News : Fractured financial leaders grasp for unity

Friday, April 14, 2023

Fractured financial leaders grasp for unity

Apr 14, 2023

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One big theme has hung over this week’s IMF-World Bank meetings in Washington: The global economy is coming apart at the seams and needs to be sewn back up.

Officials have conveyed a series of dire warnings about growing dislocations of trade and cooperation. Russia’s war in Ukraine has caused a huge tear in the fabric of global trade. U.S.-China tensions are on the rise, as are U.S.-EU squabbles over clean energy industries.

French President Emmanuel Macron inflamed the tensions as he flew back from China on the eve of the IMF meetings, calling on Europe to resist becoming “America’s followers” as it challenges Beijing.

The IMF put a tangible cost on it, estimating that the world could lose trillions of dollars of future economic output if it split into competing geopolitical blocs.

On the ground in Washington, finance ministers and other global economic officials attempted to tamp down the fires of protectionism and fragmentation. Even French finance minister Bruno Le Maire tried to do a bit of clean-up: “I don’t see any contradiction between our determination to be more independent on some strategic sectors and our cooperation with the U.S.”

U.K. Chancellor Jeremy Hunt told MM on the sidelines of the IMF meetings that “the big lesson of the last 100 years” was that Europe and the U.S. can successfully defend democracy and freedom when they stand together. He warned against protectionism — “which will mean that the world will go back to the Dark Ages” — and said he didn’t want to get into a “subsidy race” with the U.S. when it comes to green industries.

Canadian Deputy Prime Minister Chrystia Freeland took a swipe at “the neoliberal formula of free trade and low corporate taxes” but still warned “it would be a huge and historic mistake to react to the abuses of the global trading system by embracing autarky.”

“We shouldn't forget that trade integration has helped the world to achieve great poverty reduction [and an] improvement in living standards,” World Trade Organization Director General Ngozi Okonjo-Iweala said. “We know it didn't do everything, that it has some issues, that some people were left behind. But we need to fix that and not throw away the system.”

European Commission Vice President Valdis Dombrovskis called for greater U.S.-EU alignment, rather than following Macron’s lead.

“Our remarkable coordination on Ukraine can and must be replicated in other areas,” he said. “We must make our policy and economic plans converge, rather than diverge. Doing so will boost our economic strength.”

(h/t to POLITICO’s Doug Palmer, Steven Overly and Zi-Ann Lum for their indispensable reporting assist with today’s MM.)

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Driving the day

JPMorgan, Wells Fargo, Citi and PNC report earnings before markets open … Finance officials and central bankers meet in Washington … Treasury Secretary Janet Yellen’s schedule includes meetings with European commissioner for financial services Mairead McGuinness, Italian economic minister Giancarlo Giorgetti, BoE Governor Andrew Bailey and the Coalition of Finance Ministers for Climate Action … Fed Governor Christopher Waller talks about the economy in San Antonio at 8:45 a.m. …

McHenry threatens Gensler with subpoena — House Financial Services Chair Patrick McHenry warned SEC chief Gary Gensler that the committee was prepared to pursue a “compulsory process, if necessary” if he didn’t turn over documents related to charges files against FTX founder Sam Bankman-Fried.

McHenry and oversight subcommittee chair Bill Huizenga first requested the information in February.

Awkward IMF visit for Slovakian central banker — Our POLITICO EU colleagues report that the governor of Slovakia’s central bank, Peter Kažimír, was convicted of bribery and ordered to pay a fine of €100,000 or serve two years in jail — news that came to light while he attended the IMF-World Bank meetings in Washington.

“I’m innocent, despite the court’s order, which I have yet to receive,” Kažimír said Thursday in Washington. He is a member of the European Central Bank’s Governing Council, which sets interest rates.

The climate conundrum at the World Bank — Our Zack Colman and Ben White have a deep dive into the conflict surrounding the push by Yellen and other financial officials to reshape the World Bank to fight climate change. The big problem: They don’t have any appetite for massive new spending to do it.

JPMorgan, Citi, Wells kick off post-SVB bank earnings season today — Big banks are expected to have fared better than midsize lenders, which WSJ says are facing the most challenging earnings season since the 2008 financial crisis.

Economy

Bank demand for emergency Fed loans keeps falling — Bloomberg reports that banks reduced borrowings from two Federal Reserve backstop lending facilities for a fourth straight week, as liquidity concerns eased after the collapse of Silicon Valley Bank.

China’s central bank chief to speak in Washington — Yi Gang, governor of the People’s Bank of China, will give a speech on China’s monetary policy at the Peterson Institute Saturday at 12 p.m.

Arkansas lawmakers warn Yellen about rural lending — The Arkansas congressional delegation told Yellen in a letter that proposed rules for Community Development Financial Institutions “would result in many rural banks losing their CDFI status through stricter rules on interest rates, underwriting standards, risk management tools, disclosure requirements, and target markets.”

Financial literacy caucus re-launches — Reps. Joyce Beatty (D-Ohio) and Young Kim (R-Calif.) said Thursday they will co-chair the revamped Financial Literacy and Wealth Creation Caucus for this session of Congress, our Eleanor Mueller reports.

The pair renamed the caucus to include wealth creation, a change that reflects how they “have revised the mandate of the caucus to emphasize that financial literacy is a tool not only for economic stability, but also for wealth-building and lasting financial prosperity for generations to come,” Beatty said in a statement.

Crypto

Acquaintance arrested in Cash App founder’s killing — CNN reports that San Francisco police arrested 38-year-old IT business owner Nima Momeni in connection with the murder of Cash App founder Bob Lee. Momeni and Lee knew each other, according to police.

Trade group digs into bank failures — The Blockchain Association said it submitted open records requests to the Federal Housing Finance Agency and New York Department of Financial Services, as it sought answers about whether the failures of Signature Bank and Silvergate Bank were tied to anti-crypto policies.

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