain elevated.”World Bank officials said that if the current banking turmoil spiraled into a financial crisis and recession, then global growth projections might be even weaker because of the associated losses of jobs and investment.“However you look at it, if the current situation gets worse and turns into a recession, especially a recession at the global level, that could have negative implications for long-term growth prospects,” said Ayhan Kose, director the World Bank’s Prospects Group and the lead author of the report. More

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    Support Grows to Have Russia Pay for Ukraine’s Rebuilding

    Although U.S. officials have cautioned against seizing Russia’s reserves in foreign banks, others say it’s “crazy” not to after Moscow’s war of aggression.When the World Bank released its latest damage assessment of war-torn Ukraine this week, it announced that the price of recovery and rebuilding had grown to $411 billion. What it didn’t say, though, was who would pay for it.To Ukraine, the answer seems obvious: Confiscate the roughly $300 billion in Russian Central Bank assets that Western banks have frozen since the invasion last year. As the war grinds on, the idea has gained supporters.The European Union has already declared its desire to use the Kremlin’s bankroll to pay for reconstruction in Ukraine. At the urging of a handful of Eastern European and Baltic nations, the bloc convened a working group last month to assess the possibility of grabbing that money as well as frozen assets owned by private individuals who have run afoul of European sanctions.“In principle, it is clear-cut: Russia must pay for the reconstruction of Ukraine,” said Sweden’s prime minister, Ulf Kristersson, who holds the presidency of the Council of the European Union.At the same time, he noted, turning that principle into practice is fraught. “This must be done in accordance with E.U. and international law, and there is currently no direct model for this,” Mr. Kristersson said.The working group, which has a two-year mandate, is scheduled to meet in Brussels next week.Other top officials, in the United States and elsewhere, have sounded more skeptical. After visiting Kyiv last month, Treasury Secretary Janet L. Yellen reiterated her warnings of formidable legal obstacles. The Swiss government declared that confiscating private Russian assets from banks would violate Switzerland’s Constitution as well as international agreements.The legal debate is just one skein in the tangle of moral, political and economic concerns that the potential seizure of Russia’s reserves poses.Departing a Mass in Lviv, Ukraine. Some U.S. officials worry about side effects from seizing assets in order to rebuild the country. Maciek Nabrdalik for The New York TimesMs. Yellen and others have argued that seizing Russia’s accounts could undermine faith in the dollar, the most widely used currency for the world’s trade and transactions. Foreign nations might be more reluctant to keep money in U.S. banks or make investments, fearing that it could be seized. At the same time, experts worry that such a move could put American and European assets held in other countries at higher risk of expropriation in the future if there is an international dispute.There are also concerns that seizure would erode faith in the system of international laws and agreements that Western governments have championed most vocally.But Russia’s pummeling of Ukraine’s infrastructure, charges of war crimes against President Vladimir V. Putin, and the difficulty of squeezing Russia economically when demand for its energy and other exports remains high have helped the idea gain ground.Also, there is the uncomfortable realization that the cost of rebuilding Ukraine once the war is over will far outstrip the amount that even wealthy allies like the United States and Europe may be willing to give.The United States, the European Union, Britain and other allies have funneled billions of dollars into Ukraine’s war effort, as well as tanks, missiles, ammunition, drones and other military equipment. And this week the International Monetary Fund approved its biggest loan yet — $15.6 billion — just to keep Ukraine’s battered economy afloat.But public support for continued funding is not inexhaustible.“If it’s difficult to get funding now for maintaining the infrastructure or housing, why is it going to be easier to get funding later?” asked Tymofiy Mylovanov, the president of the Kyiv School of Economics and a former government minister.It’s hard enough for Ukraine to get money and equipment “while we are being killed,” Mr. Mylovanov said. “Once we’re not being killed, we’ll have difficulty getting anything.”Laurence Tribe, a university professor of constitutional law at Harvard, has argued that a 1977 law, the International Emergency Economic Powers Act, gives the U.S. president the authority to confiscate sovereign Russian assets and repurpose them for Ukraine.The U.S. authorities previously seized Iraqi and Iranian assets and redirected them to compensate victims of violence, settle lawsuits or provide financial assistance.Mr. Tribe concedes that calculations about the ripple effect on the dollar or invested assets will ultimately matter more to policymakers than legal ones. But he finds those broader political concerns unpersuasive.“It’s crazy to argue that it’s more destabilizing to have assets seized than to have wars of aggression,” Mr. Tribe said in an interview on Friday. “The survival of the global economy is far more threatened by the way Russia behaved” than by any financial retaliation.And, he added, taking billions of dollars is much more meaningful either as a deterrent or punishment than bringing war crime charges.A destroyed garage in Hostomel, a Kyiv suburb. Prominent Americans like Laurence Tribe and Lawrence Summers argue that seizing Russian assets would be the right thing to do.Emile Ducke for The New York TimesOther prominent voices in the United States have endorsed the notion. Lawrence H. Summers, a former Treasury secretary; Robert B. Zoellick, a former president of the World Bank and U.S. trade representative; and Philip D. Zelikow, a historian at University of Virginia and a former State Department counselor, made their case this week in an opinion piece in The Washington Post.“Transferring frozen Russian reserves would be morally right, strategically wise and politically expedient,” they wrote.A few countries in addition to Ukraine have taken steps to pry loose foreign assets owned by Russian individuals and entities and use the money for reconstruction. In December, the Canadian government began the process of seizing $26 million owned by the Russian oligarch Roman Abramovich after passing a law easing the forfeiture of private Russian assets from individuals who are under sanctions.A federal judge in Manhattan gave the go-ahead last month to confiscate $5.4 million from another Russian businessman facing sanctions, Konstantin Malofeev. And Estonia is also seeking to pass legislation that would give the government there similar powers.But Mr. Tribe, Mr. Summers and others argue that the main focus should be not on seizing private assets, which would be legally much more complicated and time-consuming, but on the hundreds of billions owned by Russia’s central bank.Wherever the money comes from, the bill keeps growing. Over the past year, Ukraine’s economy has shrunk by a third. The war has pushed more than seven million people into poverty, the World Bank reported, and reversed 15 years of development progress. More

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    Banks Are Borrowing More From the Fed: What to Know

    As turmoil sweeps the United States financial system, banks are turning to the Federal Reserve for loans to get them through the squeeze.Banks are turning to the Federal Reserve’s loan programs to access funding as turmoil sweeps the financial system in the wake several high-profile bank failures.The collapse of Silicon Valley Bank on March 10 followed by Signature Bank on March 12 prompted depositors to pull their money from some banks and sent the stock prices for financial firms on a roller-coaster ride. The tumult has left some institutions looking for a ready source of cash — either to pay back customers or to make sure they have enough money on hand to weather a rough patch.That is where the Fed comes in. The central bank was founded in 1913 partly to serve as a backstop to the banking system — it can loan financial institutions money against their assets in a pinch, which can help banks raise cash more quickly than they would be able to if they had to sell those securities on the open market.But the Fed is now going further than that: Central bankers on March 12 created a program that is lending to banks against their financial assets as if those securities were still worth their original value. Why? As the Fed has raised interest rates to contain inflation over the past year, bonds and mortgage debt that paid lower rate of interest became less valuable.By lending against the assets at their original price instead of their lower market value, the Fed can insulate banks from having to sell those securities at big losses. That could reassure depositors and stave off bank runs.Two key programs together lent $163.9 billion this week, according to Fed data released on Wednesday — roughly in line with $164.8 billion a week earlier. That is much higher than normal. The report usually shows banks borrowing less than $10 billion at the Fed’s so-called “discount window” program.The elevated lending underlines a troubling reality: Stress continues to course through the banking system. The question is whether the government’s response, including a new central bank lending program, will be enough to quell it.A Little HistoryBefore diving into what the fresh figures mean, it’s important to understand how the Fed’s lending programs work.The first, and more traditional, is the discount window, affectionately called “disco” by financial wonks. It is the Fed’s original tool: At its founding, the central bank didn’t buy and sell securities as it does today, but it could lend to banks against collateral.In the modern era, though, borrowing from the discount window has been stigmatized. There is a perception in the financial industry that if a big bank taps it, it must be a sign of distress. Borrower identities are released, though it’s on a two-year delay. Its most frequent users are community banks, though some big regional lenders like Bancorp used it in 2020 at the onset of the pandemic. Fed officials have tweaked the program’s terms over the years to try to make it more attractive during times of trouble, but with mixed results.Enter the Fed’s new facility, which is like the discount window on steroids. Officially called the Bank Term Funding Program, it leverages emergency lending powers that the Fed has had since the Great Depression — ones that the central bank can use in “extraordinary and exigent” circumstances with the sign-off of the Treasury secretary. Through it, the Fed is lending against Treasuries and mortgage-backed securities valued at their original price for up to a year.Policymakers seem to hope that the program will help reduce interest rate risk in the banking system — the problem of the day — while also getting around the stigma of borrowing from the discount window.Banks are Borrowing More Than UsualThe backstops seem to be working:  During the recent turmoil, banks are using both programs.Discount window borrowing climbed to $110.2 billion as of Wednesday, down slightly from $152.9 billion the previous week — when the turmoil started. Those figures are abnormally elevated: Discount window borrowing had stood at just $4.6 billion the week before the tumult began.The new program also had borrowers. As of Wednesday, banks were borrowing $53.7 billion, according to the Fed data. The previous week, it stood at $11.9 billion. The names of specific borrowers will not be released until 2025.The Borrowing Could Be a Sign of TroubleThe next issue is perhaps more critical: Analysts are trying to parse whether it is a good thing that banks are turning to these programs, or whether the stepped up borrowing is a sign that their problems remain serious.“You still have some banks that feel the need to tap these facilities,” said Subadra Rajappa, head of U.S. rates strategy at Société Générale. “There’s definitely cash moving from the banking sector and into other investments, or into the biggest banks.”While Silicon Valley Bank had some obvious weaknesses that regulation experts said were not widely shared across the banking system, its failure has prodded people to look more closely at banks — and depositors have been punishing those with similarities to the failed institutions by withdrawing their cash. PacWest Bancorp has been among the struggling banks. The company said this week that it had borrowed $10.5 billion from the Fed’s discount window.Or the Borrowing Could Be a Good SignThe fact that banks feel comfortable using these tools might reassure depositors and financial markets that cash will keep flowing, which might help avert further troubles.In the past, borrowing from the Fed carried a stigma because it signaled a bank might be in trouble. This time around, the securities the banks hold aren’t at risk of defaulting, they are just worth less in the bond market as a result of the rapid increase in interest rates.“For me, this is a very different situation to what I have seen in the past,” said Greg Peters, co-chief investment officer at PGIM Fixed Income. More

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    Republicans Say Spending Is Fueling Inflation. The Fed Chair Disagrees.

    Jerome H. Powell has said that snarled supply chains, an oil shock following Russia’s invasion of Ukraine and shifts among American consumers are primarily behind rapid price growth.WASHINGTON — The chair of the Federal Reserve, Jerome H. Powell, has repeatedly undercut a central claim Republicans make as they seek sharp cuts in federal spending: Government spending is driving the nation’s still-hot inflation rate.Republican lawmakers say spending programs signed into law by President Biden are pumping too much money into the economy and fueling an annual inflation rate that was 6 percent in February — a decline from last year’s highs, but still well above historical norms. Mr. Powell disputed those claims in congressional testimony earlier this month and in a news conference on Wednesday, after the Fed announced it would once again raise interest rates in an effort to bring inflation back toward normal levels.Asked whether federal tax and spending policies were contributing to price growth, Mr. Powell pointed to a decline in federal spending from the height of the Covid-19 pandemic.“You have to look at the fiscal impulse from spending,” Mr. Powell said on Wednesday, referring to a measure of how much tax and spending policies are adding or subtracting to economic growth. “Fiscal impulse is actually not what’s driving inflation right now. It was at the beginning perhaps, but that’s not the story right now.”Instead, Mr. Powell — along with Mr. Biden and his advisers — says rapid price growth is primarily being driven by factors like snarled supply chains, an oil shock following Russia’s invasion of Ukraine and a shift among American consumers from spending money on services like travel and dining out to goods like furniture.Mr. Powell has also said the low unemployment rate was playing a role: “Some part of the high inflation that we’re experiencing is very likely related to an extremely tight labor market,” he told a House committee earlier this month.Increased consumer spending from savings could be pushing the cost of goods and services higher, White House economists said this week.Gabby Jones for The New York TimesBut the Fed chair’s position has not swayed congressional Republicans, who continue to press Mr. Biden to accept sharp spending reductions in exchange for raising the legal limit on how much the federal government can borrow.“Over the last two years, this administration’s reckless spending and failed economic policies have resulted in continued record inflation, soaring interest rates and an economy in a recessionary tailspin,” Representative Jodey C. Arrington, Republican of Texas and the chairman of the Budget Committee, said at a hearing on Thursday.Republicans have attacked Mr. Biden over inflation since he took office. They denounced the $1.9 trillion economic aid package he signed into law early in 2021 and warned it would stoke damaging inflation. Mr. Biden’s advisers largely dismissed those warnings. So did Mr. Powell and Fed officials, who were holding interest rates near zero and taking other steps at the time to stoke a faster recovery from the pandemic recession.Economists generally agree that those stimulus efforts — carried out by the Fed, by Mr. Biden and in trillions of dollars of pandemic spending signed by Mr. Trump in 2020 — helped push the inflation rate to its highest level in 40 years last year. But researchers disagree on how large that effect was, and over how to divide the blame between federal government stimulus and Fed stimulus..css-1v2n82w{max-width:600px;width:calc(100% – 40px);margin-top:20px;margin-bottom:25px;height:auto;margin-left:auto;margin-right:auto;font-family:nyt-franklin;color:var(–color-content-secondary,#363636);}@media only screen and (max-width:480px){.css-1v2n82w{margin-left:20px;margin-right:20px;}}@media only screen and (min-width:1024px){.css-1v2n82w{width:600px;}}.css-161d8zr{width:40px;margin-bottom:18px;text-align:left;margin-left:0;color:var(–color-content-primary,#121212);border:1px solid var(–color-content-primary,#121212);}@media only screen and (max-width:480px){.css-161d8zr{width:30px;margin-bottom:15px;}}.css-tjtq43{line-height:25px;}@media only screen and (max-width:480px){.css-tjtq43{line-height:24px;}}.css-x1k33h{font-family:nyt-cheltenham;font-size:19px;font-weight:700;line-height:25px;}.css-1hvpcve{font-size:17px;font-weight:300;line-height:25px;}.css-1hvpcve em{font-style:italic;}.css-1hvpcve strong{font-weight:bold;}.css-1hvpcve a{font-weight:500;color:var(–color-content-secondary,#363636);}.css-1c013uz{margin-top:18px;margin-bottom:22px;}@media only screen and (max-width:480px){.css-1c013uz{font-size:14px;margin-top:15px;margin-bottom:20px;}}.css-1c013uz a{color:var(–color-signal-editorial,#326891);-webkit-text-decoration:underline;text-decoration:underline;font-weight:500;font-size:16px;}@media only screen and (max-width:480px){.css-1c013uz a{font-size:13px;}}.css-1c013uz a:hover{-webkit-text-decoration:none;text-decoration:none;}How Times reporters cover politics. We rely on our journalists to be independent observers. So while Times staff members may vote, they are not allowed to endorse or campaign for candidates or political causes. This includes participating in marches or rallies in support of a movement or giving money to, or raising money for, any political candidate or election cause.Learn more about our process.One recent model, from researchers at the Federal Reserve Bank of New York, the University of Maryland and Harvard University, estimates that about a third of the inflation from December 2019 through June 2022 was caused by fiscal stimulus measures.Much of that stimulus has already made its way through the economy. Spending on pandemic aid to people, businesses and state and local governments fell sharply over the last year, as emergency programs signed into law by Mr. Biden and former President Donald J. Trump expired. The federal budget deficit fell to about $1.4 trillion in the 2022 fiscal year from about $2.8 trillion in 2021.House Speaker Kevin McCarthy and Representative Jodey Arrington have attacked the Biden administration’s spending policies.Haiyun Jiang/The New York TimesThe Hutchins Center at the Brookings Institution in Washington estimates that in the first quarter of 2021, when Mr. Biden’s economic aid bill delivered direct payments, enhanced unemployment checks and other benefits to millions of Americans, government fiscal policy added 8 percentage points to economic growth. At the end of last year, the center estimates, declining government spending was actually reducing economic growth by 1 percentage point.Still, even Biden administration officials say some effects of Mr. Biden’s — and Mr. Trump’s — stimulus bills could still be contributing to higher prices. That’s because Americans did not immediately spend all the money they got from the government in 2020 and 2021. They saved some of it, and now, some consumers are drawing on those savings to buy things.Increased consumer spending from savings could be pushing the cost of goods and services higher, White House economists conceded this week in their annual “Economic Report of the President,” which includes summaries of the past year’s developments in the economy.“If the drawdown of excess savings, together with current income, boosted aggregate demand, it could have contributed to high inflation in 2021 and 2022,” the report says.Some liberal economists contend consumer demand is currently playing little if any role in price growth — placing the blame on supply challenges or on companies taking advantage of their market power and the economic moment to extract higher prices from consumers.High prices “are not being driven by excess demand, but are actually being driven by things like a supply chain crisis or war in Ukraine or corporate profiteering,” said Rakeen Mabud, chief economist for the Groundwork Collaborative, a liberal policy organization in Washington.Other economists, though, say Mr. Biden and Congress could help the Fed’s inflation-fighting efforts by doing even more to reduce consumer demand and cool growth, either by raising taxes or reducing spending.Mr. Biden proposed a budget this month that would cut projected budget deficits by $3 trillion over the next decade, largely by raising taxes on high earners and corporations. Republicans refuse to raise taxes but are pushing for immediate cuts in government spending on health care, antipoverty measures and more, though they have not released a formal budget proposal yet. The Republican-controlled House voted this year to repeal some tax increases Mr. Biden signed into law last year, a move that could add modestly to inflation.Republican lawmakers have pushed Mr. Powell on whether he would welcome more congressional efforts to reduce the deficit and help bring inflation down. Mr. Powell rebuffed them.“We take fiscal policy as it comes to our front door, stick it in our model along with a million other things,” he said on Wednesday. “And we have responsibility for price stability. The Federal Reserve has the responsibility for that, and nothing is going to change that.” More

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    Amazon Union Prevails in Ruling on Warehouse Access for Organizing

    Federal labor regulators said that Amazon had illegally barred off-duty employees from work sites and that the policy was aimed at union backers.Federal labor regulators have concluded that Amazon’s policy of restricting the warehouse access of off-duty employees is illegal, backing a contention of the union that has represented workers at a Staten Island warehouse since winning an election there last year.In a written communication sent to the union on Wednesday, a lawyer for the National Labor Relations Board’s Brooklyn region, Brent E. Childerhose, said the regional office had determined that the company broke the law by adopting the access rule last summer in response to union activity, and that it had applied the rule in a discriminatory fashion against union supporters.The Amazon Labor Union contends that the access policy makes it difficult for workers to exercise their right to talk to co-workers about joining or supporting a union.An Amazon spokeswoman, Mary Kate Paradis, said that the company had adopted the rule to protect employee safety and building security, and that it applied the rule fairly and in a way that “has nothing to do with whether an individual supports a particular cause or group.” Employees continue to have access to nonwork areas outside company buildings, she said.Portions of the case will go to a trial before an administrative law judge unless Amazon settles it beforehand. The losing side can appeal the judge’s decision to the labor board in Washington. A lawyer for the union, Seth Goldstein, said that if the labor board prevailed, Amazon might have to roll back the off-duty-access policy at warehouses around the country. The labor board did not immediately respond to a query about the potential impact.The board also said the company had illegally failed to bargain with the union. An N.L.R.B. regional director certified the result in January, but the company is appealing the outcome to the labor board in Washington.The Amazon spokeswoman said it wouldn’t make sense to negotiate changes to how the company operated at the site while Amazon continued to challenge the election’s validity.Amazon has traditionally forbidden workers to remain inside its warehouses, including break rooms, if they are not within 15 minutes of their shift. But the labor board reached a settlement with the company to ease the policy nationally in late 2021, as the union campaign at the Staten Island warehouse, known as JFK8, was gaining momentum.Union organizers attribute their election victory at JFK8 partly to the ability of off-duty employees to talk to co-workers and distribute food and union material in break rooms. They say the loss of such access last summer, not long after their victory, made it far more difficult to reach workers at the warehouse and try to enlist them in a pressure campaign to bring Amazon to the bargaining table.Under the settlement, Amazon was allowed to reinstitute a more restrictive policy after a few months, but the labor board contends that the manner in which it did so was discriminatory and therefore illegal. More

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    Double-Barreled Economic Threat Puts Congress on Edge

    Republicans and Democrats disagree over how recent bank closures should impact the debt limit stalemate, and have taken divergent lessons from past economic crises.WASHINGTON — In 2008, an imminent collapse of the banking system consumed Congress before lawmakers delivered a bailout. Three years later, a debt limit crisis enveloped Washington and led to a series of spending cuts after a dangerous brush with default and a first-ever downgrade in the nation’s credit rating.Now unease about the banking system’s stability and a stalemate over raising the debt limit are engulfing the capital simultaneously, ratcheting up an already high level of financial anxiety as two economic challenges Congress has experienced before become intertwined.“The stakes are exceptionally high when you are dealing with what amounts to a one-two punch of economic peril,” said Senator Ron Wyden, Democrat of Oregon and chairman of the Senate Finance Committee. “The messages that you send to the economy and the public with respect to banking and the full faith and credit of the United States — it doesn’t get more consequential than that.”Republicans and Democrats acknowledge it is a scary case of déjà vu times two. But they diverge sharply on how recent bank failures — and uncertainty over how Congress should respond to them, if at all — will influence the debt limit fight later this summer.At their just-concluded retreat in Florida, House Republicans took the line that shakiness in the banking system should strengthen their hand in the coming showdown over the debt limit. They argued that a Democrat-led spending spree spurred inflation, forced up interest rates and led to a precarious situation for all but the largest banks. The clear answer, to them, remains deep spending cuts, and they say they will still insist on cuts before making any move to raise the debt ceiling.Treasury Secretary Janet L. Yellen said on Tuesday that the president was willing to talk federal spending with Republicans, just not under the threat of a debt default.Pete Marovich for The New York Times“That should wake everybody up,” Speaker Kevin McCarthy, Republican of California, told reporters on Tuesday when asked about the intersection of banking stability and the debt limit. “Why are we having a crisis? Because the government spent too much and created inflation.”“I believe to get to a debt ceiling limit, you have to be spending less than we spent before,” he said.But Jerome H. Powell, the Fed chair, on Wednesday disputed the notion that spending remained the chief driver of inflation.“Spending was of course tremendously high during the pandemic,” he said at a news conference announcing an increase in interest rates. “As pandemic programs rolled off, spending actually came down.”“Fiscal impulse is actually not what’s driving inflation right now,” he said. “It was at the beginning perhaps, but that’s not the story right now.”Democrats say House Republicans are doing the exact opposite of what is required at a critical moment, even as the Fed offers assurances about the soundness of the banking system. They say the fallout from any banking instability should persuade Republicans that the last thing the economy needs is the specter of a default from a failure to raise the debt limit, which is projected to be reached as early as July without action by Congress.Senator Chuck Schumer, Democrat of New York and the majority leader, on Wednesday assailed the Republican stance as “reckless and truly clueless.”.css-1v2n82w{max-width:600px;width:calc(100% – 40px);margin-top:20px;margin-bottom:25px;height:auto;margin-left:auto;margin-right:auto;font-family:nyt-franklin;color:var(–color-content-secondary,#363636);}@media only screen and (max-width:480px){.css-1v2n82w{margin-left:20px;margin-right:20px;}}@media only screen and (min-width:1024px){.css-1v2n82w{width:600px;}}.css-161d8zr{width:40px;margin-bottom:18px;text-align:left;margin-left:0;color:var(–color-content-primary,#121212);border:1px solid var(–color-content-primary,#121212);}@media only screen and (max-width:480px){.css-161d8zr{width:30px;margin-bottom:15px;}}.css-tjtq43{line-height:25px;}@media only screen and (max-width:480px){.css-tjtq43{line-height:24px;}}.css-x1k33h{font-family:nyt-cheltenham;font-size:19px;font-weight:700;line-height:25px;}.css-1hvpcve{font-size:17px;font-weight:300;line-height:25px;}.css-1hvpcve em{font-style:italic;}.css-1hvpcve strong{font-weight:bold;}.css-1hvpcve a{font-weight:500;color:var(–color-content-secondary,#363636);}.css-1c013uz{margin-top:18px;margin-bottom:22px;}@media only screen and (max-width:480px){.css-1c013uz{font-size:14px;margin-top:15px;margin-bottom:20px;}}.css-1c013uz a{color:var(–color-signal-editorial,#326891);-webkit-text-decoration:underline;text-decoration:underline;font-weight:500;font-size:16px;}@media only screen and (max-width:480px){.css-1c013uz a{font-size:13px;}}.css-1c013uz a:hover{-webkit-text-decoration:none;text-decoration:none;}How Times reporters cover politics. We rely on our journalists to be independent observers. So while Times staff members may vote, they are not allowed to endorse or campaign for candidates or political causes. This includes participating in marches or rallies in support of a movement or giving money to, or raising money for, any political candidate or election cause.Learn more about our process.“Instead of calling for calm, House Republicans are sowing chaos by threatening a default at a time when banks need stability,” he said. “The right answer is for Republicans in the House to stop saber-rattling, drop the hostage-taking and brinkmanship and work together, work in a bipartisan way, to extend the debt ceiling without strings attached.”Other Democrats shared those sentiments, dismissing calls from some Republicans to prioritize federal payments should Congress fail to agree on a debt-limit increase. They say that approach is unworkable and default by another name.“The banking crisis highlights the importance of paying our bills on time,” said Senator Chris Van Hollen, Democrat of Maryland and a member of the Banking Committee. “We don’t want to create any more uncertainty in the financial markets and the economy. Because of what happened with the banks, it is more important than ever that Republicans don’t allow us to get close to the cliff.”“Because of what happened with the banks, it is more important than ever that Republicans don’t allow us to get close to the cliff,” said Senator Chris Van Hollen, Democrat of Maryland.Pete Marovich for The New York TimesThe 2008 and 2011 economic crises were earthshaking events on Capitol Hill. In the fall of 2008, in response to warnings from Treasury and Fed officials that the nation’s banks were about go under, Congress dove into a titanic, market-rattling debate over the $700 billion Troubled Asset Relief Program, ultimately approving a historic government intervention in the economy.Three years later, a new House Republican majority and the Obama administration took their clash over spending to the brink of financial ruin, bringing the country close to a federal default before striking a last-minute deal on spending cuts cleared the way for an increase in the debt ceiling, averting disaster.Lawmakers say they drew many lessons from those painful experiences. But the two parties did not draw the same ones.For Democrats, the 2011 experience hardened their opposition to negotiating over increasing the debt limit, confirming their belief that it should be raised without conditions since it is simply making good on spending already approved by Congress, with the support of members of both political parties. Republicans, by contrast, say that same experience persuaded them that the only way to exact real spending cuts is to use the threat of a federal debt default as leverage.The clashing approaches now have the parties again dug in over increasing the debt limit. Scant progress has been made toward finding a resolution that could avoid undermining the economy, even as the banking system exhibits signs of stress.Some Republicans say that they see the high-profile failure of the Silicon Valley Bank as an isolated incident, in contrast to the widespread fear of a total banking collapse in 2008 before Congress intervened.“This is not ’08 and ’09 when the banking industry was crazy on their asset side,” said Senator Mike Braun, Republican of Indiana. “That side of the economy I think learned its lesson.”He and other Republicans said they need to continue to push for spending reductions as part of any agreement to raise the debt limit and called on Democrats and President Biden to drop their refusal to negotiate.“This is not just a one-way street,” said Senator John Cornyn, Republican of Texas. “Hopefully Biden and the administration will get real when it comes to negotiating something, rather than saying, ‘I am not going to negotiate anything.’”In an appearance on Tuesday before the American Bankers Association, Treasury Secretary Janet L. Yellen said that the president was willing to talk federal spending with Republicans, just not with the debt limit sword held at his throat.“Having this conversation needs to happen over time and in the appropriations process and not through the threat of forcing a default,” she told members of the group. “It is essential that Congress raise the debt ceiling and that they do it promptly in order not to inflict a truly catastrophic wound on our economy and our financial system.”Republicans and Democrats credit consumer confidence for holding off economic calamity and so far preventing Congress from entering the crisis atmosphere that permeated both 2008 and 2011. But there is no guarantee that confidence can be maintained, and lawmakers warn of the possibility of cascading events should the banking system become viewed as unstable or the debt limit standoff go on too long.“It has,” warned Senator Richard Blumenthal, Democrat of Connecticut, “the makings of a perfect storm.” More