The European Commission will complain to Treasury Secretary Timothy Geithner that proposed US regulations could discourage banks from trading European sovereign bonds, the WSJ says. Michel Barnier, the European commissioner for the internal market, told the newspaper he would speak to Mr Geithner next month, adding: “We can’t accept extraterritorial consequences or Europe will be tempted to do the same thing”. Mr Barnier said the UK chancellor George Osborne raised concerns at a meeting on Monday.
US Treasury Secretary Tim Geithner, the last remaining member of the Obama administration’s original economic team, said he doesn’t expect the president to ask him to stay in office if re-elected. “He’s not going to ask me to stay on, I’m pretty confident,” Mr Geithner told Bloomberg. “I’m confident he’ll be president. But I’m also confident he’s going to have the privilege of having another secretary of the Treasury.”
US Treasury Secretary Timothy Geithner will stay on in the role, despite considering stepping down after the government debt ceiling limit was raised. Mr Geithner confirmed on Sunday that he will remain at his post at President Barack Obama’s request. “I believe in this president,” Mr Geithner told CNBC. The move avoids a potentially unsettling transition at the tiller of US economic policy amid renewed strains in financial markets and concerns about the trajectory of the recovery, says the FT. Mr Geithner came under pressure from White House officials to remain, given the tight relationship he has forged with Barack Obama, president, and the fact that economic and financial challenges still remain more than two years after the end of the financial crisis and the ensuing recession.
The White House and congressional leaders expressed confidence they could still reach a deal to raise the US borrowing limit and avert a default, the FT says, even after talks to strike an ambitious plan to cut $4,000bn from the country’s deficit broke down over disagreements on tax cuts for the wealthy. Talks on Monday will instead focus on a more limited $2,000bn savings plan after John Boehner, Republican Speaker of the House of Representatives, on Saturday rejected a large-scale deficit reduction compromise because of Democratic insistence on raising new revenues in the deal. New pressure to strike a deal could come this week from Wall Street. Moody’s Investors Service has warned it could place America’s triple-A credit rating on review for downgrade by mid-July in the absence of a deal. Treasury secretary Tim Geithner and new IMF chief Christine LaGarde both warned on Sunday of the ramifications of a US default, reports Reuters.
A small team of officials at the US Treasury is looking at ways to avoid default if Congress fails to raise the debt limit by August 2, Reuters says, despite senior officials including Timothy Geithner repeatedly saying there were no contingency plans. Sources told the news agency that top officials have studied several options. One of those options – using the 14th Amendment to continue issuing payments without debt increase approval from Congress – has been dismissed by the White House as “not failsafe”. Ways of working around the debt ceiling by delaying payments and prioritising payments are also being examined. Meanwhile Eric Cantor, the House leader, laid out conditions under which Republicans might support an administration move to raise revenues by reducing some tax breaks, saying such measures could be considered if they were offset by tax cuts elsewhere. The FT reports the comments were seen as a positive step towards reaching an agreement on the debt ceiling.
Tim Geithner is considering leaving his post as US Treasury secretary, but not before the tense negotiations over raising the country’s borrowing limit and preventing a default are concluded, according to people close to the matter. A Treasury official told the FT on Thursday that Mr Geithner did not plan to make any decision while he was focused on negotiations regarding deficit reduction and the debt limit. However, Mr Geithner has been telling associates for several weeks that he might leave the administration, according to people familiar with the matter. News of the potential departure comes amid fears that the White House and Congress have not made enough progress on a deal on fiscal policy. Mr Geithner has often prevailed over President Obama during his tenure, says the Washington Post.
Ratings agency Fitch said it would place the US credit rating on negative watch if the debt ceiling was not raised by August 2, Reuters reports, the date by which Treasury secretary Tim Geithner believes borrowing authority would be exhausted. Moody’s issued a similar warning this month, saying it would put the US on review if there was no agreement on the debt limit by mid-July.
Senior US officials sought to allay concerns about a future debt crisis in the world’s largest economy, saying the country had taken a leap towards fiscal discipline with President Barack Obama’s new deficit plan, the FT reports. In separate comments on Thursday, Jack Lew, White House budget director, and Tim Geithner, Treasury secretary, played down the political tensionsover fiscal policy, expressing confidence that Republicans and Democrats would quickly reach a deal to repair the US’s long-term finances. Bloomberg adds that Geithner also said Congress needs to raise the debt limit to prevent markets from losing confidence in the US economy and avert a global financial crisis.
The Federal Crisis Inquiry Commission has released the audio interviews to go along with its 662-page potboiler. We’re talking hours and hours of stuff to listen to here.
And there are some big names — Goldman’s Lloyd Blankfein, Deutsche Bank’s Greg Lippmann and Eugene Xu, Warren Buffett, JPMorgan’s Jamie Dimon, the Fed’s Donald Kohn, Merrill’s John Thain — and many, many more. Read more
It’s the question that’s seemingly stumped Tim Geithner: how to identify a priori systemically important non-bank financial institutions.
The Federal Reserve on Tuesday suggested further rules regarding who might be considered for attention by the Financial Stability Oversight Council (FSOC) as per section 113 of Dodd-Frank. In short, they need to be “financial” and “significant”. Read more
The Obama administration will take its first step on Friday towards a possible overhaul of the US corporate tax system, as senior Treasury officials meet top business executives to discuss lowering rates and removing tax breaks, the FT reports. Tim Geithner, US Treasury secretary, will lead talks with a group of 18 chief financial officers – from ExxonMobil and Microsoft to Coca-Cola and Walt Disney – in the latest sign of gathering momentum behind corporate tax reform. However, the Hill, citing a senior White House adviser, says overhauling the nation’s tax codes could take years.
Tim Geithner, the Treasury secretary, has questioned the feasibility of identifying financial institutions as “systemically important” in advance of a crisis, just as the regulatory council he chairs is supposed to start doing precisely that, the FT reports. A report by a government watchdog into the rescue of Citigroup quotes Mr Geithner as saying: “What size and mix of business do you classify as systemic? … It depends too much on the state of the world at the time.” The report, from SigTarp, also said Citi is arguably still too big and interconnected to be allowed to fail, according to Reuters.
US Treasury secretary Tim Geithner denied that the US was trying to devalue the dollar to boost its economy, the FT reports, as he attempted to ease tension in foreign exchange markets. However the WSJ reports that Mr Geithner also described China’s currency as “significantly undervalued.” Meanwhile, Brazil has raised inflow taxes in an attempt to control gains in the real, Bloomberg reports. Tax on foreigners’ investments in fixed-income securities was raised to 6 per cent, up from 4 per cent, while the levy on money brought in for the futures market was increased to 6 per cent, up from 0.38 per cent.
A sharp sell-off in Apple and IBM shares after earnings statements disappointed was weighing on global stocks, while the latest skirmishes in the “currency wars” may have added to the cautious mood, the FT reports in its rolling global market overview. The FTSE All-World index was down 0.2 per cent, commodities were slightly softer and the dollar a bit firmer. US equity futures were pointing to a 0.8 per cent fall for the S&P 500 index when trading starts later in New York. The FTSE Asia-Pacific Index was down 0.3 per cent. Japan’s Nikkei 225 was up 0.3 per cent and Australia’s S&P/ASX 200 was 0.1 per cent higher but South Korea’s Kospi Composite was off 0.8 per cent. Currencies were moving in a tight range at the start of the session, the dollar was up 0.2 per cent on a trade-weighted basis at 77.40.
Mohamed El-Erian, chief executive and co-chief investment officer at PIMCO, looks ahead to today’s American policy announcements
The US Administration will seek today to regain the economic policy initiative. Think of it as an overdue attempt by officials to be seen to be more engaged, and to influence a narrative that has slipped away at a time of unacceptably high unemployment, muted growth, and deficit concerns. Read more
Tim Geithner, US Treasury secretary, faced tough questions about the Obama administration’s proposed $90bn bank tax on Tuesday, with one Republican senator accusing him of a “political stunt”, reports the FT. The anti-bank sentiment that flared up with last month’s fraud charges against Goldman Sachs failed to prevent senators at a congressional hearing from adopting a sceptical attitude to the proposed levy.
A surprise meeting between the Chinese vice-premier and the US Treasury secretary on Thursday has increased speculation about a shift in China’s currency regime, the Financial Times reported on Friday. While the meeting ended with no immediate change in policy, analysts have focused on the unscheduled nature of the visit, which came at the end of a trip to India by Tim Geithner. They say this has increased the probability that China may adjust its fixed exchange rate over the next few months. Officially, Wang Qishan, vice-premier of the State Council, and Mr Geithner delivered only a bland statement saying that the two had discussed a range of issues.
Timothy Geithner, US Treasury secretary, will make an unscheduled visit to Beijing on Thursday, suggesting an understanding could be close on China’s contentious pegged currency regime, reports the FT. Mr Geithner will meet Wang Qishan, the vice-premier responsible for economic affairs, after spending two days in India. The visit comes as Beijing appears to be preparing the ground publicly for a shift in exchange rate policy.
More than 100 members of the US Congress have signed a letter to Timothy Geithner, US Treasury secretary, and Gary Locke, commerce secretary, demanding that China be labeled a currency manipulator, the FT Reports. The declaration would form part of a regular report on currency manipulation, due next month, and shows the amount of pressure the Obama administration is under to take a more confrontational stance towards Beijing.
Whom would you rather see in the pages of Vogue?
Thursday’s story, that the Timothy Geithner-headed Federal Reserve Bank of New York tried to cover up certain details of mega-insurer AIG’s bailout in 2008, has finally prompted some responses from US Treasury — where Geithner is now head.
The below, for instance, was told to the Wall Street Journal: Read more
Interesting story published earlier on from the New York Times’ Dealbook site on Thursday:
Starting in November 2008, the Federal Reserve Bank of New York under Timothy Geithner began urging American International Group, the huge insurer that the government had bailed out, to limit disclosure on payments made to banks at the height of the financial crisis, e-mail messages obtained by DealBook show.
Did the BBC mean for their dramatisation of the last days of Lehman Brothers to be utterly, cringeworthingly hilarious?
If they didn’t, they certainly did a good job making it look like they did. Read more
The key points from Friday’s FT comment piece.
First, capital requirements for banks simply must be higher across the board. Bringing more capital into the banking system is vital. It is equally crucial to hold the largest, most interconnected institutions, whether or not they own banks, to tougher standards than others.
Last week the US Treasury Secretary Timothy Geithner provided more details on how he plans to give regulators greater powers in policing the world of commodity exchange-listed and OTC derivatives. The biteback from the industry is now gathering pace.
Barcap’s daily energy note on Tuesday infers such moves are ‘misguided’ (our emphasis): Read more
An interesting observation from Bank of New York Mellon’s FX team on Wednesday (our emphasis):
Indeed, at the risk of over-simplification, it appears to us that we have now entered a new era in financial history – an era in which certain governments are seriously deliberating the USD’s hegemony as a reserve currency and even its stability over the longer-term.
The FT reported on Tuesday that Brazil and China have come one step closer towards dropping the dollar in trade transactions in favour of their own currencies. Brazilian president Luiz Inácio Lula da Silva is currently visiting Beijing on a state visit.
The news follows a Reuters report on Saturday that Russia and Turkey have also discussed the possibility of switching to national currencies for the purpose of bilateral trade. As Reuters points out, Russia is Turkey’s largest trading partner, while Turkey is the fifth largest trading partner for Russia. Read more
China’s Q1 GDP growth figures came in on Thursday at a quarterly 6.1 per cent – less than the widely forecast 6.3 per cent, reports Reuters, reflecting a further slowdown in the country’s hitherto stellar growth.
But is this only a temporary slip? Could China actually be one step ahead, actively masterminding its future GDP dominance forever? Read more
The citric fruit is cropping up in the oddest of places — specifically, in relation to Tim Geithner’s PPIP plan.
For instance, it’s in economist Willem Buiter’s Maverecon blog. Read more
Anyone worried that Geithner’s toxic asset plan would encourage investors to overpay for toxic bank assets should be relieved. It doesn’t.
What they should be worried about, however, is whether it will actually do anything for the banks. Read more