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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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Stock markets in Europe and the U.S. tumbled Wednesday as investors worried about the stability of global banking systems in the immediate aftermath of the collapse of two American banks.

Major stock indexes in London, Paris and Frankfurt all plunged by more than 3% while three key U.S. indexes — the Dow Jones Industrial Average of 30 key stocks, the broader S&P 500 index and the tech-heavy Nasdaq index — also dropped, although by 1% or less in late-day trading. Asian markets increased, mirroring Tuesday gains in the U.S.

The newest worries centered on Credit Suisse, with shares for the beleaguered Swiss lender falling more than 17% after its biggest shareholder, the Saudi National Bank, said it would not invest more money in it.

Problems at Credit Suisse, with outlets in major global financial centers, predated the U.S. government takeover of operations at Silicon Valley Bank and Signature Bank in the last week.

Credit Suisse said Tuesday that managers had identified “material weaknesses” in the bank’s internal controls on financial reporting as of the end of last year.

But on Wednesday, Credit Suisse chairman Axel Lehmann, speaking at a financial conference in the Saudi capital of Riyadh, defended the bank’s operations, saying, “We already took the medicine” to reduce risks. “We are regulated. We have strong capital ratios, very strong balance sheet. We are all hands on deck.”

But with the drop in the share price for Credit Suisse, bank stocks in Britain, France and Germany also fell sharply, although not by as much as for Credit Suisse.

S&P Global Ratings said on Tuesday that the failures at the two U.S. banks would have little effect on the fortunes of European banks. But the S&P analysts added, “That said, we are mindful that SVB’s failure has shaken confidence.”

Share prices of other U.S. regional banks like Silicon Valley have fallen sharply in recent days.

Some information for this report came from The Associated Press.
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Argentina’s annual inflation rate breached the 100% mark for the first time since 1991.

The government’s statistics agency said Tuesday the yearly inflation rate for February rose to 102.5%, making it one of the highest in the world. The agency said consumer prices rose 6.6% last month compared to the same period a year ago, and a combined 13.1% for the first two months of this year.

The sharp rise in the rate was due to an increase in the price for food and beverages, finishing up at 9.8% last month compared to January.

Reports say the surge in consumer prices has defied numerous attempts by the government of President Alberto Fernandez to tame inflation, including a cap on the price of food and other goods.

The soaring inflation rate has been blamed on a number of factors, including a flood of money into circulation by the central bank, along with a lingering heatwave and subsequent drought that has destroyed crops and impacted agricultural exports. The high inflation rate has further left the South American country mired in a lingering economic crisis.

The International Monetary Fund has approved a $44 billion financial aid package for Argentina.

Some information for this report came from Reuters.
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In the early days of the COVID-19 pandemic, nurses, truck drivers, grocery clerks and other essential workers were hailed as heroes.

“Now we are vilifying them … and this has long-term ramifications for our well-being,” said Manuela Tomei, International Labor Organization assistant director-general for governance, rights, and dialogue.

“The work that these persons perform is absolutely essential for families and societies to function,” she said, speaking Wednesday in Geneva. “So, the non-availability of their services would really result into a loss of well-being and the impossibility of ensuring safe lives to society at large.”

And yet a new study by the International Labor Organization (ILO) finds essential workers are undervalued, underpaid and laboring under poor working conditions, exposed to treatment that “exacerbates employee turnover and labor shortages, jeopardizing the provision of basic services.”

The U.N. agency’s report classifies key workers into eight main occupation groups covering health, food systems, retail, security, cleaning and sanitation, transport, manual, and technical and clerical occupations.

Data from 90 countries show that during the COVID-19 crisis key workers suffered higher mortality rates than non-key workers overall, with transport workers being at highest risk.

The report found 29% of key workers globally are low paid, earning on average 26% less than other employees. It reports they tend to work long, unpredictable hours under poor conditions.

Tomei said inaction in improving sub-standard conditions of work is having consequences today.

“In a number of countries, these sectors are facing some labor shortages because people are increasingly reluctant to engage in work which is not fairly valued by society and rewarded in terms of better pay and also improved working conditions.

“So, we are facing a crisis right now,” she added.

Richard Samans, director of the ILO research department, noted that a critical shortage of nurses in many countries is of particular concern.

“This affects the very life of people,” he said Wednesday. “Many people in countries are facing long delays in treatment. In the event of a shock — some sort of a major health disruption or natural disaster or otherwise — if the system is already strained, it cannot handle the major influx of demand for those nursing services.”

A new report by the World Health Organization warns the “widespread disruptions to health services” due to the COVID-19 pandemic “has resulted in a rapid acceleration in the international recruitment of health professionals,” mainly from poor to rich countries, exacerbating shortages of this vital workforce in developing countries.

The ILO reports that countries are still experiencing supply shortages three years after WHO declared COVID-19 a pandemic. ILO research director Richard Samans attributes this to a scarcity of truck drivers due to lack of training and bad working conditions.

“In the event of a shock that increases the demand for certain types of products and services, if the underlying logistical infrastructure is not fit for purpose, then that affects the daily livelihood of people and, in some cases, their health and well-being,” he said.

The ILO report also says key workers fare worse than non-key workers in both wealthy and poor countries, but ILO senior economist Janine Berg said the problems are worse in low-income countries.

“There are particularly severe problems, for example, in agricultural work in low-income countries, and the entire agricultural food chain is part of the key worker definition,” she said. “There are also very severe problems in lower-income countries with respect to very low coverage in social protection.”

The report urges nations to identify gaps in decent work and develop national strategies to address the problems facing key workers through strengthened policies and investment.

Among its recommendations, the report calls on governments to reinforce occupational health and safety systems, improve pay for essential workers, guarantee safe and predictable working hours through regulation, and increase access to training so that key workers can carry out their work effectively and safely.
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They are perhaps the two most feared words for regulators of the financial industry: Bank run.

And that is what happened last week when depositors, during a single day, withdrew $42 billion from California-based Silicon Valley Bank (SVB), leaving it with a negative cash balance of a billion dollars.

“This was the first Twitter-fueled bank run,” is how Republican Representative Patrick McHenry, chair of the House Financial Services Committee, described the tsunami of withdrawals.

Depositors and others began speculating on social media about the bank’s health after CEO Greg Becker sent a letter to shareholders on March 8, revealing a loss of $1.8 billion on the sales of U.S. treasuries [debt obligations issued by the government to raise cash] and mortgage-backed securities. Becker outlined his quest to find more than $2 billion to stabilize the bank.

The letter was the catalyst for the second-largest failure of a financial institution in U.S. history and the first such collapse since an economic recession in the country 15 years ago.

As SVB was sinking, regulators in the state of New York suddenly shut down Signature Bank, known as friendly to the unstable cryptocurrency industry, after panic withdrawals there totaling $10 billion brought it to the brink of insolvency.

Some of Signature Bank’s biggest customers were the top crypto exchanges, which individually had hundreds of millions of dollars in deposits.

The bank runs threatened to expand, with individuals across the country whose deposits were more typically in the thousands of dollars and not millions of dollars wondering if their money was safe. Regional banks were especially vulnerable as their stock prices plummeted.

“If the damage had spread across our financial system, the deposits and savings of tens of millions of families and small businesses could have been at serious risk,” Majority Leader Chuck Schumer said on the Senate floor Tuesday.

The government corporation Federal Deposit Insurance Corporation (FDIC) stepped in with unprecedented action.

Most bank customers know the FDIC from its logo displayed at branches with the written assurance: “Each depositor insured to at least $250,000.” Such a limit is likely to cover the potential losses of most individual depositors in America, but Silicon Valley Bank’s well-heeled customers were high-tech startups and entrepreneurs with far larger deposits.

The FDIC decided that the customers of SVB and Signature would be made whole, no matter how much money they had in either of those banks. This restored consumer confidence, and there have been no additional runs on American banks. But the decision was perceived by some as a bailout for the wealthy.

“No losses will be borne by the taxpayers,” President Joe Biden said on Monday.

That is technically correct, as the FDIC is cashing out depositors from a pool of money that all insured banks are required to pay into. But “it is most definitely a bailout,” said Thomas Hoenig, distinguished senior fellow at George Mason University’s Mercatus Center and a former vice chairman of the FDIC.

“This is where the market discipline breaks down,” Hoenig said.

On its website, the FDIC touts its track record: “No depositor has ever lost a penny of insured deposits since the FDIC was created in 1933.”

The FDIC was formed as an independent agency during the Great Depression after a wave of bank runs led to the failure of thousands of financial institutions in the early 1930s, wiping out the savings of many Americans at a time of high unemployment.

“The FDIC was considered pretty radical at the time,” Hoenig told VOA. He noted that even President Franklin D. Roosevelt initially was uneasy about setting up a deposit insurance fund because of concern “about the moral hazard issue that people would not pay attention to what a bank was doing.”

A sister organization, the Federal Savings and Loan Insurance Corporation, was set up to protect depositors at non-commercial banks. The FSLIC and its parent agency, the Federal Home Loan Bank Board, eventually went bankrupt and were dissolved in 1989. The FDIC now is available to ensure those smaller thrift institutions, while the government-backed National Credit Union Administration, a successor to the Bureau of Federal Credit Unions, was established in 1970 to exclusively protect those depositors.

An FDIC bankruptcy “is always a possibility,” according to Hoenig. But the FDIC effectively has a line of credit from the U.S. Treasury it could access if there were to be massive bank failures and it ran out of money.

Right now, Hoenig noted, the FDIC has $100 billion in its fund. But that is against about $20 trillion in banking deposits. Hoenig cautions, “You really don’t want to be bailing out everyone every time, or you might as well just make these institutions public utilities.”
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According to recent studies, working four days a week instead of five can improve people’s overall wellness. The challenge, however, is whether businesses can maintain the same level of productivity in shorter periods of time. VOA’s Veronica Balderas Iglesias spoke with those who have experimented with the formula.
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Facebook-parent Meta Platforms said on Tuesday it would cut 10,000 jobs, just four months after it let go 11,000 employees, the first Big Tech company to announce a second round of mass layoffs. 

“We expect to reduce our team size by around 10,000 people and to close around 5,000 additional open roles that we haven’t yet hired,” Chief Executive Officer Mark Zuckerberg said in a message to staff.  

The layoffs are part of a wider restructuring at Meta that will see the company flatten its organizational structure, cancel lower priority projects and reduce its hiring rates as part of the move. The news sent Meta’s shares up 2% in premarket trading. 

The move underscores Zuckerberg’s push to turn 2023 into the “Year of Efficiency” with promised cost cuts of $5 billion in expenses to between $89 billion and $95 billion. 

A deteriorating economy has brought about a series of mass job cuts across corporate America: from Wall Street banks such as Goldman Sachs and Morgan Stanley to Big Tech firms including Amazon.com  and Microsoft.  

The tech industry has laid off more than 280,000 workers since the start of 2022, with about 40% of them coming this year, according to layoffs tracking site layoffs.fyi.  

Meta, which is pouring billions of dollars to build the futuristic metaverse, has struggled with a post-pandemic slump in advertising spending from companies facing high inflation and rising interest rates.  

Meta’s move in November to slash headcount by 13% marked the first mass layoffs in its 18-year history. Its headcount stood at 86,482 at 2022-end, up 20% from a year ago. 
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Illegal fishing, a multibillion-dollar industry closely linked to organized crime, is set to pose a greater threat to global security as climate change warms the world’s oceans, according to a report by the Royal United Services Institute, a research organization based in London, in partnership with The Pew Charitable Trust.

Illegal, unreported and unregulated, or IUU, fishing is worth up to $36.4 billion annually, according to the report, representing up to a third of the total global catch.

Fish stocks

As climate change warms the world’s oceans, fish stocks are moving to cooler, deeper waters, and criminal operations are expected to follow.

“IUU actors and fishers in general will be chasing those fish stocks as they move. And there’s predictions, or obviously concern, that they will move in across existing maritime boundaries and IUU actors will pursue them across those boundaries,” report co-author Lauren Young told VOA.

RUSI said that global consumption of seafood has risen at more than twice the rate of population growth since the 1960s. At the same time, an increasing proportion of global fish stocks have been fished beyond biologically sustainable limits.

The report also highlights that fish play a key role in capturing carbon through feeding, so a decline in fish stocks itself could accelerate warming temperatures.

Crime nexus

“Climate change will impact in other ways, with impacts on coastal erosion as well, and that will have impacts on local small-scale fisheries. As their livelihoods become more vulnerable, they may begin engaging more in IUU practices like disruptive fishing practices or engaging in other type of criminal activity as well.”

“There is a nexus with other crime types as well, like narcotics, human trafficking and labor abuses,” Young added.

Many poorer countries do not have the capacity to police their waters. In parts of Africa and South America, foreign trawlers — including many vessels from China — have devastated fish stocks. Beijing denies its fleets conduct illegal fishing.

The United States Coast Guard said in 2021 that IUU fishing had replaced piracy as the leading global maritime security threat. “If IUU fishing continues unchecked, we can expect deterioration of fragile coastal states and increased tension among foreign-fishing nations, threatening geo-political stability around the world,” the document warned.

US response

The United States launched a sustainable fishing initiative in Peru and Ecuador in October. Project “Por la Pesca” is aimed at helping artisanal fishing in the face of depleted stocks caused by IUU fishing.

“It’s having a profound impact on stocks of fish, on the livelihoods of fisherpeople, on sustainability,” U.S. Secretary of State Antony Blinken said on a visit to Peru in October. “We have many countries around the world where fishing is at the heart of their economy and the heart of their culture as well, where illegal, unreported, unregulated fishing is a real and growing challenge.”

South China Sea

RUSI highlights the warming South China Sea as a flashpoint. Already, fishing grounds and maritime boundaries are hotly contested, with frequent armed confrontations.

“Many relate to China’s commitment to the nine-dash line, which is the country’s self-declared sort of maritime boundary,” said RUSI’s Young. “And they enforce that through armed fishing militia. So that obviously plays into it a lot as well. But those existing tensions there are likely to be exacerbated by climate change. And that is in line with predictions of climate change being this kind of threat multiplier.”

Enforcement

Earlier this month, United Nations member states agreed to the High Seas Treaty, aimed at protecting biodiversity by establishing vast marine protected areas.

“Whilst it’s a positive move with climate change that we’re looking to protect more of the world’s oceans, we need to improve our ability to actually monitor and enforce [the agreements] as well,” Young said.

The report authors call on governments and multinational bodies to tackle illegal fishing based on climate change predictions; enhanced vessel monitoring capabilities and tougher enforcement, with greater recognition on the role the industry plays in wider criminal networks.
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Stock markets in Asia fell Tuesday, with shares of banks hit particularly hard, following a decline in U.S. markets amid the fallout from the collapse of two U.S. banks. 

Japan’s Nikkei 225 Index closed down 2.2% with shares of Softbank falling 4.1%, Mizuho Financial Group dropping 7.1% and Sumitomo Mitsui Financial Group sinking 9.8%.  Hong Kong’s Hang Seng Index closed down 2.4% Tuesday. 

U.S President Joe Biden Monday sought to reassure Americans that the U.S. banking system is secure and that taxpayers would not bail out investors at California-based Silicon Valley Bank and the New York-based Signature Bank.    

“Americans can have confidence the banking system is safe. Your deposits are safe,” Biden said in a five-minute statement delivered at the White House.     

He said customers’ deposits will be covered by funds banks routinely pay into a U.S. government-held account for such emergencies.      

Biden vowed, “We must get a full accounting of what happened” at the two banks.     

Despite the assurances, U.S. banks lost about $90 billion in stock market value on Monday as investors feared additional bank failures. The biggest losses came from midsize banks, of the size of Silicon Valley Bank.     

While shares of the country’s biggest banks — such as JP Morgan Chase, Citigroup and Bank of America — also fell Monday, the selloff was not as sharp. The huge banks have been strictly regulated since the 2008 financial crisis and have been repeatedly stress tested by regulators.    

Biden ignored reporters’ questions Monday about the cause of the U.S. bank failures, but financial experts say both banks were affected by a rise in interest rates, which negatively affected the market values of significant portions of their assets, such as bonds and mortgage-backed securities.       

Banks don’t lose money if they hold such notes until maturity. But if they must sell them to cover depositor withdrawals, as was the case in recent days, the losses can quickly mount.       

The Federal Deposit Insurance Corp. reported that industrywide, U.S. banks at the end of last year reported $620 billion in such paper losses caused by rising interest rates.     

The U.S. Federal Reserve, the country’s central bank, announced Monday that it would review its oversight of Silicon Valley Bank in the wake of the bank’s failure.    

“We need to have humility and conduct a careful and thorough review of how we supervised and regulated this firm, and what we should learn from this experience,” said Fed vice chair for supervision Michael Barr.      

The FDIC, which insures deposits up to $250,000 and supervises financial institutions, said Monday it transferred all Silicon Valley Bank deposits to a so-called “bridge bank.” The new bank is run by a board appointed by the agency until it can stabilize operations.          

The Bank of England also announced Monday the sale of Silicon Valley Bank’s United Kingdom subsidiary to HSBC to stabilize the bank, “ensuring the continuity of banking services, minimizing disruption to the U.K. technology sector and supporting confidence in the financial system.”      

The actions were prompted by the failure of Silicon Valley Bank, which U.S. regulators seized on Friday after concerns about the bank’s financial health led to a large number of depositors withdrawing their money at the same time.          

With about $200 billion in assets, Silicon Valley Bank’s failure was the second largest in U.S. history. The bank was heavily involved in financing for venture capital firms, especially in the tech sector.            

Signature Bank also had a large portion of clients in the tech sector, including cryptocurrency.  Its failure, with more than $100 billion in assets, was the third largest in U.S. history, behind Washington Mutual and Silicon Valley Bank.           

Some information for this story came from The Associated Press, Agence France-Presse and Reuters. 
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Lebanon’s currency fell to a new low Tuesday, with parallel market rates hitting 100,000 Lebanese pounds to the dollar.

While the official rate is set at 15,000 Lebanese pounds to the dollar, private money exchangers said the black-market rate used in most transactions in the country had reached 100,000 pounds to a dollar.

The currency has been sinking since an economic crisis erupted in Lebanon in 2019, one that the World Bank has called one of the world’s worst since the mid-19th century.

The currency plummet, coupled with withdrawal limits at banks, have led to protests and lawsuits from depositors who say they cannot access their money.

Banks on Tuesday resumed a strike they began in early February to protest judiciary actions against them, including a court order for one of the country’s largest banks to pay some of its depositors’ savings in cash.

Some information for this story came from The Associated Press, Agence France-Presse and Reuters.

 
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U.S. President Joe Biden assured Americans on Monday that the U.S. banking system is secure and that taxpayers would not bail out investors at two banks that collapsed.

“Americans can have confidence the banking system is safe. Your deposits are safe,” Biden said in a five-minute statement delivered at the White House as businesses opened for the work week.

He said that all customers at the California-based Silicon Valley Bank and the New York-based Signature Bank would have immediate access to their deposits as federal financial officials take control of their operations.

“No losses will be borne by taxpayers,” Biden declared. “Managers of these banks will be fired. Investors in these banks will not be protected.”

He said customers’ deposits will be covered by funds banks routinely pay into a U.S. government-held account for such emergencies.

But he vowed, “We must get a full accounting of what happened” at the two banks.

He ignored reporters’ questions about the cause of the failures, but financial experts say both banks were affected by a rise in interest rates, which negatively affected the market values of significant portions of their assets, such as bonds and mortgage-backed securities.

Banks don’t lose money if they hold such notes until maturity. But if they must sell them to cover depositor withdrawals, as was the case in recent days, the losses can quickly mount.

The Federal Deposit Insurance Corp. reported that industrywide, U.S. banks at the end of last year reported $620 billion in such paper losses caused by rising interest rates.

In a statement late Sunday, Biden said, “I am firmly committed to holding those responsible for this mess fully accountable and to continuing our efforts to strengthen oversight and regulation of larger banks so that we are not in this position again.”

The statement followed a meeting of officials from top financial regulators, and said the Federal Reserve, the country’s central bank, was also giving other banks access to an emergency lending program to provide additional stability to the wider banking system.

The FDIC, which insures deposits up to $250,000 and supervises financial institutions, said Monday it transferred all Silicon Valley Bank deposits to a so-called “bridge bank.” The new bank is run by a board appointed by the agency until it can stabilize operations.

The Bank of England also announced Monday the sale of Silicon Valley Bank’s United Kingdom subsidiary to HSBC to stabilize the bank, “ensuring the continuity of banking services, minimizing disruption to the U.K. technology sector and supporting confidence in the financial system.”

A Bank of England statement said all depositor money was safe and that Silicon Valley Bank U.K. would continue operating as normal.

The actions were prompted by the failure of Silicon Valley Bank, which U.S. regulators seized on Friday after concerns about the bank’s financial health led to a large number of depositors withdrawing their money at the same time.

With about $200 billion in assets, Silicon Valley Bank’s failure was the second largest in U.S. history. The bank was heavily involved in financing for venture capital firms, especially in the tech sector.

Signature Bank also had a large portion of clients in the tech sector, including cryptocurrency. Its failure, with more than $100 billion in assets, was the third largest in U.S. history, behind Washington Mutual and Silicon Valley Bank.

Some information for this story came from The Associated Press, Agence France-Presse and Reuters.
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U.S. Federal Reserve officials meet next week again chasing persistent inflation but now balancing that against the first acute tremors from the aggressive interest rate hikes the central bank approved over the past year.

The sudden failure of Silicon Valley Bank last week isn’t expected to prevent the Fed from continuing to raise interest rates at its March 21-22 meeting, with inflation still running far above the Fed’s 2% target and Fed chair Jerome Powell indicating monetary policy might need to become even more aggressive.

But it could add a dose of caution to the policy debate and undermine the sense, common among officials so far, that Fed policy had not caused anything to “break” in an economy where spending and job growth have seemed immune to the impact of higher interest rates. 

SVB’s failure, which the Fed came to a view as a potentially systemic shock if bank depositors faced losses, prompted the Fed to announce a new bank lending facility on Sunday in an effort to maintain confidence in the system – effectively putting the Fed back in the business of emergency lending even as it tries to tighten credit overall with higher interest rates.

Given the stakes that bit of dissonance seemed unavoidable, and may be accompanied by a slightly softer approach to monetary policy if risks are seen to be intensifying.

“The threat of a systemic disruption in the banking system is small, but the risk of stoking financial instability may well encourage the Fed to opt for a smaller rate increase at the upcoming meeting,” Oxford Economics economist Bob Schwartz wrote on Friday after SVB was closed by regulators and as officials began examining how to respond to the largest bank failure since the 2007 to 2009 financial crisis.

The upcoming Fed session was already providing a reality check of sorts, as policymakers tried to understand why the rapid rate hikes of the last year have not had more impact on the pace of price increases.

The inflation rate in January actually rose, while an Atlanta Fed real-time projection as of March 8 showed gross domestic product expanding at a 2.6% annual rate, well above the economy’s roughly 2% underlying potential.

Officials were poised to push the expected path of interest rates higher yet again as a result, the third time in their two-year battle against inflation that U.S. policymakers will have shifted on the fly after price increases proved to be faster, broader and more persistent than seen in their forecasts.

A February jobs report released Friday showed the unemployment rate rising to 3.6%. More importantly for the Fed, monthly wage growth slowed even as the economy continued to add jobs, an outcome that leaves open whether the Fed will approve a quarter or a half point rate increase at its next meeting. By late Sunday after the day’s emergency actions, the probability of a half-point hike had diminished to below one-in-five. 

Higher end point?

New inflation data to be released Tuesday and retail sales data on Wednesday both have the potential to push policymakers in either direction at the two-day meeting, which concludes March 22 with a new Federal Open Market Committee statement and projections issued at 2 p.m. EDT (1800 GMT), and a press conference by Powell at 2:30 p.m.

While investors at this point see lower odds of a return to larger rate hikes, there is still the question of just how much higher the Fed will go overall. Powell in his remarks to Congress last week signaled the new “dot plot” of projections for the rate path beyond March would likely be higher than previously expected in order to slow inflation to the central bank’s 2% target from levels more than double that.

As of December the high point for the target federal funds rate was expected by most officials to be 5.1%. In their final public comments before the beginning of a pre-meeting blackout period, Fed officials other than Powell also said they were primed for a more aggressive response if upcoming data show them losing more ground on inflation.

“The ultimate level of interest rates is likely to be higher than previously anticipated,” Powell said in congressional testimony that reset expectations for where the Fed was heading, and pushing yields on U.S. Treasury bonds higher and prompting a sell-off in equity markets.

At a Feb. 1 press conference, in contrast, his focus was on a “disinflationary process” he saw taking root.

Developments since then have raised some doubt in investors minds if Fed officials will follow through with that, however, and much of the immediate heat on bond yields and rate expectations eased after Friday’s employment data, with the weekend’s developments in the banking sector to address the Silicon Valley Bank collapse also factoring into the reversal. 

Still nimble?

Government reports released after Powell’s last press conference showed the central bank’s preferred measure of inflation had risen slightly to a 5.4% annual rate.

Revisions to prior months also erased some of the progress policymakers had relied on when they decided to step down to quarter point rate hikes at their last session. A New York Fed study last week suggested moreover that current inflation was being driven more by persistent factors and less by cyclical or sectoral influences that might be quicker to dissipate.

It is not the first time the Fed has been caught out by after-the-fact data updates. In the fall of 2021 the first release of monthly jobs reports seemed to show the job market weakening, taking some of the urgency out of discussions about when to start tightening monetary policy. By the end of the year revisions showed hundreds of thousands more jobs had been added than originally estimated.

“If you are trying to be nimble, this is the risk. And Powell is trying to be nimble,” said former Fed economist John Roberts. 
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U.S. President Joe Biden is due to speak Monday about the banking system after the government acted to try to contain a potential crisis from the failure of two major banks. 

“The American people and American businesses can have confidence that their bank deposits will be there when they need them,” Biden said in a statement late Sunday. “I am firmly committed to holding those responsible for this mess fully accountable and to continuing our efforts to strengthen oversight and regulation of larger banks so that we are not in this position again.” 

The U.S. Treasury Department said in a statement Sunday that depositors at the California-based Silicon Valley Bank and the New York-based Signature Bank will have access to all of their money on Monday. 

The regulators also said no losses associated with the resolution of Silicon Valley Bank and Signature Bank will be borne by the taxpayer. 

The statement followed a meeting of officials from top financial regulators, and said the Federal Reserve was also giving other banks access to an emergency lending program to provide additional stability to the wider banking system. 

The actions were prompted by the failure of Silicon Valley Bank, which regulators seized on Friday after concerns about the bank’s financial health led to a large number of depositors withdrawing their money at the same time. 

With about $200 billion in assets, Silicon Valley Bank’s failure was the second-largest in U.S. history.  The bank was heavily involved in financing for venture capital firms, especially in the tech sector. 

Signature Bank also had a large portion of clients in the tech sector, including cryptocurrency. Its failure, with more than $100 billion in assets, was the third-largest in the country’s history. 

Both banks were affected by a rise in interest rates, which negatively affected the market values of significant portions of their assets such as bonds and mortgage-backed securities. 

Some information for this story came from The Associated Press, Agence France-Presse and Reuters. 
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