Finance

President Joe Biden will nominate Sarah Bloom Raskin to be the Federal Reserve’s next vice chair for supervision, a powerful regulatory role.
Biden will also nominate Lisa Cook and Philip Jefferson to serve as Federal Reserve governors, according to a person familiar with the matter.
The nominations come at a precarious time for the Fed, which has in recent weeks signaled it will soon move to raise interest rates to fight inflation.

Sarah Bloom Raskin, in her role as Deputy Treasury Secretary at the Treasury Department in Washington, October 2, 2014.
Yuri Gripas | Reuters

President Joe Biden will nominate Sarah Bloom Raskin to be the Federal Reserve’s next vice chair for supervision, arguably the nation’s most powerful banking regulator, according to people familiar with the matter.
Biden will also nominate Lisa Cook and Philip Jefferson to serve as Federal Reserve governors, according to the people, who asked not to be named in order to speak freely.

Each nominee will in the coming weeks face questioning from the Senate Banking Committee, the congressional body in charge of vetting presidential appointments to the central bank. Should the Senate confirm their nominations, Cook would be the first Black woman to serve on the Fed’s board while Jefferson would be the fourth Black man to do so.
That committee on Tuesday held a nomination hearing for Fed Chair Jerome Powell, whom Biden chose to nominate to a second term. The committee held a similar hearing for Fed Governor Lael Brainard on Thursday, whom Biden picked to be the central bank’s next vice chair.
In choosing Raskin for the vice chair for supervision post, Biden looks to make good on Democrats’ promises to reinforce laws passed in the aftermath of the financial crisis and restore aspects of a rule named for former Fed Chair Paul Volcker that had restricted banks’ ability to trade for their own profit.
Raskin has experience at the Fed and served as a governor at the central bank from 2010 to 2014 before serving as deputy secretary of the Treasury under the Obama administration. She is married to Rep. Jamie Raskin, D-Md.
Powell and Brainard are both expected to clear the Senate without fanfare and with bipartisan support, but Raskin, Cook and Jefferson could see tougher confirmation odds. Pennsylvania Republican Sen. Pat Toomey, the ranking member of the Banking committee, was quick to pan Biden’s latest choices.

“Sarah Bloom Raskin has specifically called for the Fed to pressure banks to choke off credit to traditional energy companies and to exclude those employers from any Fed emergency lending facilities,” he said in a statement Thursday evening. “I have serious concerns that she would abuse the Fed’s narrow statutory mandates on monetary policy and banking supervision to have the central bank actively engaged in capital allocation.”
“I will closely examine whether Ms. Cook and Mr. Jefferson have the necessary experience, judgment, and policy views to serve as Fed Governors,” he added.
While Jefferson’s name had more recently come up in closed-door discussions to serve as a governor, Cook’s nomination was well telegraphed. CNBC reported in May that she was the top choice of Sen. Sherrod Brown, the Banking Committee’s chairman and an Ohio Democrat, to serve as a governor.
Cook is a professor of economics and international relations at Michigan State University. She is also a member of the steering committee at the Center for Equitable Growth, a progressive Washington-based think tank that counts several of Biden’s top economists among its alumni. She also served as a senior economist in the Obama administration’s Council of Economic Advisors.
Jefferson, meanwhile, is vice president for academic affairs and dean of faculty at Davidson College. His decadeslong career in academics has focused on labor markets and poverty.
Notable works of his include a 2005 study that evaluated the costs and benefits of monetary policy that promotes a “high-pressure economy” in which the Fed allows easier access to cash and lower interest rates to spur tighter labor markets.
He and other economists, including Brainard, have argued – in general and barring extraordinary economic conditions – that the added benefits of lower rates on maximum employment is worth the potential for warmer inflation.

Raskin and regulation

Since leaving the government, Raskin has pressed the Fed and other financial regulators to take a more proactive role to address the financial risks posed by climate change.
“While none of its regulatory agencies was specifically designed to mitigate the risks of climate-related events, each has a mandate broad enough to encompass these risks within the scope of the instruments already given to it by Congress,” Raskin wrote in September.
“In light of the changing climate’s unpredictable – but clearly intensifying – effects on the economy, U.S. regulators will need to leave their comfort zone and act early before the problem worsens and becomes even more expensive to address,” she added.
Former Vice Chair for Supervision Randal Quarles, who recently left the Fed, played a major role in reducing capital requirements for U.S. banks with less than $700 billion in assets and relaxing the Volcker Rule’s audit rules for trades made by JPMorgan Chase, Goldman Sachs and other investment banks.

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Fed officials in favor of an easier regulatory stance argue the industry is well-capitalized and not in need of some of the more restrictive measures enacted in the wake of the crisis.
Many Democrats, including Massachusetts Sen. Elizabeth Warren, have pushed back and said rollbacks leave the banking sector more vulnerable to shocks and liable to excess risk taking.

Inflation battle

The nominations come at a precarious time for the Fed, which has in recent weeks has started to wind down its easy-money policies in the face of recovering employment and the highest level of year-over-year inflation since 1982.
In times of normal economic activity, the Fed adjusts short-term interest rates to maximize employment and stabilize prices.
When the Fed wants the economy to heat up, it can cut borrowing costs to spur the housing market and broader economic activity as well as employment. But if it is concerned about an overheating economy or unruly inflation, it can raise interest rates to make borrowing more expensive.
In times of economic emergency, the central bank can also tap broader powers and purchase vast quantities of bonds to keep borrowing costs low and boost financial markets with easy access to cash. It did so in 2020 with the arrival of the Covid-19 pandemic, a move that worked to pacify traders and soothe companies concerned about liquidity.
Bond yields fall as their prices rise, meaning that those purchases forced rates lower. But ending those types of emergency-era liquidity measures — and the prospect of higher rates — can have the opposite effect on markets.
The release of the Fed’s latest meeting minutes earlier in January, which showed several officials in favor of cutting the balance sheet and raising rates soon, sparked a sell-off on Wall Street.

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U.S. stock index were little changed during overnight trading on Thursday, ahead of earnings from the major banks on Friday.
Futures contracts tied to the Dow Jones Industrial Average advanced 29 points. S&P 500 futures were up 0.08%, while Nasdaq 100 futures rose 0.12%.

All of the major averages slid during regular trading on Thursday. The Dow and S&P 500 fell 0.48% and 1.42%, respectively, registering the first down day in three. At one point the 30-stock benchmark had been up more than 200 points.
The Nasdaq Composite was the relative underperformer, shedding 2.51% and snapping a three-day winning streak as technology stocks came under pressure. Microsoft declined more than 4%, while Nvidia dipped 5%. Apple, Amazon, Meta, Netflix and Alphabet also closed lower.
Investors have rotated out of growth and into value stocks amid rising rate fears, which makes future profits — including from growth companies — look less attractive.
“Big Tech stocks are selling off so dramatically as a product of, ‘yes US rates are likely to go up further this year,’ but also as investors rotate into value and cyclical trades,” said Ed Moya, senior market analyst at Oanda. “Wall Street is trying to get a sense of how much growth is going to slow and the banks will start providing some insight on Friday,” he added.

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Companies have started posting quarterly updates, but reporting season will get into full swing on Friday when JPMorgan, Citigroup and Wells Fargo release results before the market opens.

A slew of economic data will also be released Friday, including December retail sales numbers. Economists are expecting the print to show a decline of 0.1%, according to estimates compiled by Dow Jones. During November sales rose by 0.3%, slower than the 0.9% economists had been expecting.
Industrial production numbers will also be reported, with the Street expecting a 0.2% rise. Consumer sentiment figures will be released later Friday morning.
The reports come as investors closely watch all of the latest inflation readings. The producer price index rose 0.2% month over month in December, the Labor Department said Thursday, which was lower than the 0.4% economists were expecting. The report followed Wednesday’s consumer price index reading, which jumped 7% year over year during December for the fasted annual rate since 1982.
“Economic growth will remain strong, and fears about inflation and the Fed will cool from a boil to a simmer,” said Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management Company. “Supply chains and the labor market are going to catch up and that will essentially kill two birds with one stone,” he added.
With Thursday’s move lower, the major averages are now in negative territory for the week. The Dow and S&P are on track for their second straight negative week, while the Nasdaq is on track for a third week of losses.

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Philadelphia Fed President Patrick Harker said Thursday he sees three or four interest rate hikes this year as likely to fight inflation.
The policy tightening would be in response to inflation that is running at the highest level in nearly 40 years.
While Harker expressed support for hikes and the end of monthly bond purchases, he favors waiting before decreasing the Federal Reserve’s $8.8 trillion balance sheet.

Philadelphia Fed President Patrick Harker said Thursday he foresees three or four interest rate hikes this year as likely to fight inflation.
His thinking, outlined in a live interview on CNBC’s “Closing Bell,” is consistent with estimates the policymaking Federal Open Market Committee released in December.

But while officials then penciled in the likelihood of three quarter-percentage-point increases in 2022 of the Federal Reserve’s benchmark overnight borrowing rate, Harker said he may be open to even more.
“We do need to take action on inflation. It is more persistent than we thought a while ago. I’ve been off the ‘transitory’ team for a while now,” he said, citing the term Fed officials used to characterize inflation through most of 2021 before pivoting toward the end of the year.
“I think it’s appropriate to take action this year,” Harker said. “Three [hikes] is what I’ve penciled in, but four is not out of the question in my mind.”
Harker’s comments come as Labor Department reports showed inflation surging through the U.S. economy. Consumer price inflation is at 7%, its highest year-over-year rate since June 1982, while wholesale prices in 2021 gained 9.7%, the biggest move in data going back to 2010.
Following the December meeting, the Federal Open Market Committee set a schedule that also would wrap up the monthly bond purchases by around March. Minutes released subsequently showed that some members also think the Fed should start reducing the size of its balance sheet, likely by allowing some of its bond proceeds to roll off each month.

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But Harker favors a slower approach on the balance sheet question. He thinks the Fed should wait until it raises rates “for sake of argument 100 basis points,” or four hikes, before starting to whittle down what has become a more than $8.8 trillion balance sheet as the result of asset purchases during the pandemic. A basis point is one one-hundredth of a percentage point.
“I don’t want to do that all at once. I think that’s just the wrong way to go,” he said. “Let’s do them in stages.”
Going slow, he said, would cushion the economy from shocks that might occur from the Fed backing off from the easiest monetary policy in its history. He said the Fed can avoid killing the recovery if it moves “carefully and methodically. This is why I’m not in the camp of raising rates and doing balance sheet normalization at the same time,” he said.
Earlier in the day, Chicago Fed President Charles Evans also said he sees three rate increases as most likely, though he, too, is open to more.
“[Three increases are] probably a good opening bid this year depending on how the data roll out,” Evans said to reporters. “It could be four if the data don’t improve quickly enough on inflation.”
Neither Evans nor Harker are voters this year on the FOMC, though they do get to voice their opinions at policy meetings and their views are part of the committee’s “dot plot” of members’ interest rate expectations.

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Newly manufactured Ford Motor Co. 2021 F-150 pick-up trucks are seen waiting for missing parts in Dearborn, Michigan, March 29, 2021.
Rebecca Cook | Reuters

Check out the companies making headlines in midday trading.
Ford — Shares jumped more than 2% as the automaker’s market cap topped $100 billion for the first time Thursday. The rally comes as the company plans to increase electric vehicle production, including the Mustang Mach-E crossover and an upcoming electric version of its best-selling F-150 pickup. Deutsche Bank also named Ford one of its top 2022 auto stock picks.

Delta Air Lines – The airline’s stock rose about 2% after beating on the top and bottom lines of its quarterly results. Delta earned an adjusted 22 cents per share on revenue of $9.47 billion. Wall Street expected adjusted earnings of 14 cents per share on revenue of $9.21 billion, according to Refinitiv. The company also said it expects to turn a profit in 2022.
Boeing – Shares gained nearly 3% after Chinese aviation regulators issued a directive to bring the aircraft maker’s 737 Max back to the skies. The planes have been grounded for more than two and a half years, after the second of two fatal crashes.
KB Home – The homebuilder’s stock soared 16.5% after reporting better-than-expected quarterly results. KB Home reported earnings of $1.91 per share, topping estimates of $1.77 per share, according to Refinitiv. KB Home also issued a positive outlook for 2022.
Snap – Shares fell more than 10% after Cowen downgraded the social media stock to market perform. The firm said Snap should continue to face challenges from Apple’s privacy rules.
Virgin Galactic – The stock plunged 18.9% after the space tourism company announced plans to raise up to $500 million in debt. The company intends to raise $425 million from the sale of 2027 convertible senior notes through a private offering, with an additional $75 million option also expected to be granted to buyers.

Moderna – The vaccine maker saw its shares fall 5.7% after the company said it expects to report data from its Covid-19 vaccine trials involving 2- to 5-year-olds by March. The company could file for approval to vaccinate that age group if the data is supportive, it said in a statement.
Virgin Orbit – Shares fell 5.6%% as the company was set for a satellite launch mission Thursday afternoon.
Taiwan Semiconductor – Shares rose 5.3% after the chipmaker’s fourth-quarter profit and revenue topping beat StreetAccount consensus estimates. The company also issued an upbeat outlook.
Halliburton – The energy giant rose 1.8% to a new 52-week high after JPMorgan upgraded the stock to overweight from neutral. “We see more earnings upside and a more attractive relative valuation under our ‘normalized’ framework,” JPMorgan said.
Mattel – Shares gained more than 3% after MKM upgraded the toymaker to buy from neutral. “We look for continued positive momentum from Mattel’s product portfolio in 2022,” MKM said.
— CNBC’s Maggie Fitzgerald, Pippa Stevens and Tanaya Macheel contributed reporting

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Gemini, the $7.1 billion crypto company, is getting into wealth management with the acquisition of a digital asset platform for financial advisors, CNBC has learned exclusively.
The company has agreed to purchase BITRIA, a five-year-old San Francisco-based start-up whose tools help advisors manage holdings of bitcoin and other tokens, according to Gemini’s global head of business development Dave Abner.
Crypto insiders have forecast a boom in mergers this year as a cohort of newly flush digital asset giants like Gemini and Coinbase look to acquire capabilities and expand offerings.

David Abner, Gemini’s Global Head of Business Development.
Source: David Abner

Gemini, the $7.1 billion crypto exchange, is getting into wealth management with the acquisition of a digital asset platform for financial advisors, CNBC has learned exclusively.
The company has agreed to purchase BITRIA, a five-year-old San Francisco-based start-up whose tools help advisors manage holdings of bitcoin and other tokens, according to Gemini’s global head of business development Dave Abner.

The move creates one of the industry’s first full-service digital asset custodians for advisors, according to Abner, who declined to disclose how much Gemini paid in the deal. Gemini intends to combine its crypto custody and exchange capabilities with BITRIA’s portfolio management programs, allowing advisors to do things like tax-loss harvesting, he said.
“Advisors manage the biggest pool of money in the country right now, and they’re hearing from their clients that want access to crypto,” Abner said this week in a phone interview. “This creates a one-stop, end-to-end experience for advisors to manage all of their clients’ digital assets within their traditional portfolio management systems.”
Crypto insiders have forecast a boom in mergers this year as a cohort of newly flush digital asset giants like Gemini and Coinbase look to acquire capabilities and expand offerings. Just yesterday, Coinbase announced it was buying Chicago-based FairX so that it could offer derivatives to retail and institutional customers.
Though crypto started more than a decade ago as a retail investor-led phenomenon, the rise of bitcoin, ethereum and other coins in the past two years has enticed bigger investors into the space. That’s created the need for ways to provide wealthy investors access to crypto through familiar wealth management vehicles like separately managed accounts.
“Nobody else in the crypto space is looking at servicing the wealth management community the way that Gemini is,” Abner said. “We’re already the largest service provider to crypto ETFs globally. Now we are moving into the wealth space, and we’re going to be the only pure-play full service provider of crypto assets” to advisors.

Arrows pointing outwards

Source: Gemini

BITRIA, which changed its name from Blockchange in November, is one of a small handful of crypto companies that have sprung up to service financial advisors. Competitors include Onramp Invest and Eaglebrook Advisors. The broader financial advisor industry’s assets have surged along with booming equities markets, topping $110 trillion during the pandemic.
Gemini, founded in 2014 by Winklevoss twins Tyler and Cameron, was valued at $7.1 billion in a November funding round. Ballooning valuations in the industry have left companies flush with cash and with mandates to ramp up growth.
The acquisition followed a partnership between the two firms announced in 2020. BITRIA’s employees, including co-founder and CEO Daniel Eyre, are joining Gemini, the companies said.
“The future of wealth management lies in digital assets and blockchain technology and the integration of BITRIA’s technology with Gemini provides a bridge to that future,” Eyre said in a statement.

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THE 177-PAGE coalition agreement between Germany’s Social Democrats, Free Democrats (FDP) and the Greens contains grand plans to combat climate change and covid-19, and to speed up digitisation. Tucked away on page 73 is a more modest promise, to fund a small part of its public-pension scheme by investing in stocks. Reactions in Germany ranged from the apprehensive to the enraged. “Is our pension safe in stock?” fretted one news outlet. Another asked: “Are politicians gambling away our pension?”As retirees live longer, Germany’s pension system, which was established in 1889 by Otto von Bismarck, is buckling. Workers and bosses together pay a “pension tax” of about 18% of a worker’s gross wage. This is meant to fund the roughly €300bn ($340bn, or about 9% of GDP) paid out in pensions each year. But shortfalls have meant that the government has had to subsidise the scheme, to the tune of €100bn last year. The problem is only set to get worse as more baby-boomers retire.In order to help fix the problem, the liberal FDP has long supported a plan to reshape the pension scheme along Swedish lines. Sweden’s system consists of a standard pension, to which taxpayers contribute 16% of their gross income, and a supplemental “premium” pension, through which 2.5% of each taxpayer’s income is placed into a stock fund of their choosing. Should the taxpayer decide against active investment, the money is deposited instead in a state fund, which since 2003 has made an annual return of 9.9%.The plan outlined in Germany’s coalition deal is far more modest. The government will funnel €10bn from its annual budget into a publicly managed pension fund, which will be invested in the stockmarket, and which may generate attractive returns. The principal itself accounts for only about ten days of pension payments, says Martin Werding of the Ruhr University Bochum, who conducted a feasibility study of the FDP’s proposal ahead of the election. But the party hopes it may only be a first step towards a “stock-and-bond covered pension system”.The reaction to the government’s plan tells you much about Germans’ attitudes to capital markets. Studies indicate that they are “market-shy” and tend to overestimate the risks from investing. Only around a quarter of households own stocks. By contrast, more than half of all American households do so, much of it in the form of 401(k) retirement plans. This could in part reflect differences between the two countries’ tax systems. Germany imposes a higher tax rate—of 25%—on long-term capital gains, for instance.Then there are Germany’s scars from the dotcom era. In 1996 Deutsche Telekom listed on the stockmarket. Germans headed to the market in droves; about 650,000 of the buyers of the newly issued stock were first-time punters. The share price soared seven-fold before crashing spectacularly in the early 2000s. The effects still linger. Those who held Deutsche Telekom shares or who might remember the crash are less likely to hold stocks even today, as are their children, suggests research published last year by the German Institute for Economic Research (DIW), a think-tank in Berlin. Even by 2020 the number of Germans investing in the stockmarket was still a shade below its 2001 level.The FDP hopes that the planned changes to the pension scheme might increase Germans’ familiarity with stock investing. “The Swedes really aren’t known as turbo-capitalistic stock gamblers,” jokes Johannes Vogel, the party’s expert on pension politics. The coalition government also aims to make it easier for people to save for retirement outside their state pension. The tax-free personal allowance on capital gains will rise from €800 to €1,000 a year in 2023, and the coalition hopes to launch an inquiry into the creation of a Swedish-style public-investment fund.These changes alone might do little to put the pension system on a sustainable footing and make pensioners better off. That, says Marcel Fratzscher of the DIW, would require a change to the state retirement age, as well as labour-market reforms. Nonetheless, he reckons, the plans provide a “glimmer of hope” that the government realises, at least, that the system needs reform. ■This article appeared in the Finance & economics section of the print edition under the headline “Aversion therapy” More

KAZAKHSTAN IS OFTEN called the Saudi Arabia of uranium. In fact its market share, at more than 40% of the world’s nuclear fuel, is not far off the share in the oil market of the Organisation of the Petroleum Exporting Countries and Russia combined. So when unrest, followed by harsh repression, shook the country early this month, buyers of the metal shuddered. Spot uranium prices jumped by 8% on January 5th alone, to $45 per pound, according to UxC, a data provider. With protests now quashed, the market has settled. Nevertheless, the commodity, which is often dubbed “yellowcake”, seems set for a turbulent decade.The immediate impact of the Kazakh turmoil may be limited. Although the protests happened far away from uranium-producing regions, a small drop in global output is nevertheless likely. To extract uranium, Kazakhstan uses a method that involves pumping acid into the ground to dissolve the ore, recovering the solution and then using chemicals to separate out the metal. Disruptions to the shipping of compounds and equipment, because of stranded trains or communication problems, may have slowed operations.Any shortfall may not matter much for now. Big buyers of uranium, such as China and France, which are heavy users of nuclear fuel, have several years’ worth of inventories. The most exposed utilities could borrow from foreign peers in case of immediate shortages, reckons Toktar Turbay of CRU, a consultancy. Most of them buy nuclear fuel using long-term contracts that largely insulate them from short-term jumps in the spot price. All of this creates a buffer against a squeeze.Still, the events in Kazakhstan, which for decades was the world’s most stable uranium supplier, may eventually jolt buyers into guarding against the risk of relying too much on a single source. A day may come when the Kazakh government falls or state assets come under attack (Kazatomprom, the country’s sole uranium producer, is 75% owned by a sovereign fund). Some consumers are therefore looking to diversify their sources of supply. As Kazakhstan is the lowest-cost producer by far, that will mean paying a premium.A rise in overall demand could lift prices further. From Belarus to Bangladesh, many emerging markets are going nuclear to help them decarbonise. China is planning 150 new reactors in the next 15 years. Even in the West, which has long been ambivalent towards nuclear energy, attitudes could change. The European Commission plans to class nuclear as green in its “taxonomy” for investors, which could direct funds towards new projects. NuScale, the first firm seeking to commercialise small, modular reactors to be approved by American regulators, is preparing to go public (via a merger with a special-purpose acquisition company).Beyond the near term, supply may not be able to rise quickly enough to satisfy greater appetite for the metal, supporting prices further. New mines are planned in Africa and the Americas, but they require a price of at least $50-60 per pound of uranium to be profitable. If a rise in demand of 2% a year between now and 2030—a conservative estimate—is to be satisfied, then all of those projects will need to be up and running, says Tim Bergin of Calderwood Capital, a hedge fund. That may not be realistic. One such mine, in Canada, is under a lake; another involves freezing the ground up to 400 metres below the surface. The price of fissile fuel may become increasingly flammable. ■For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter.This article appeared in the Finance & economics section of the print edition under the headline “Atom and abroad” More

WANG BIN has gained the undesirable distinction of becoming China’s first “tiger” of the year. The term refers to a senior official ensnared in a corruption probe (as opposed to a “fly”, a lower-level cadre). Mr Wang, the chairman and Communist Party secretary of China Life, one of the world’s largest insurers, is a big catch. On January 8th the Central Commission for Discipline Inspection, China’s corruption watchdog, announced that he was under investigation for serious violations of law and party discipline—bywords for corruption. (China Life said in a statement that it firmly supported the probe.)Conviction rates for high-profile, publicly announced investigations such as this are 100%. One of the biggest tigers of finance so far, Hu Huaibang, the former head of China Development Bank, is imprisoned for life. Another, Lai Xiaomin, the former chairman of a state asset manager, was put to death.The probe into Mr Wang is only part of China’s long crackdown on insurers. Much of that attention has been warranted. Not long ago the fastest-growing segment of the industry, which holds about 25trn yuan ($3.9trn) in assets, was high-risk, high-return investment products, rather than conventional policies such as life and health insurance. Premiums on short-term policies were often used by companies to buy property and trophy assets overseas, leading to dangerous mismatches between assets and liabilities.A whirlwind crackdown starting in 2017 at the direction of Xi Jinping, China’s president, put a stop to many of the excesses. The chairman of the industry watchdog was thrown in prison, and the regulatory body was taken over by its banking counterpart. The chairman of Anbang Insurance, which had gone on a foreign-acquisition spree lasting several years, was arrested and his company was bailed out and nationalised, in order to prevent spillovers to the rest of the financial system.Regulators have become more stringent over time. Many high-margin investment products have been banned. And investments made by the companies are closely monitored. As soon as new products prove popular and profitable, regulators often step in to make sure they become less so.That is starting to make the job of providing insurance harder to do. Products that cover accidents, for example, were until recently a booming corner of the industry. This came to a halt when new rules required insurers either to raise their loss ratios (claims as a share of premiums earned) or lower their premiums. Vehicle and health insurance have also faced more red tape and have seen a rapid decline in premiums, too. Insurers now find it increasingly difficult to plan for the long term because “the rules of the game change almost every year,” says Sam Radwan of Enhance International, a consultancy.There have been knock-on effects. Chinese insurers rely heavily on vast armies of agents to sell products. By 2018 China Life had amassed more than 2m agents, about the same number as active personnel in the military. Cheap labour and ever-fatter premiums made the industry incredibly profitable. In 2019 the profits of Ping An, the world’s largest insurer by market value, surged by about 40% in a single year.Since then, however, agents have become hard to hire and retain. Tighter rules and shrinking premiums have made the job less lucrative for salespeople, who rely on commissions. The pandemic has discouraged in-person meetings and has made it harder to make sales. At the same time, as premiums have become compressed, big insurers have sought to sell higher-value products to wealthier people. This requires skilled agents with a knack for working with rich clients—something few companies have in great numbers, says Li Jian at Huatai Securities, a broker.The impact has been devastating. China Life has shed more than 1m agents since the start of 2018, with nearly half the exodus taking place in 2020. About 700,000 agents left Ping An between 2019 and September 2021. Overall, about 30% of salespeople have departed from the industry over the past three years.All this has turned a booming industry into a backwater. China Life’s value of new business, a gauge of profitability, fell by 19.6% in the first nine months of 2021, compared with the same period in 2020. Net profits were about 55% lower in the third quarter of 2021 than they were a year earlier. Ping An has reported similarly gloomy results. The investigation into Mr Wang has industry executives asking who might be next. But that is probably not the only thing keeping them up at night. ■For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter.This article appeared in the Finance & economics section of the print edition under the headline “Taming tigers” More