Last Call For Shutdown Countdown, Armageddon Edition, Con't

With Treasury Secretary Janet Yellen putting a hard date on June 5th for when the US can't pay the bills, House Republicans are trying to scuttle any notion of a reported deal as they want Biden's economy to pay the same price Trump did for Covid, only worse.

In response to reports about the details of the agreement, leading conservative lawmakers and budget experts raised strong objections, arguing that McCarthy had failed to extract sufficient concessions from the Biden administration in exchange for raising the debt ceiling. McCarthy pushed back in remarks to reporters on Friday, saying the criticisms were being leveled by people unaware of the substance of the deal.

Negotiators are closing in on an agreement that would raise the debt ceiling by two years — a key priority of the Biden administration — while also essentially freezing government spending on domestic programs and slightly increasing funding for the military and veterans affairs, said three people familiar with the matter who spoke on the condition of anonymity to reflect private deliberations. Although the deal is expected to include key GOP priorities, such as partially clawing back new funding for the Internal Revenue Service, a growing chorus of conservatives has balked at how little the deal appears to cut government spending overall — especially because it would also give up their party’s leverage on the debt ceiling until after the 2024 presidential election.

Rep. Ralph Norman (R-S.C.), a top member of the far-right House Freedom Caucus, described what he has learned so far of the emerging deal as “watered down.” Norman urged McCarthy to hew closely to the legislation that conservatives helped craft and pass last month, which raised the debt ceiling only into next year and coupled the increase with larger spending cuts than the two parties are now discussing.

“This is totally unacceptable, and it’s not what we agreed to,” Norman said.

Rep. Bob Good (R-Va.), another House conservative, complained about reports that the deal would raise the debt ceiling by more money than the bill approved by the House. Good said the emerging deal would do so “for a whole lot less in return that we need from a policy standpoint, from a fiscal standpoint.” He added: “And if that were true, that would absolutely collapse the Republican majority for this debt ceiling increase.”

Rep. Andy Harris (R-Md.), another House conservative, added of the longer debt ceiling increase: “You’ve got to add things into it, not compromise things away.” Rep. Chip Roy (R-Tex.), a key conservative leader, downplayed the idea that the deal would lead to McCarthy losing his speakership but added of the deal: “I think it’s an exit ramp about five exits too early.”

Asked by reporters about the criticisms on Friday, McCarthy said: “I’m not concerned about anybody making any comments right now about what they think is in or not it. Whenever we come to an agreement, we’ll make sure we will first brief our entire conference.”

The extent and ferocity of the conservative revolt could prove crucial to the ongoing debt ceiling standoff, as well as McCarthy’s future. But it was not exactly clear how many GOP lawmakers shared the objections voiced by Norman and Good. Since the beginning of the negotiations, McCarthy has been widely assumed to be able to lose the roughly three dozen members of the far-right House Freedom Caucus and still manage to pass the debt ceiling increase and retain his position as speaker. If he loses several dozen additional House Republican lawmakers, though, both the deal — and his grip on power — could be on shaky ground.

“These guys were never going to vote for it, so the question becomes how many of them you lose,” one GOP strategist said, speaking on the condition of anonymity to describe internal dynamics.

 

A deal was always going to require Democratic votes. McCarthy's issue is of course that if the deal is a majority Democratic one, he gets removed as House Speaker. A bill that a majority of the House GOP was going to accept and has enough Democrats on board to actually pass it, well, that's McCarthy's real problem, because it doesn't exist.

 

So now we watch as the circus ringmaster puts himself through the flaming hoops, and if he fails, the entire tent burns down and America along with it.

 

 

Last Call For Shutdown Countdown, Armageddon Edition, Con't

House Republicans passed a DOA immigration bill Thursday that would add thousands of Border patrol agents and force the government to finish Trump's idiotic wall, and now the Clown Car is demanding that the bill become law as part of debt ceiling hostage nonsense or they'll crater the economy and send us into a recession.

 

Key GOP lawmakers are signaling they want border policies in the mix as congressional leadership and the White House try to negotiate a debt ceiling deal, the day after Republicans passed a sweeping border and immigration bill. It was a GOP wishlist that included restarting construction of the U.S.-Mexico border wall and placing new restrictions on asylum seekers.

“We passed the bill that I think does the job. … And by the way, I think this is now a central part of any debt ceiling or spending debate for the remainder of the year,” Rep. Chip Roy (R-Texas) said in an interview on Friday.

“Every day that the President continues to dilly dally, in my mind, the price goes up, not down. … You want a debt ceiling increase? You want to go fund the operations of government? Then fix the damn border, Mr. President,” Roy added.

And it’s not just Roy. One of McCarthy’s top deputies, Rep. Garret Graves (R-La.), pointed to the border bill and said Republicans are “bringing more ideas to the table.”

“The House has now added more to the mix,” Graves said in a separate interview Friday. “With yesterday passing the immigration bill — which doesn't just secure America, doesn't just save lives from fentanyl overdose, but also saves tens of billions of dollars in wasted money as a result of this administration's careless border policy.”

Republicans aren’t yet demanding specifics on which border provisions they want to see in a potential debt ceiling deal, instead pointing to their recently passed bill more broadly. That, of course, has no chance at passing the Senate.

But Roy, who said he wasn’t going to negotiate publicly, said that he was “not alone” in viewing it as a key issue in the negotiations now. He said they’d also want to bring it up during talks about government spending, with a shutdown deadline at the end of September.

 

Understand that if Biden and the Dems give in now, House Republicans will only keep increasing their demands until the country's economy shatters and tens of millions are made to suffer.

 

 

Last Call For Shutdown Countdown, Armageddon Edition, Con't

Treasury Secretary and former Fed Chair Janet Yellen says that the government will run out of debt ceiling tricks and could be forced to default on loans as soon as June 1, and as far as the Biden administration is concerned, the time to put this mess to bed is now here.

 

A standoff between House Republicans and President Biden over raising the nation’s borrowing limit has administration officials debating what to do if the government runs out of cash to pay its bills, including one option that previous administrations had deemed unthinkable.

That option is effectively a constitutional challenge to the debt limit. Under the theory, the government would be required by the 14th Amendment to continue issuing new debt to pay bondholders, Social Security recipients, government employees and others, even if Congress fails to lift the limit before the so-called X-date.

That theory rests on the 14th Amendment clause stating that “the validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.”

Some legal scholars contend that language overrides the statutory borrowing limit, which currently caps federal debt at $31.4 trillion and requires congressional approval to raise or lift.

Top economic and legal officials at the White House, the Treasury Department and the Justice Department have made that theory a subject of intense and unresolved debate in recent months, according to several people familiar with the discussions.

It is unclear whether President Biden would support such a move, which would have serious ramifications for the economy and almost undoubtedly elicit legal challenges from Republicans. Continuing to issue debt in that situation would avoid an immediate disruption in consumer demand by maintaining government payments, but borrowing costs are likely to soar, at least temporarily.

Still, the debate is taking on new urgency as the United States inches closer to default. Treasury Secretary Janet L. Yellen warned on Monday that the government could run out of cash as soon as June 1 if the borrowing cap is not lifted.

Mr. Biden is set to meet with Speaker Kevin McCarthy of California at the White House on May 9 to discuss fiscal policy, along with other top congressional leaders from both parties. The president’s invitation was spurred by the accelerated warning of the arrival of the X-date.

But it remains unclear what type of compromise may be reached in time to avoid a default. House Republicans have refused to raise or suspend the debt ceiling unless Mr. Biden accepts spending cuts, fossil fuel supports and a repeal of Democratic climate policies, contained in a bill that narrowly cleared the chamber last week.

Mr. Biden has said Congress must raise the limit without conditions, though he has also said he is open to separate discussions about the nation’s fiscal path.

A White House spokesman declined to comment on Tuesday.

 

America has 30 days or the economy implodes thanks to GOP terrorists.

 

Luckily, House Democrats are also trying to stop the clock.

 

The only clue to the gambit was in the title of the otherwise obscure hodgepodge of a bill: “The Breaking the Gridlock Act.”

But the 45-page legislation, introduced without fanfare in January by a little-known Democrat, Representative Mark DeSaulnier of California, is part of a confidential, previously unreported, strategy Democrats have been plotting for months to quietly smooth the way for action by Congress to avert a devastating federal default if debt ceiling talks remain deadlocked.

With the possibility of a default now projected as soon as June 1, Democrats on Tuesday began taking steps to deploy the secret weapon they have been holding in reserve. They started the process of trying to force a debt-limit increase bill to the floor through a so-called discharge petition that could bypass Republican leaders who have refused to raise the ceiling unless President Biden agrees to spending cuts and policy changes.

“House Democrats are working to make sure we have all options at our disposal to avoid a default,” Representative Hakeem Jeffries, Democrat of New York and the minority leader, wrote in a letter he sent to colleagues on Tuesday. “The filing of a debt ceiling measure to be brought up on the discharge calendar preserves an important option. It is now time for MAGA Republicans to act in a bipartisan manner to pay America’s bills without extreme conditions.”

An emergency rule Democrats introduced on Tuesday, during a pro forma session held while the House is in recess, would start the clock on a process that would allow them to begin collecting signatures as soon as May 16 on such a petition, which can force action on a bill if a majority of members sign on. The open-ended rule would provide a vehicle to bring Mr. DeSaulnier’s bill to the floor and amend it with a Democratic proposal — which has yet to be written — to resolve the debt limit crisis.

The strategy is no silver bullet, and Democrats concede it is a long shot. Gathering enough signatures to force a bill to the floor would take at least five Republicans willing to cross party lines if all Democrats signed on, a threshold that Democrats concede will be difficult to reach. They have yet to settle on the debt ceiling proposal itself, and for the strategy to succeed, Democrats would likely need to negotiate with a handful of mainstream Republicans to settle on a measure they could accept.

Still, Democrats argue that the prospect of a successful effort could force House Republicans into a more acceptable deal. And Treasury Secretary Janet L. Yellen’s announcement on Monday that a potential default was only weeks away spurred Democratic leaders to act.

 

It's time to send in the bomb squad and disarm the debt doomsday device for good.

The Revenge Of 2008, Con't

The big 4 banks (JPMorgan Chase, Bank of America Citibank and Wells Fargo) are too big to fail, we made that clear 15 years ago. Small local banks already have their deposits covered by FDIC insurance because very few depositors have accounts worth more than $250,000. That leaves mid-sized regional banks in the middle, and now they want TBTF status as well.

 

A coalition of midsize US banks asked federal regulators to extend FDIC insurance to all deposits for the next two years, arguing the guarantee is needed to avoid a wider run on the banks.

“Doing so will immediately halt the exodus of deposits from smaller banks, stabilize the banking sector and greatly reduce chances of more bank failures,” the Mid-Size Bank Coalition of America said in a letter to regulators seen by Bloomberg News.

The collapse this month of Silicon Valley Bank and Signature Bank prompted a flood of deposits out of regional lenders and into the nation’s largest banks, including JPMorgan Chase & Co. and Bank of America Corp. Customers spooked by the bank failures were taking refuge in firms seen as too big to fail.

“Notwithstanding the overall health and safety of the banking industry, confidence has been eroded in all but the largest banks,” the group said in the letter. “Confidence in our banking system as a whole must be immediately restored,” it said, adding that the deposit flight would accelerate should another bank fail.

The expanded insurance program should be paid for by the banks themselves by increasing the deposit-insurance assessment on lenders that choose to participate in increased coverage, the group proposed.

The MBCA’s letter was sent to the Federal Deposit Insurance Corp., the Comptroller of the Currency, the Federal Reserve and Treasury Secretary Janet Yellen.

 

Not only do I believe Yellen will do this, I also believe that nobody should be surprised when every single bank turns around and start charging massive new fees for depositors in order to pay for the higher FDIC premiums.  And since everyone will be doing it, the Biden administration can't single out a target. So, they'll look the other way while overdraft fees double, and new account fees skyrocket, and banks will end up making a profit and have FDIC coverage so that they can do whatever they want to with investment risk...because there won't be any risk for the banks.  It's all covered.

 

All covered by you and me.

 

The Big Casino is back, baby!

Last Call For The Revenge Of 2008, Con't

Add First Republic Bank to the growing list of financial institutions getting bailed out as the contamination for the collapse of Silicon Valley Bank spreads.

 

A group of financial institutions has agreed to deposit $30 billion in First Republic Bank in what’s meant to be a sign of confidence in the banking system, the banks announced Thursday afternoon.

Bank of America, Wells Fargo, Citigroup and JPMorgan Chase will contribute about $5 billion apiece, while Goldman Sachs and Morgan Stanley will deposit around $2.5 billion, the banks said in a news release. Truist, PNC, U.S. Bancorp, State Street and Bank of New York Mellon will deposit about $1 billion each.


“This action by America’s largest banks reflects their confidence in First Republic and in banks of all sizes, and it demonstrates their overall commitment to helping banks serve their customers and communities,” the group said in a statement.

The deposits would be obligated to stay at First Republic for at least 120 days, sources told CNBC’s David Faber. Regional bank stocks initially fell on Thursday but reversed higher after reports from Faber and others about the development of the deposit plan.

The news comes after First Republic’s stock has been pummeled in recent days, sparked by the collapse of Silicon Valley Bank last Friday and Signature Bank over the weekend. Both of those banks had a high number of uninsured deposits, as did First Republic, leading to concern that customers would pull their money out. The new deposits from the major banks are uninsured.

First Republic’s stock, which closed at $115 per share on March 8, traded below $20 at one point Thursday. The stock was halted repeatedly during the session and rose to $40 per share at one point, up more than 20% on the day.

 

These banks are saving First Republic for their own good, they are a competitor. They're not even doing it to save their own skin to try to halt the chaos. No, they're doing it because the Biden administration gave them something in return, and that's going to be the White House dropping their insistence on stopping "junk fees" on US bank account holders. 

I guarantee you that the Junk Fee Prevention Act is now going to die a quiet death in the weeks ahead.

Watch.

The Revenge Of 2008, Con't

A lot has happened over the last 48 hours pertaining to not one but two more crypto venture capital banks collapsing over the weekend and the fate of some $300 billion in deposits.

Federal regulators announced on Sunday that another bank had been closed and that the government would ensure that all depositors of Silicon Valley Bank — which failed Friday — would be paid back in full as Washington rushed to keep fallout from the collapse of the large institution from sweeping through the financial system.

The Federal Reserve, Treasury and Federal Deposit Insurance Corporation announced in a joint statement that “depositors will have access to all of their money starting Monday, March 13.” In an attempt to assuage concerns about who would bear the costs, the agencies said that “no losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.”

The agencies also said that they would make whole depositors at Signature Bank, which the government disclosed was shut down on Sunday by New York bank regulators. The state officials said the move came “in light of market events, monitoring market trends, and collaborating closely with other state and federal regulators” to protect consumers and the financial system.

President Biden said on Sunday evening that the actions were taken at his direction and that he would deliver remarks about the banking system on Monday morning.

“I am pleased that they reached a prompt solution that protects American workers and small businesses, and keeps our financial system safe,” Mr. Biden said in a statement. “The solution also ensures that taxpayer dollars are not put at risk.”

He added: “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 collapse of Signature marks the third significant bank failure within a week. Silvergate, a California-based bank that made loans to cryptocurrency companies, announced last Wednesday that it would cease operations and liquidate its assets.

Amid the wreckage, the Fed also announced that it would set up an emergency lending program, with approval from the Treasury, to funnel funding to eligible banks and help ensure that they are able to “meet the needs of all their depositors.” 

 

Now why does Signature Bank of New York sound familiar? Oh, because it had some very famous New York clientele. 

Signature was a commercial bank with private client offices in New York, Connecticut, California, Nevada and North Carolina, and had nine national business lines including commercial real estate and digital asset banking.

As of September, almost a quarter of its deposits came from the cryptocurrency sector, but the bank announced in December that it would shrink its crypto-related deposits by $8 billion.

Signature Bank announced in February that its chief executive officer, Joseph DePaolo, would transition into a senior adviser role in 2023 and would be succeeded by the bank’s chief operating officer, Eric Howell. DePaolo has served as president and CEO since Signature's inception in 2001.

The bank had a long-standing relationship with former President Donald Trump and his family, providing Trump and his business with checking accounts and financing several of the family's ventures. Signature Bank cut ties with Trump in 2021 following the deadly Jan. 6 riots on Capitol Hill, and urged Trump to resign.

Yep. This used to be Donald Trump's bank. It cut ties with Trump after January 6th, but let's imagine what kind of bank it had to be in order to do business with Trump in the first place, and to do so throughout his term in office. 

Treasury Secretary Janet Yellen isn't about to bail out Silicon Valley Bank, and the only question now is if the political pressure grows quickly and powerfully enough to force her hand.

 

Treasury Secretary Janet Yellen said Sunday that the federal government would not bail out Silicon Valley Bank, but is working to help depositors who are concerned about their money.

The Federal Deposit Insurance Corporation insures deposits up to $250,000, but many of the companies and wealthy people who used the bank — known for its relationships with technology startups and venture capital — had more than that amount in their account. There are fears that some workers across the country won’t receive their paychecks.

Yellen, in an interview with CBS’ “Face the Nation,” provided few details on the government’s next steps. But she emphasized that the situation was much different from the financial crisis almost 15 years ago, which led to bank bailouts to protect the industry.

“We’re not going to do that again,” she said. “But we are concerned about depositors, and we’re focused on trying to meet their needs.”

With Wall Street rattled, Yellen tried to reassure Americans that there will be no domino effect after the collapse of Silicon Valley Bank.

“The American banking system is really safe and well capitalized,” she said. “It’s resilient.”

Silicon Valley Bank is the nation’s 16th-largest bank. It was the second biggest bank failure in U.S. history after the collapse of Washington Mutual in 2008. The bank served mostly technology workers and venture capital-backed companies, including some of the industry’s best-known brands.

 

Meanwhile, SVB's assets are being unwound and the newly created National Bank of Santa Clara will begin operating on Monday.  We'll see if the Trump regime weakened FDIC powers enough to cause problems today, but I'm thinking that Yellen will hold firm for now.

Besides, she's doing the opposite of what Larry Summers wants, and that's good enough for me.

But all this depends on the FDIC finding a buyer for the bank's assets, and nobody has stepped up to play ball yet.

Federal authorities are seriously considering safeguarding all uninsured deposits at Silicon Valley Bank, weighing an extraordinary intervention to prevent what they fear would be a panic in the U.S. financial system, according to three people with knowledge of the matter, who spoke on the condition of anonymity to describe private deliberations.

Officials at the Treasury Department, Federal Reserve, and Federal Deposit Insurance Corporation discussed the idea this weekend, the people said, with only hours to go before financial markets opened in Asia. White House officials have also studied the idea, per two separate people familiar with those discussions.

The plan would be among the potential policy responses if the government is unable to find a buyer for the failed bank. The FDIC began an auction process for SVB on Saturday and hoped to identify a winning bidder Sunday afternoon, with final bids expected by 2 p.m. Eastern time, according to two people familiar with the matter.

Selling SVB to a healthy institution remains the preferred solution, officials have told members of Congress. Most bank failures are resolved that way and enable depositors to avoid losing any money.

In calls with federal banking regulators late Saturday and Sunday, Democrats said they were “praying for a buyer,” said Rep. Brad Sherman (D-Calif.), a member of the House Financial Services Committee. “Big buyer, small buyer, fat buyer, skinny buyer — we need a buyer,” he said. “If they have a bunch of buyers, I would argue you take the best offer,” he said, noting then they can “quibble about which offer to take.”

Although the FDIC insures bank deposits up to $250,000, a provision in federal banking law may give them the authority to protect the uninsured deposits as well if they conclude that failing to do so would pose a systemic risk to the broader financial system, the people said. In that event, uninsured deposits could be backstopped by an insurance fund, paid into regularly by U.S. banks.

 

The techbros who spent years lobbying for faster, looser capital requirements because "People learned their lesson 15 years ago" are the first people warning that unless these same techbros get back every dime of their billions that they will have no choice but to help collapse more banks until Yellen surrenders.

 

That's the real problem, and everyone knows it.

As far as the bailout of rich depositors and corporations went, late Sunday, Yellen gave in.

Banking regulators devised a plan Sunday to backstop depositors with money at Silicon Valley Bank, a critical step in stemming a feared systemic panic brought on by the collapse of the tech-focused institution.

Depositors at both failed SVB and Signature Bank in New York, which was shuttered Sunday over similar systemic contagion fears, will have full access to their deposits as part of multiple moves that officials approved over the weekend. Signature had been a popular funding source for cryptocurrency companies.

Those with money at the bank will have full access starting Monday.

The Treasury Department designated both SVB and Signature as systemic risks, giving it authority to unwind both institutions in a way that it said “fully protects all depositors.” The FDIC’s deposit insurance fund will be used to cover depositors, many of whom were uninsured due to the $250,000 cap on guaranteed deposits.

Along with that move, the Federal Reserve also said it is creating a new Bank Term Funding Program aimed at safeguarding institutions affected by the market instability of the SVB failure.

A joint statement from the various regulators involved said there would be no bailouts and no taxpayer costs associated with any of the new plans. Shareholders and some unsecured creditors will not be protected and will lose all of their investments.

“Today we are taking decisive actions to protect the U.S. economy by strengthening public confidence in our banking system,” said a joint statement from Federal Reserve Chair Jerome Powell, Treasury Secretary Janet Yellen and FDIC Chair Martin Gruenberg.

So the investors are losers as they should be, but not the cryptobros who had their unsecured deposits in the bank. They're going to get billions back. Lobbyists during the Trump years begged for less oversight and to take greater risks with tech billions. Supposedly this will all be covered by the FDIC as systemic risk. That's the bailout.

But a quarter-trillion plus doesn't go belly up without consequences. Signature Bank is going to bring the total to well over $300 billion. Maybe this all stops Monday.

President Biden spoke earlier this morning to calm the markets.

US President Joe Biden on Monday addressed the nation after the collapses of Silicon Valley Bank and Signature Bank, and said, "Americans can have confidence that the banking system is safe."

"Your deposits will be there when you need them. Small businesses across the country that have deposit accounts at these banks can breathe easier knowing they'll be able to pay their workers and pay their bills," he said in his Monday address.

 

Which is the right message, but why did this bank run happen in the first place?

Because Republican mega-donor techbros made it happen.

The run was sparked by a letter that Silicon Valley Bank Chief Executive Officer Greg Becker sent to shareholders Wednesday. The bank had suffered a $1.8 billion loss on the sale of US treasuries and mortgage-backed securities and outlined a plan to raise $2.25 billion of capital to shore up its finances.

Customers immediately tried to pull their money, including many of the venture-capital firms the bank had cultivated over decades. Peter Thiel’s Founders Fund, Coatue Management, Union Square Ventures and Founder Collective all advised their startups to pull their cash from the bank, people familiar with the matter said.

The withdrawals initiated by depositors and investors amounted to $42 billion on Thursday alone, according to the regulator. Despite being in sound financial condition prior to Thursday, the California watchdog said the run “caused the bank to be incapable of paying its obligations as they come due,” and it was now insolvent.

The bank was then closed by the California DFPI and placed into FDIC receivership, marking the biggest failure of a US bank since the financial crisis.

They pulled their money on purpose to collapse the bank and to force the Biden administration to give them 100% of any losses back, and they collapsed SVB because otherwise they were going to have to pay up for their risky mortgage investments.

This was deliberate sabotage, the fiduciary equivalent of burning down a building to collect the insurance, so these donors turned a $1.8 billion loss that would have shut down one techbro startup and made the rest of Silicon Valley suddenly aware of being on the hook for their own bad investments into a $42 billion bank run that wiped out their creditors and assured that the feds would pay them back for any losses, with the threat of economic destruction if they didn't.

Because if these assholes can collapse one bank in order to avoid losses, they can do it to anyone.

The game is now fully on.

Job-A-Palooza, Con't

The "Are we in a recession?" nonsense was ended thunderously in the negative with Friday's spectacular July jobs report.

 

America’s employers added a stunning 528,000 jobs last month despite raging inflation and anxiety about a possible recession, restoring all of the positions lost in the coronavirus recession. Unemployment fell to 3.5%, the lowest level since the pandemic struck in early 2020.

There were 130,000 more jobs created in July than there were in June, and the most since February.

The red-hot jobs numbers from the Labor Department on Friday arrive amid a growing consensus that the economy is losing momentum. The U.S. economy shrank in the first two quarters of 2022 — an informal definition of recession. But most economists believe the strong jobs market has kept the economy from slipping into a downturn.

Friday’s surprisingly strong report will undoubtedly intensify the debate over whether America is in a recession or not.

“Recession – what recession?” wrote Brian Coulton, chief economist at Fitch Ratings, after the numbers came out. “The U.S. economy is creating new jobs at an annual rate of 6 million – that’s three times faster than what we normally see historically in a good year. ‘’

Economists had expected only 250,000 new jobs in July.

 

GDP may have slowed down, but jobs are roaring ahead. Is it possible that Treasury Secretary Janet Yellen and Fed Chairman Jerome Powell might actually know what they are doing? 

We'll see.

Playing Near Gasoline WIth An Open Flame

The Biden administration is trying to find a sweet spot between keeping Russian sanctions on oil and causing a massive jump in oil prices to $200 a barrel or more, and one wrong move could blow up the global economy completely.

Relief at the gas pump coupled with this past week’s news that businesses continue to hire at a blistering clip have tempered many economists’ fears that America is heading into a downturn.

But while President Biden’s top aides are celebrating those economic developments, they are also worried the economy could be in for another serious shock later this year, one that could send the country into a debilitating recession.

White House officials fear a new round of European penalties aimed at curbing the flow of Russian oil by year-end could send energy prices soaring anew, slamming already beleaguered consumers and plunging the United States and other economies into a severe contraction. That chain of events could exacerbate what is already a severe food crisis plaguing countries across the world.

To prevent that outcome, U.S. officials have latched on to a never-before-tried plan aimed at depressing global oil prices — one that would complement European sanctions and allow critical flows of Russian crude onto global markets to continue but at a steeply discounted price.

Europe, which continues to guzzle more than two million barrels of Russian oil each day, is set to enact a ban on those imports at the end of the year, along with other steps meant to complicate Russia’s efforts to export fuel globally. While Mr. Biden pushed Europe to cut off Russian oil as punishment for its invasion of Ukraine, some forecasters, along with top economic aides to the president, now fear that such policies could result in huge quantities of Russian oil — which accounts for just under a tenth of the world’s supply — suddenly taken off the global market.

Analysts have calculated that such a depletion in supply could send oil prices soaring to $200 per barrel or more, translating to Americans paying $7 a gallon for gasoline. Global growth could slam into reverse as consumers and businesses pull back spending in response to higher fuel prices and as central banks, which are already raising interest rates in an effort to tame inflation, are forced to make borrowing costs even more expensive.

The potential for another oil shock to puncture the global economy, and perhaps Mr. Biden’s re-election prospects, has driven the administration’s attempts to persuade government and business leaders around the world to sign on to a global price cap on Russian oil.

It is a novel and untested effort to force Russia to sell its oil to the world at a steep discount. Administration officials and Mr. Biden say the goal is twofold: to starve Moscow’s oil-rich war machine of funding and to relieve pressure on energy consumers around the world who are facing rising fuel prices.

To transport its oil to market, Russia draws on financing, ships and, crucially, insurance from Britain, Europe and the United States. The European penalties, as currently constructed, would not only cut Russia off from most of the European oil market but also from those other Western supports for its shipments. If strictly enforced, those measures could leave Moscow with no means of transporting its oil, at least temporarily.

The Biden administration’s proposal would not affect the European ban, but it would ease some of the other restrictions — but only if the transported Russian oil is sold for no more than a price set by the United States and its allies. That would allow Moscow to continue moving oil to the rest of the world. The oil now flowing to France or Germany would go elsewhere — Central America, Africa or even China and India — and Russia would have to sell it at a discount.

Some economists and oil industry experts are skeptical that the plan will work, either as a way to reduce revenues for the Kremlin or to push down prices at the pump. They warn the plan could mostly enrich oil refiners and could be ripe for evasion by Russia and its allies. Moscow could refuse to sell at the capped price.

Treasury Secretary Janet L. Yellen plans to push for more support for the cap when she meets with fellow finance ministers from the Group of 20 nations — including Russia’s — in Asia in the next week. The American delegation will have no contact with the Russians, a Treasury official said.

But even some skeptics say that the price cap could, if nothing else, keep enough Russian oil pumping to avoid a recession-triggering price spike.

Administration officials say privately that there are signs in oil markets that even in its infant stages, the cap proposal is already helping to reassure traders that the world could avoid abruptly losing millions barrels of Russian oil per day at the year’s end.

 

And I see we're conducting war with the Rational Actor Theory again, where the White House assumes that Putin is in this for the money. If oil overheats, the argument goes, oil would collapse economies, a global recession would occur, and oil would drop back to $20 again. Putin will then go along with the price cap because not doing so would hurt him far more than the West.

That's a hell of a bet, that Putin will be an active participant in his own punishment.

If it fails, we're looking at a nightmare just as elections are coming up here.

We'll see.

Last Call For The Return Of A Fat Stack Of Tubmans

After Donald Trump and Treasury Secretary Stephen Mnuchin made sure that putting Harriet Tubman on the $20 would take no less than twelve years, delaying the 2016 Obama-era decision until at least 2028 for "counterfeit safety reasons" and scrapping a 2019 redesign that was nearly finished, for the sole reason that racist Trump loved racist Andrew Jackson as his favorite president and wanted to keep Jackson on the bill, it seems President Joe Biden has come to fix yet another Trump mess.

President Joe Biden is looking to resume work to redesign the $20 bill to feature abolitionist Harriet Tubman.

“The Treasury Department is taking steps to resume efforts to put Harriet Tubman on the front of the new $20 notes,” White House press secretary Jen Psaki told reporters Monday.

She added that America's currency should "reflect the history and diversity of our country, and Harriet Tubman's image gracing the new $20 note would certainly reflect that.”

The effort, initiated late in former President Barack Obama’s second term, was backburnered by the Trump administration under former Treasury Secretary Steven Mnuchin. Mnuchin has said that the delay was due to additional work needed on anti-counterfeiting security features, and that bills with her image on it were not likely to enter circulation before 2028.

A Treasury Department spokesperson confirmed that they are looking at ways to speed up the process but did not specify what those might be. When Mnuchin first announced the delay, he also said that the $10 and $50 bills would be refreshed ahead of the $20 denomination, and that work remains underway.

The redesigned note, on which Tubman would usurp President Andrew Jackson — a slaveowner who would be relegated to the backside of the note — was supposed to roll out in 2020. The timing of the design’s unveiling was initially supposed to coincide with the 100th anniversary of the 19th Amendment, which extended voting rights to women.

Jackson, the seventh president, proved to be one of former president Donald Trump’s favorite historical figures. Trump spoke of Jackson often on the 2016 campaign trail, deriding plans replacing him with Tubman as “pure political correctness” and suggested placing Tubman on the $2 bill instead.

The Treasury Department has previously denied that the delay was influenced by political considerations. In 2019 the department’s inspector general agreed to open an investigation into the decision to push back the redesign for several years.

 

I'm not sure how long the project will take, but it was supposed to be done last year. I'm hoping it can done sooner rather than later, especially before Republicans can add a poison pill to must-pass legislation that would kill the project completely.

Still, this is not a top priority, I'd rather have the $1,400 in my pocket today already, but it's something.