Economy

WASHINGTON (Reuters) -The U.S. Department of Education on Wednesday said it will cancel all remaining federal student loans used to attend any campus of for-profit Corinthian Colleges Inc, which shut down in 2015 amid multiple federal and state investigations into whether it misled investors and students.The decision, which Vice President Kamala Harris will discuss publicly on Thursday, will result in $5.8 billion in loan forgiveness for 560,000 borrowers, the largest single such move ever made by the department, department officials said.The department was investigating problems at other institutions, and this could lead to loan discharges for more students cheated by their colleges, a senior official told reporters. “The reality is that far too many students have been left worse off than if they had never gone to college at all,” a second official said, citing “troubling racial disparities.”Harris sued Corinthian when she was California attorney general, alleging the Santa Ana, California-based company intentionally misled students about job placement rates and engaged in deceptive advertising and recruitment.Corinthian, which operated the Heald College, Everest and WyoTech schools and offered degrees in healthcare and trades, filed for bankruptcy in May 2015, 20 years after its founding. At its peak in 2010, Corinthian enrolled more than 110,000 students at 105 campuses.The department’s move will cancel outstanding loans. Borrowers who have not paid off their debt will receive refunds of past loan payments, officials said. But borrowers who fully paid off their loans will not receive refunds, they said.Borrowers would not have to take any action to receive the money, they added.Officials said they continued to study broader student debt relief options. To date, the department has approved $25 billion in loan relief for 1.3 million borrowers since January 2021 for a variety of reasons. More

(Reuters) – Jamie Dimon, Chairman and Chief Executive of JPMorgan Chase & Co (NYSE:JPM) described the challenges facing the U.S. economy akin to an “hurricane” down the road and urged the Federal Reserve to take forceful measures to avoid tipping the world’s biggest economy into a recession.Dimon’s comments come a day after President Joe Biden met with Federal Reserve Chair Jerome Powell to discuss inflation, which is hovering at 40-year highs.”It’s a hurricane,” Dimon told a banking conference, adding that the current situation is unprecedented. “Right now, it’s kind of sunny, things are doing fine. Everyone thinks the Fed can handle this. That hurricane is right out there down the road coming our way. We just don’t know if it’s a minor one or Superstorm Sandy,” he added.The Fed is under pressure to decisively make a dent in an inflation rate that is running at more than three times its 2% goal and has caused a jump in the cost of living for Americans. It faces a difficult task in dampening demand enough to curb inflation while not causing a recession.”The Fed has to meet this now with raising rates and QT (quantitative tightening). In my view, they have to do QT. They do not have a choice because there’s so much liquidity in the system,” Dimon said.Major central banks, already plotting interest rate hikes in a fight against inflation, are also preparing a common pullback from key financial markets in a first-ever round of global quantitative tightening expected to restrict credit and add stress to an already-slowing world economy.The inflation battle has become the focal point of Biden’s June agenda amidst his sagging opinion polls and before November’s congressional election.Uncertainty about the U.S. central bank’s policy move, the war in Ukraine, prolonged supply-chain snarls due to COVID-19 and higher Treasury yields have rocked global stock markets, with the benchmark S&P 500 index falling 13.3% year-to-date.”You gotta brace yourself. JPMorgan is bracing ourselves, and we’re going to be very conservative in our balance sheet,” Dimon added.SOFT LANDING? Wells Fargo (NYSE:WFC) & Co’s CEO warned that the Federal Reserve would find it “extremely difficult” to manage a soft landing of the economy as the central bank seeks to douse the inflation fire with interest rate hikes.The CEO of the fourth-largest U.S. lender also said that Wells Fargo is seeing a direct impact from inflation on consumers’ spending, particularly on fuel and food.”The scenario of a soft landing is … extremely difficult to achieve in the environment that we’re in today,” Wells Fargo Chief Executive Officer Charlie Scharf said at the conference.”If there is a short recession, that’s not all that deep… there will be some pain as you go through it, overall, everyone will be just fine coming out of it,” he added.Scharf said while the overall consumer spending is strong, growth is slowing.”Corporations are still spending, where they can they’re increasing inventories … we do expect the consumer and ultimately businesses to weaken, which is part of what the Fed is trying to engineer but hopefully in a constructive way,” he added.Recent Fed reports and surveys reported households on average in a strong financial position, with working families doing well, and unemployment at levels more akin to the boom years of the 1950s and 1960s. Wages for many lower-skilled occupations are rising, and bank accounts, on average, are still flush with cash from coronavirus support programs.But confidence has waned, and in a recent Reuters/Ipsos poll the economy topped respondents’ list of concerns. “I don’t think our crystal ball relative to the macro later this year, 2023, 2024 is necessarily any better than others. Clearly, we’re going to see with the Fed actions different impacts in different businesses,” GE CEO Larry Culp, told the conference.Still, not everyone in corporate America is seeing slowdown.”Of the vast majority of the markets we serve are still quite strong,” Caterpillar Inc (NYSE:CAT) CEO Jim Umplebly said. “And our challenge at the moment, quite frankly, is supply chain, our ability to supply enough equipment to meet all the demand that’s out there,” he added. More

(Reuters) – A California task force released a 500-page report detailing the state’s role in perpetuating historic discrimination against African Americans, while recommending an official government apology and making a case for financial restitution.The document made public on Wednesday explained the harms suffered by descendants of enslaved people long after slavery was abolished in the 19th century, citing discriminatory laws and practices in housing, education, employment and the legal system.”From colonial times forward, governments at all levels adopted and enshrined white supremacy beliefs and passed laws in order to maintain slavery, a system of dehumanization and exploitation that stole the life, labor, liberty, and intellect of people of African descent,” the task force said in a report to the California legislature.The task force was formed by California in 2020 to research and develop reparation proposals for African Americans, making it the first U.S. state to engage in such a study. Individual cities and educational institutions have previously taken up the cause.”This system of white supremacy is a persistent badge of slavery that continues to be embedded today in numerous American and Californian legal, economic, and social and political systems,” the report said.”These effects of slavery continue to be embedded in American society today and have never been sufficiently remedied. The governments of the United States and the State of California have never apologized to or compensated African Americans for these harms.”The task force will release a further comprehensive reparations plan next year. California is home to the fifth-largest Black population in the United States.The report also made initial recommendations within the prison system, saying that incarcerated people should not be forced to work while in prison and if they do, they must be paid fair market wages. More

NEW YORK (Reuters) -U.S. prosecutors in Manhattan on Wednesday charged a former product manager at OpenSea, the largest online marketplace for non-fungible tokens, with insider trading, the first such case involving digital assets.Nathaniel Chastain, 31, of Manhattan, was accused of secretly buying 45 NFTs on 11 separate occasions based on confidential information that the tokens, or others by the same creator, would soon be featured on OpenSea’s home page.Prosecutors said Chastain chose which NFTs to feature, and sold his NFTs shortly after they were featured, typically for two to five times what he paid.In one instance, Chastain allegedly more than quadrupled his money by purchasing the NFT “Spectrum of a Ramenfication Theory” on Sept. 14, 2021, and selling it early the next morning.Prosecutors said the scheme ran from June to September 2021, with Chastain transacting through anonymous digital currency wallets and accounts at OpenSea, also known as Ozone Networks Inc.”NFTs might be new, but this type of criminal scheme is not,” U.S. Attorney Damian Williams in Manhattan said in a statement. “Today’s charges demonstrate the commitment of this office to stamping out insider trading – whether it occurs on the stock market or the blockchain.”Chastain pleaded not guilty on Wednesday to wire fraud and money laundering charges, each carrying a maximum 20-year prison term, before U.S. Magistrate Judge Barbara Moses in Manhattan. Bond was set at $100,000.”When all the facts are known, we are confident he will be exonerated,” Chastain’s lawyer David Miller said in an email.Non-fungible tokens are unique digital assets, reflecting ownership of files such as artwork, other images, videos and text, and recorded on a blockchain.The NFT market totaled about $40 billion in 2021, and more than $37 billion from January to April 2022 though transaction activity has been stabilizing, according to the blockchain data firm Chainalysis Inc.”When we learned of Nate’s behavior, we initiated an investigation and ultimately asked him to leave the company,” OpenSea said in a statement about Chastain. “His behavior was in violation of our employee policies and in direct conflict with our core values and principles.” More

“I don’t think anyone saw the invasion – Russia’s invasion of Ukraine – coming, which is driving the high energy prices that we see today,” Adeyemo told MSNBC a day after U.S. Treasury Secretary Janet Yellen said she was “wrong” last year about the path that inflation would take.Yellen had told CNN on Tuesday that since public comments she made in 2021 suggesting a more benign and transitory path for inflation, the global economy was hit by multiple unanticipated shocks, including persistent supply chain disruptions, Russia’s war in Ukraine and strict lockdowns of China’s economy.Adeyemo echoed those comments and said other countries were also struggling with high inflation.”The best way to compare what’s happening here in the United States is to look around the world, because inflation isn’t only happening here in the United States. It’s happening around the globe,” Adeyemo said.Adeyemo said President Joe Biden had outlined plans to address inflation, including potential future releases from the Strategic Petroleum Reserve, but dodged a question about new approaches.”The best example of the things we’re willing to do in the future is what we’ve already done, including releasing the Strategic Petroleum Reserve,” he added.President Biden was also looking at calling on energy producers to boost production to drive prices lower.”We’re open to doing everything that the president can do on his own, but he also wants to work with Congress to do things like bring down the price of prescription drugs.” Asked if he believed inflation could be brought down without causing a recession, Adeyemo said: “I do, because part of my job is talking to business leaders around the country. The CEOs … make clear to me that they feel as if demand for their products and goods remains strong.” More

Reuters reported in March that Boeing was edging toward a landmark order from Delta for up to 100 of its 737 MAX 10 jets..Asked at an industry conference if he saw a place for the MAX in Delta’s fleet, Bastian said he agreed.”I think there is. We’ve been trying to get a deal done with Boeing. We’re keeping our eye on that, and hopefully, we’ll be able to figure that out,” Bastian said on Wednesday.A Boeing spokeswoman declined to comment.At the event in New York to celebrate the opening of a new terminal at LaGuardia Airport, Bastian declined to offer details of the size of any potential 737 MAX order and emphasized no decision had been made.”We continue to see if there’s opportunities with the MAX but no decisions, no hold ups,” Bastian told Reuters.Delta is the only major U.S. carrier without a 737 MAX on order.The MAX 10 competes with Airbus’ strongest-selling model, the A321neo. Both planes are aimed at the fast-growing segment of the market just above 200 seats.In September, Airline Weekly quoted Bastian as saying there was a place for the MAX at Delta if the carrier could figure out how to bring them in. More

Government bond prices fell on Wednesday as investors on both sides of the Atlantic bet that central banks would act aggressively to combat inflation.The yield on the 10-year US Treasury note rose 0.08 percentage points to 2.92 per cent, while the more policy-sensitive two-year note climbed 0.12 percentage points to 2.66 per cent. Yields rise when prices fall.The moves followed stronger than forecast results from a closely watched survey of the US manufacturing sector. The Institute for Supply Management’s factory activity index rose to 56.1 in May, higher than consensus forecasts of 54.5 and well above the 50 level that indicates expansion.Markets have been volatile in recent weeks as investors grappled with conflicting signs about the health of the global economy and predictions about the future paths of inflation and interest rates. Wednesday’s manufacturing data was seen as a sign that the Federal Reserve has more leeway to lift rates without pushing the US economy into recession.Investors now expect the fed funds rate to reach 3 per cent by next February, according to futures markets, up from 2.8 per cent at the start of the week.“Clearly, the initial post-shock surge in activity is over, but output is still increasing at a healthy pace and some industries, notably autos, have a long way to go before a full recovery is complete,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.The pressure on Treasuries also came as the Fed on Wednesday began the long process of quantitative tightening, reducing its balance sheet by allowing bonds that it bought to mature without replacing them.The prospect of higher rates weighed on stock markets, with the benchmark S&P 500 index and tech-dominated Nasdaq Composite each closing 0.7 per cent lower. After several weeks of wild swings, the broad S&P index ended May at almost exactly the same level it started. Some analysts warned of further declines to come. Anna Stupnytska, global economist at Fidelity International, said: “When we look at various historical episodes, we think equities have not found the trough yet, given headwinds of further aggressive tightening from central banks, the risk related to the war in Ukraine, which is clearly systemic, and commodity markets performing strongly.”European assets followed a similar pattern, with the Stoxx 600 stock index falling 1 per cent while the yield on Germany’s benchmark 10-year Bund rose 0.06 percentage points, to 1.18 per cent.Data on Tuesday showed eurozone inflation hit a record high in May, though worse than predicted German retail sales data on Wednesday exacerbated worries about slowing economic growth in the currency bloc.European Central Bank policymakers will meet next week to discuss how quickly the central bank should raise interest rates to combat inflation without pushing the region into recession.EU leaders also earlier this week struck a deal to ban most Russian oil imports. Brent crude, the international oil benchmark, rose 0.6 per cent to $116.29 a barrel on Wednesday.In Asia, Hong Kong’s Hang Seng fell 0.6 per cent, as investors weighed the easing of coronavirus restrictions in Shanghai following two months of lockdown against growth concerns. A privately compiled gauge from Caixin showed that activity in China’s manufacturing sector had contracted for a third consecutive month. More

Bullard reminded the Economic Club of Memphis on Wednesday that in late 2019, prior to the Covid-19 pandemic, Fed rates were 1.55%, the 10-year Treasury yield was 1.86% and mortgage rates were below 4%.“This may provide a practical benchmark for where the constellation of rates may settle once inflation comes under control in the U.S.,” he said during the virtual presentation.Bullard, who has been the most hawkish Fed official this year, has supported Chair Jerome Powell’s plan to raise interest rates by a half-point at the next two meetings. He later told reporters that he currently is looking for another hike of that size in September if data comes in as expected. Yet he also repeated that rates may come back down in 2023 or 2024 once inflation returns to target.‘Good Plan’“I think we have a good plan for now,” Bullard told the reporters. “This 50 basis point per meeting increase is twice the normal pace that the committee has used in recent years which shows that there’s a lot of unanimity around expeditiously moving to neutral in this high-inflation environment that we’re in.”The Federal Open Market Committee raised rates by a half-point last month to cool the hottest inflation in 40 years and officials have signaled they’ll hike by the same amount again at their meetings in June and July. They also began shrinking their massive balance sheet at a monthly pace of $47.5 billion from Wednesday, stepping up to $95 billion in September, in a process also called quantitative tightening.Bullard said front-loading the rate hikes this year rather than spreading them out over two or more years would allow the Fed to counter inflation, much of which has been caused by fiscal and monetary stimulus as opposed to supply issues related to Covid.“We want to move as quickly as we can,” he said.The U.S. economy is already beginning to slow in response to less monetary stimulus, cited in the Beige Book report on regional economic conditions. Bullard told reporters that was expected and welcome. Growth should be expected to slow to a long-term trend rate, of around 1.75-2%, he said.‘’This doesn’t surprise me,” Bullard said. “I would say overall the anecdotal reports I’ve heard — some of which filtered in to the Beige Book — are consistent with continued growth in the US economy: In certain markets very, very strong. In others more tempered.”(Updates with comments from media briefing starting in first paragraph.)©2022 Bloomberg L.P. More