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U.S. Treasury Secretary Janet Yellen told lawmakers on Thursday the U.S. banking system remains sound even though two regional banks failed in the last week.

She told the Senate Finance Committee that Americans “can feel confident” their deposits “will be there when they need them.”

Yellen said the government “took decisive and forceful actions to strengthen public confidence” in the U.S. banking system by ensuring that all depositors, including those holding uninsured funds exceeding $250,000, were protected by federal deposit insurance when Silicon Valley Bank and Signature Bank collapsed.

Some critics of the government’s action have called it a bailout, but investors have lost their financial stakes in the two banks, something that would not occur in the normal definition of a bailout, and their executives have been fired.

Senator Mike Crapo of Idaho, the committee’s lead Republican, said, “I’m concerned about the precedent of guaranteeing all deposits,” calling the federal rescue action a “moral hazard.”

“Nerves are certainly frayed at this moment,” said Democratic committee chairman Senator Ron Wyden. “One of the most important steps the Congress can take now is make sure there are no questions about the full faith and credit of the United States,” referring to raising the country’s $31.4 trillion debt ceiling in the next few months so the government can borrow more money to continue to pay its bills.

Some Republicans have demanded large spending cuts in exchange for raising the debt ceiling, while the White House has requested passage of a debt limit increase that is not tied directly to spending cuts. Both Republican and Democratic lawmakers have said they will not cut health insurance and pensions for older Americans.

Stock markets in both Europe and the U.S. rallied sharply Thursday after Credit Suisse announced it would borrow almost $54 billion from the Swiss central bank to shore up its finances.
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Central African economy ministers are calling for investing in energy and farming as Africa’s poorest region struggles to recover from natural disasters, armed conflicts, and fallout from Russia’s invasion of Ukraine.  Heads of state from the six nations of regional bloc CEMAC meet Friday to discuss the challenges. 

Economy and integration ministers of the Central African Economic and Monetary Community, CEMAC, say most of their 55 million civilians live in abject poverty that has only been made worse by the last few years of global troubles.

Ministers of the six-nation-bloc, which includes Cameroon, the Central African Republic, Chad, Equatorial Guinea, Gabon, and the Republic of Congo, met Thursday in Yaoundé.

President of CEMAC Daniel Ona Ondo, who was born in Gabon, said Russia’s invasion of Ukraine is the latest in a series of global disasters to impact the region.

He said the ministers’ meeting strongly recommended huge investments in agriculture and energy to end over dependency on imported food and petroleum products from Russia and Ukraine.

Before Russia’s invasion of its neighbor, Central African states’ imports from Russia and Ukraine accounted for 60 percent of their fuel and 80 percent of their wheat.

Last July, Cameroon, the Central African Republic, and Gabon reported fuel shortages they blamed on disruptions from Russia’s war.

CEMAC says the war caused a sharp increase in prices that member states paid for fuel and fertilizers and added pressure on the region’s farmers, who were already struggling from conflict and climate shocks.

Ondo said armed conflicts and political unrest in the region also added to the challenge for economies to recover from the COVID-19 pandemic.

Despite the setbacks, Cameroon’s Minister of the Economy Alamine Ousman Mey voiced an optimistic outlook.

Mey is also president of CEMACs council of ministers of the economy and integration.

He said although central African states face many security and environmental shocks, and an influx of refugees and displaced persons, Cameroon, Chad, Equatorial Guinea, Gabon, the Central African Republic, and the Republic of Congo have shown resilience.  Mey said the economic growth rate was maintained at three percent in 2022.  He said CEMAC will always work for the interest of its people despite the challenging world economy and severe crises.

The ministers said they will propose a plan for improving conditions through energy and farming when heads of state meet in Yaoundé on March 17.

Ernest Moloua is an economist at the Cameroon’s University of Buea.

He said the region’s leaders should push harder for the free movement of people and goods as part of the African Continental Free Trade Area.

Speaking via messaging app from Buea, he says the trade deal provides a lot of opportunities for CEMAC if the heads of state take it seriously.

“The most important thing for CEMAC is to improve on public infrastructure, improve on the communication and telecommunication infrastructure, improvement of roads, improvement of railway links.  When this happens then the region places itself in an advantageous position to reap the benefits that will come from the continental free trade area,” said Moloua.

CEMAC says Friday’s heads of state summit will focus on structural reforms to deal with the economic consequences of the COVID pandemic and Russia’s war on Ukraine.
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The EU will reveal hotly debated proposals Thursday to boost spending on clean tech, possibly overcoming internal divisions to include nuclear energy in the mix, to confront growing industrial competition from the United States and China.

Brussels wants to protect European businesses by prioritizing green technologies, including solar and wind, for more financing and greater regulatory freedom.

The European Commission, the EU’s executive arm, will publish draft plans for a Net Zero Industry Act on Thursday to meet its ambitious target to become a “climate neutral” economy with zero greenhouse gas emissions by 2050.

The proposal was to be made public Tuesday, but a standoff in the commission over whether to include nuclear power, a low-carbon energy, delayed the announcement. Heated discussion was expected until the last minute.

Another landmark draft regulation will also be unveiled on Thursday that aims to secure supplies of critical raw materials needed to make the most of the electrical products consumers use today, including smartphones and electric vehicles.

Green technology production took on greater urgency after the United States unveiled a $370 billion “buy American” subsidy program for tax credits and clean energy subsidies, known as the Inflation Reduction Act (IRA) last year.

European businesses have warned that lavish subsidies elsewhere alongside lower energy bills could tempt the continent’s firms to Asia or North America, and EU officials have complained that the IRA will discriminate against Europe’s industry.

Matching subsidies

The commission has toiled over a response to the IRA despite divisions in the 27-member bloc, with some countries arguing for looser subsidy rules to allow them to back their own firms with state aid, and others opposed over fears of triggering a subsidies war.

Last week, the commission loosened state aid rules for green technology and allowed members to match subsidies offered in other states.

The clean technology sector is expected to be worth $630 billion worldwide by 2030, more than three times current levels.

Under draft proposals seen by AFP, the commission now wants at least 40% of green tech to be produced in the EU by 2030.

This will be achieved, the commission hopes, by ensuring businesses obtain permits faster and says public tenders would be considered based on green criteria that could favor European companies.

If nuclear is included as a green technology, that would be a victory for around a dozen countries including France, although there is stringent opposition from anti-nuclear Germany.

Some have questioned the bloc’s “protectionist” objectives.

“The purpose of this law and how the draft was written is not to achieve faster decarbonization, but it’s basically to reshore production and that is a protectionist goal,” said Niclas Poitiers, research fellow at the Brussels-based Bruegel think tank.

“This is about making sure that batteries and solar panels are produced in the EU.”

Commission President Ursula von der Leyen, however, this week dismissed such claims and insisted the proposal was in fact “a very open act.”

‘Vulnerable’ EU

The EU also wants to meet the rapidly growing need for raw materials, much of which it currently imports from China, to avoid relying on one country for a specific product.

When Moscow invaded Ukraine last year, the EU was brought to its knees by higher energy costs as Brussels raced to find fossil fuels elsewhere instead of Russia.

“The EU’s supply of raw materials is highly concentrated on a few countries… This makes us vulnerable to supply disruptions or aggressive actions,” the bloc’s internal market commissioner Thierry Breton said.

According to the leaked proposals, the EU wants the bloc to meet 10% of the demand for mining and extraction of raw materials.

It also says the EU should not rely on one single country for more than 70% of imports for any strategic raw material by 2030.
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Credit Suisse announced Thursday that it would borrow almost $54 billion from the Swiss central bank to reinforce the group after a plunge in its share prices.

The disclosure came just hours after the Swiss National Bank said capital and liquidity levels at the lender were adequate for a “systemically important bank,” even as it pledged to make liquidity available if needed.

In a statement, Credit Suisse said the central bank loan of up to $53.7 billion would “support… core businesses and clients,” adding it was also making buyback offers on about $3 billion worth of debt.

“These measures demonstrate decisive action to strengthen Credit Suisse as we continue our strategic transformation to deliver value to our clients and other stakeholders,” CEO Ulrich Koerner said in the statement.

“My team and I are resolved to move forward rapidly to deliver a simpler and more focused bank built around client needs.”

Credit Suisse, hit by a series of scandals in recent years, saw its stock price tumble off a cliff Wednesday after major shareholder Saudi National Bank declined to invest more in the group, citing regulatory constraints.

Its shares fell more than 30% to a record low before regaining ground to end the day 24.24% down, at 1.697 Swiss francs.

Credit Suisse’s market value had already taken a heavy blow this week over fears of contagion from the collapse of two U.S. banks, as well as its annual report citing “material weaknesses” in internal controls.

Mounting concerns

Analysts have warned of mounting concerns over the bank’s viability and the impact on the larger banking sector, as shares of other lenders sank Wednesday after a rebound the day before.

Credit Suisse is one of 30 banks globally deemed too big to fail, forcing it to set aside more cash to weather a crisis.

Neil Wilson, chief market analyst at trading firm Finalto, said Wednesday that if the bank did “run into serious existential trouble, we are in a whole other world of pain.”

In February 2021, Credit Suisse shares were worth 12.78 Swiss francs, but since then, the bank has endured a barrage of problems that have eaten away at its market value.

It was hit by the implosion of U.S. fund Archegos, which cost it more than $5 billion.

Its asset management branch was rocked by the bankruptcy of British financial firm Greensill, in which some $10 billion had been committed through four funds.

The bank booked a net loss of nearly $8 billion for the 2022 financial year.

That came against a backdrop of massive withdrawals of funds by its clients, including in the wealth management sector — one of the activities on which the bank intends to refocus as part of a major restructuring plan.
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With fewer people coming to work at offices in Manhattan, New York City’s commercial real estate market has lost about $400 billion dollars in value since the start of the pandemic. Aron Ranen has this story from the Big Apple.
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