The legislation would also bar the Biden administration from moving forward with a new income-driven repayment plan that cuts monthly payments for most borrowers and shortens the timeline to loan forgiveness for some borrowers.
In addition, the GOP plan would permanently prohibit the Education Department from issuing any significant regulation or executive action that would increase the long-term cost to the government of operating the federal student loan programs.
Such a sweeping prohibition would imperil efforts by the administration to provide additional relief or benefits to student loan borrowers. That would include any backup option for canceling large amounts of student debt if the Supreme Court rejects Biden’s student debt relief plan in the coming months.
Key context: The provisions are among dozens of policy changes and spending caps that House Republicans included in their 320-page legislation to raise the debt limit by $1.5 trillion or until March of next year, whichever comes first.
Republicans have argued that they want concessions from the administration that lower the federal deficit and reduce spending in exchange for their votes to raise the nation’s borrowing limit.
McCarthy said he hopes to pass it in the House next week. But the proposal stands no chance of passing the Democrat-controlled Senate.
Biden swiftly dismissed McCarthy’s proposal as a nonstarter. “That’s the MAGA economic agenda: spending cuts for working and middle class folks,” Biden said of the plan on Wednesday. “It’s not about fiscal discipline, it’s about cutting benefits for folks that they don’t seem to care much about.”
There are other ideas floating around, but the one thing they all have in common is that they rely on the Federal Reserve’s cooperation and its willingness to continue acting as the government’s “fiscal agent” — essentially its banker, a role established by the Fed’s statute.
Under one scenario, for instance, if the Treasury Department decided to switch to issuing low face value, high coupon bonds, the Federal Reserve would have to facilitate the creation of such bonds in their book entry system, facilitate their sale and make periodic interest payments on Treasury’s behalf. Alternatively, if the Biden administration decided to declare the debt ceiling unconstitutional, or made other similar maneuvers, the Fed would again have to facilitate auctions of securities and defer to Treasury legal interpretation. In this sense, the platinum coin option is the most straightforward one since it draws on the Federal Reserve’s most basic “fiscal agent” responsibilities — accepting deposits.
Naturally then, the conversation around unilateral White House options has come to focus on the Federal Reserve and Chair Jerome Powell. When asked inFebruary whether he’d follow Treasury’s direction in issuing payments amid a debt ceiling crisis, Powell dodged, cryptically stating “In terms of our relationship with the Treasury, we are their fiscal agent. And I’m just going to leave it at that.”
In fact, in a largely overlooked episode from the recent past, Powell already showed he’d be willing to do whatever it takes to avoid the catastrophic consequences of federal default. To truly understand what Powell’s Fed is prepared to do, go back to what he said when he was a Fed governor during 2013’s debt ceiling crisis.
Despite the Federal Reserve’s uneven record on transparency, it does eventually release transcripts of some of its most critical meetings in the years after they happen. And in an October 2013 conference call, Fed officials discussed a memo with options for how to respond to a government default. On that call, Powell and most of his colleagues reluctantly endorsed buying defaulted Treasury securities — an unprecedented move to maintain financial stability —if a legislative debt ceiling solution did not come in time.
Here’s the key exchange between Powell and then-Fed Chair Ben Bernanke (options “8 and 9” in the memo are purchases of defaulted Treasury securities and the Fed “swapping” non-defaulted Treasury securities for defaulted Treasury securities):
Powell’s willingness to purchase defaulted Treasury securities — however “loathsome” he finds it — casts the entire debate over bypassing Congress on the debt ceiling in a new light. No option under discussion is more extreme, from the Federal Reserve’s point of view, than stepping in and buying compromised securities of uncertain underlying value. If Powell will buy Treasury securities in the face of government default, he will almost certainly fulfill the Federal Reserve’s legal responsibilities as a fiscal agent and allow the Treasury Department to avoid government default in the first place.
In fact, Powell’s comments on disclosure in this meeting are especially revealing in that they signal he won’t be more forthright about what he will do in public until the last minute:
In short, not only will Powell likely not interfere with any of the White House’s options to make an end run around the debt ceiling, his deflection on how he would respond to the Biden administration is consistent with what he said privately back in 2013.
The moves up for debate should also be considered less “loathsome” to the Fed because they would involve doing as the Treasury directs, rather than stepping into a charged political environment on its own. Buying defaulted Treasury securities would stem from the Fed’s independent judgment about its own financial stability mandate. In contrast, if the Treasury mints a trillion dollar coin, Powell could accurately tell the press that he did so at Treasury’s order to fulfill the Fed’s legal obligation as the government’s banker.
No doubt the Fed would experience some political blowback from the right if it went along with a unilateral White House maneuver. But clearly Powell sees the prospect of an actual federal default as far more explosive and worth avoiding at all costs.
Given that the Federal Reserve is not a real barrier to solving the debt ceiling crisis without Congress, the White House has the freedom to be bolder. Joe Biden and Janet Yellen should threaten to deploy any of the alternative options being proposed, and if Republicans don’t pass a “clean” debt ceiling increase, simply use one of them. The White House doesn’t have to negotiate with hostage takers, so it shouldn’t.
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( With inputs from : www.politico.com )
House Republicans’ internal frustrations go beyond their long-stalled debt limit talks with President Joe Biden. The conference is near its breaking point over a contentious border bill that has exposed divisions between hardline conservatives and politically vulnerable purple-district members. Then there are the simmering tensions that no GOP lawmaker wants to talk about — the evident disconnect between the speaker and his budget chief, as well as chatter over the elevation of a new McCarthy lieutenant with a vast portfolio.
House Budget Committee Chair Jodey Arrington (R-Texas), who appeared to diverge from McCarthy last month on the GOP’s plans for its fiscal blueprint, said as he entered Tuesday’s morning meeting that “I hope we’re focused on our mission.” Arrington added pointedly: “We don’t need distractions. We need to unify.”
And he got his wish that McCarthy not bring up any behind-the-scenes drama before the rest of their colleagues. Talk of McCarthy-Arrington discord did not come up at the private conference meeting, according to six lawmakers in the room.
Instead, Republicans focused on presenting a unified front on the debt limit as they prepare for a new, more urgent phase of their political jostling with the Biden White House. The fact that no internal rifts got rehashed on Tuesday morning is a positive sign for McCarthy, who has almost no room for error on his debt plan given his four-vote majority.
Rep. Tom Cole (R-Okla.), a close McCarthy ally, dryly summed up the meeting’s tone: “It’s a chorus of unity and sunshine.”
Inside the room, according to one attendee, McCarthy ticked through a brief slideshow laying out the basic principles of his fiscal plan — which includes a passel of deregulatory and energy provisions as well as steep federal spending cuts in exchange for a one-year lift to the nation’s debt ceiling.
One major part of Tuesday’s private GOP conversation centered on whether leaders should try to pay down the national debt by repealing elements of Democrats’ marquee tax, climate and health care measure passed last year, including funding for new IRS enforcement and green tax incentives.
Many GOP lawmakers have demanded party leaders make those moves, though some aides and budget experts say it’s unclear whether they would yield any real savings. McCarthy addressed that topic by laying out pros and cons in his slides, per the meeting attendee who spoke on condition of anonymity.
Some of McCarthy’s closest advisers projected confidence that they would have enough support in a conference. Financial Services Committee Chair Patrick McHenry (R-N.C.), a confidant of the California Republican, simply said “yes” to reporters who asked if the speaker would get a majority.
Other Republicans, however, are preparing for the prospect that McCarthy’s plan fails to get enough traction within the conference.
At least one member, first-term swing-district Rep. Mike Lawler (R-N.Y.), raised the idea of a separate discharge petition as a Plan B approach if the threat of an economically disastrous debt default began to loom over members.
As he left Tuesday’s meeting, though, Lawler insisted that he backs McCarthy’s plan: “The speaker has put forth a plan and I support it.”
Rep. Matt Gaetz (R-Fla.), one of McCarthy’s harshest critics in the past, said leadership doesn’t yet have the votes because members haven’t seen the full plan on paper.
“We still have to resolve major questions like the dollar amount, and the duration, and the policy concessions we are seeking from the Senate. So it couldn’t possibly have 218 votes, because it doesn’t even exist,” Gaetz said, adding that he won’t “prognosticate the end-zone dance before we draw the game plan.”
Those flashing yellow lights haven’t stopped McCarthy allies from bullishly predicting that a bill could be ready for a floor vote next week. Republicans close to leadership privately said text could be released as soon as Wednesday or Thursday — with some expecting the House to put off its next recess until passage of a debt plan that stands no chance of becoming law.
Yet in order to write that bill, GOP lawmakers still have to settle crucial questions like whether to lift the ceiling by a specific dollar amount and when the fight might come up again next year.
“Some had a few little tweaks they’d like to see to it. But I think, in general, everyone is supportive of it,” Rep. Blaine Luetkemeyer (R-Mo.) said, adding that “everyone’s got good ideas. They are all supportive of the general idea and program that the speaker laid out.”
Meanwhile, an immigration fight is about to compete with the debt for the House GOP’s attention.
Republicans will formally kick off work on border security, with the Judiciary Committee slated to vote on an immigration package Wednesday and the Homeland Security panel set to follow with its own bill next week. But months after leadership initially vowed action within the first few weeks of the year, there are few signs that the GOP is any closer to a bill that can pass the House.
Rep. Tony Gonzales (R-Texas), who discussed the issue alongside the GOP-helmed Congressional Hispanic Conference earlier Tuesday, warned that the Judiciary Committee proposal isn’t ready for “prime time.” Gonzales, who’s taken a public stand against conservatives pushing for a strident border bill, pledged not to be sidelined by his party’s right flank.
“In this Congress, five votes is 100,” Gonzales said, referring to the ease with which only a handful of Republicans can derail a bill on the floor, given the party’s slim majority.
And even as House Republicans publicly brushed off reports of contention within their upper ranks, some leaders are hearing hush-hush questions about McCarthy’s confidence in his own team.
Some rank-and-file members, reading reports of internal strife, started asking leadership “‘This is terrible, is this true?’” said one senior House Republican, who requested anonymity to speak frankly.
“It’s not true,” this senior Republican added.
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( With inputs from : www.politico.com )
Rebuffed by President Joe Biden since February on that point, McCarthy and his team are now attempting to demonstrate their seriousness by drafting their own debt limit proposal — one that includes a half-dozen attempts to slash federal spending or loosen regulations in a bid to boost the economy.
“We are seeing in real time the effects of reckless government spending, record inflation and the hardship it causes,” McCarthy said inside the colonnaded walls of the New York Stock Exchange on a gloomy morning as a smattering of progressive protestors chanted out front. “Rising interest rates, supply chain shortages, instability in the banking system and uncertainty across the board.”
The speaker on Monday repeatedly blamed Biden and Democrats for driving higher inflation through excess spending, reiterating that any hike in the debt limit should be offset by significant spending cuts. He said Republicans would pass their own bill within weeks but offered no further details on which cuts his conference wants to see.
Some early drafts of those plans have been shared with GOP members in recent days, but party leaders stress that nothing is final until the entire conference can weigh in.
McCarthy vowed that in the next few weeks, “the House will vote on a bill to lift the debt ceiling into next year, save taxpayers trillions of dollars, make us less dependent on China, and curb high inflation — all without touching Social Security or Medicare.”
The bill is almost certain to include some of the GOP’s recently-passed energy priorities, including a new way to streamline the permitting process, as first reported by POLITICO.
Much of the discussion over what that bill will look like is expected to kick off this week, with Congress returning from a holiday recess to a sense of rising anxiety in both parties over the debt standoff. Even so, McCarthy sought to reassure the markets during his speech, saying defaulting on the nation’s existing debt “is not an option.”
“I have full confidence that if we limit our federal spending, if we save taxpayers money, if we grow the economy, we will end our dependence on China, we will curb inflation, and we will protect Medicare and Social Security so America will be stronger,” McCarthy said — repeatedly invoking former President Ronald Reagan, a favorite among many Wall Street traders.
The California Republican ripped Biden for doing “nothing” on the federal debt and annual deficits, saying that as a senator, Biden “voted for spending reforms attached to debt limit increases four times.”
Democrats have dismissed McCarthy’s initial proposal — which includes steep spending cuts, stricter work requirements for social programs and a new deregulatory push — as going nowhere in a divided government. They argue that Republicans should cleanly lift the borrowing limit and avoid risky negotiations with potentially dire consequences for the global economy.
“Speaker McCarthy continues to bumble our country towards a catastrophic default, which would cause the economy to crash, cause monumental job loss and drastically raise costs to the American people. He went all the way to Wall Street and gave us no more detail,” Senate Majority Leader Chuck Schumer told reporters after the speech.
Schumer said he would be willing to meet with McCarthy after the Republicans decide on a specific package of spending cute. He also stressed that while he would be willing to discuss future spending levels, he wouldn’t entertain tying that conversation to the debt limit.
“No more facts, no new information at all. I’ll be blunt. If Speaker McCarthy continues in this direction, we are headed to default,” Schumer said. And as for McCarthy’s push for a one-year debt ceiling increase — which would punt the issue until the heat of the 2024 campaign season — Schumer called it a “terrible idea.”
Wall Street traders and executives continue to believe that House Republicans and the White House will eventually cut a deal ahead of a deadline sometime this summer, avoiding a default. Republicans and Democrats clashed over the debt limit through much of former President Barack Obama’s tenure, including the first downgrade of U.S. debt by ratings agency Standard & Poor’s in 2011. (That crisis led to 10 years of spending austerity, known as budget caps, that only just ended.)
Still, the path to a deal remains unclear. McCarthy on Monday said that a “no-strings-attached debt limit increase cannot pass” — which happens to be exactly what Democrats have unwaveringly demanded.
But even a GOP-only measure may not be easy to pass in the House. Republicans can only lose four votes on the floor, meaning that virtually all of McCarthy’s conference must line up behind a package that stands no chance of becoming law in its current form.
Already, that opening offer on the debt limit is running into some potential political pitfalls — including an expiration date that would tee up another high-stakes fiscal fight just months before the 2024 presidential election.
McCarthy “again failed to clearly outline what House Republicans are proposing and will vote on, even as he referenced a vague, extreme MAGA wish list,” White House spokesperson Andrew Bates said, accusing the GOP of increasing costs for families and taking “food assistance and health care away from millions of Americans” with their emerging proposal.
“A speech isn’t a plan, but it did showcase House Republicans’ priorities,” Bates said.
Burgess Everett contributed to this report. Ferris reported from Washington.
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( With inputs from : www.politico.com )
Conservatives had seized on the case as a way to rein in Joe Biden’s efforts to cancel student debt and attack a potential backup plan to enact mass loan forgiveness if the Supreme Court strikes down his debt relief program in two other pending cases.
The three college operators were challenging the same law — the Higher Education Act’s “compromise” authority — that is widely seen as a fallback option for Biden. The administration’s existing student debt relief program is tied to the Covid-19 national emergency under a 2003 law known as the HEROES Act.
Everglades College Inc., Lincoln Educational Services Corporation and American National University argued that the settlement unfairly maligns them. About 3,800 of the colleges’ former students who said they were defrauded are set to receive relief under the settlement, but the schools note that those allegations were never proven.
The settlement, which the Education Department agreed to last year, came after years of litigation that accused the agency of mishandling and delaying applications by borrowers seeking loan forgiveness based on the misconduct of their college.
The deal is aimed at wiping out a backlog of hundreds of thousands of those applications, which are known as “borrower defense” claims. Some have languished at the department for years.
The Biden administration and attorneys who represent the student loan borrowers had argued that the three colleges lacked standing to challenge the settlement in the first place, dismissing the schools’ claims of reputational harm as too speculative.
In its brief earlier this week, the Justice Department pushed back on the idea that the class-action settlement is related to Biden’s broader debt cancellation program, calling them “entirely distinct.” The settlement “does not reflect any ‘en masse’ cancellation of outstanding debt, nor an assertion by the Secretary of the power to discharge the Department’s entire $1.6 trillion loan portfolio,” Solicitor General Elizabeth Prelogar wrote.
The decision by the Supreme Court on Thursday sends the case back to the 9th Circuit Court of Appeals, which has already set a briefing schedule to hear the colleges’ appeal of the settlement.
It’s possible the case could return to the high court after that. The justices’ ruling on Thursday addressed only emergency relief.
But in the meantime it clears the Education Department to continue processing loan discharges for tens of thousands of borrowers.
The Biden administration reported on Wednesday that it had already wiped out the debts of about 78,000 borrowers out of the roughly 200,000 borrowers who qualify for immediate relief under the settlement.
Beyond the immediate loan forgiveness, the settlement also requires the Education Department to set up a streamlined process for tens of thousands of additional borrowers to obtain loan forgiveness.
Eileen Connor, president and director of the Project on Predatory Student Lending, which represents the class of student loan borrowers in the case welcomed the court’s decision on Thursday.
“Today’s swift and decisive action from the highest court should end, once and for all, any ongoing debate about the legitimacy of this settlement,” she said in a statement. “The message is clear: the rights of student borrowers will not falter, even in the face of well-funded, politically-motivated attacks masquerading as legal argument.”
Josh Gerstein contributed to this report.
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( With inputs from : www.politico.com )
That’s creating new tensions with the U.S. and its Western allies that will be on display as top finance officials gather this week in Washington for the spring meetings of the IMF and World Bank. The U.S. is pressing China to provide more debt relief in what will be one of the most significant areas of conflict at the event.
The IMF, World Bank and other development lenders have been running programs that under certain conditions forgive up to 100 percent of debt in struggling countries — an initiative that got a boost after Bono and other celebrities led a high-profile public pressure campaign in the 2000s.
Now Treasury Secretary Janet Yellen and other officials are growing adamant that what they view as China’s hardline approach to lending is squeezing countries and threatening to deepen poverty in Africa and elsewhere.
Yet the conflict also highlights a new potential fault line in the global economic order: China is pursuing a parallel system of development finance that challenges the Western model of providing assistance and negotiating debt relief with borrowers, which has been dominant since the end of World War II.
China’s approach to lending is widely considered more transactional and criticized as opaque. Beijing’s desire to access oil, minerals and other commodities made Chinese lenders less prone to applying strict conditions and less risk-averse in helping governments finance roads, bridges and railroads to unlock those resources.
The ascendance of China in developing country finance threatens to add to the broader trend of “decoupling” that is unraveling trade and technology ties with the West. The debt China is owed by poor countries only consolidates its influence in Africa and other regions.
“We are moving to more of a bipolar system with a very significant creditor to a great many countries bent on doing things bilaterally with its own rules,” said Carmen Reinhart, who served as the World Bank’s chief economist until last year and has directly participated in debt-relief talks. “That rift is there. … The tension could be cut with a knife.”
The issue will come to a head on April 12 when the two institutions host the Global Sovereign Debt Roundtable, which is meant to address the broader terms of restructuring sovereign debt in distressed countries.
Those talks will affect country-specific efforts that have been largely deadlocked. One of those is in Zambia, where China is a significant creditor. The country defaulted on its public debt two years ago and has become a test case for dealing with a potential onslaught of defaults as the U.S. Federal Reserve and other major central banks are raising interest rates to tamp down inflation. That’s making it more expensive to pay off debt denominated in dollars and other key currencies.
Other countries like Sri Lanka, Ghana, Ethiopia and Pakistan, where China has lent heavily, have already defaulted or are on the cusp of doing so.
“I’m very, very concerned about some of the activities that China engages in globally, investing in countries in ways that leave them trapped in debt and don’t promote economic development,” Yellen told U.S. lawmakers last month. “We are working very hard to counter that influence in all of the international institutions that we participate in.”
Yellen raised the issue with China’s then-Vice Premier Liu He in January in Zurich.
“It is both in the borrower’s interest but also the creditor’s interest to come to a speedy resolution,” said a senior Treasury official, who was granted anonymity because they were not authorized to discuss the issue. “Letting a debt overhang sit a long time winds up just meaning the country in the end can pay back less.”
Close observers say that argument — that China will never get repaid unless it moves to forgive some of its debt — is the best leverage the U.S. has with Beijing.
But since that meeting, China hasn’t taken any significant steps to write down its debt beyond some initial assurances. And while the country agreed to join a G-20-driven process known as the common framework two and a half years ago, that forum — meant to help the poorest countries resolve debt problems arising from the pandemic — has yet to deliver meaningful results.
IMF Managing Director Kristalina Georgieva said top Chinese officials expressed a willingness to cooperate on debt during her own recent visit to the country.
“It takes far too long for debt resolution,” Georgieva told POLITICO’s Ryan Heath in an April 6 interview. “Yes, China has multiple institutions that deal with debt,” she said. “It makes it complicated domestically, but they have to speed up their participation.”
China rebuffs claims about its lending. The government argues that its massive financing of projects has been central to development in regions like Africa and says the private sector, consisting mainly of bondholders in the U.S. and Europe, often owns more debt than China does in poor countries.
“We reject the unjustified accusation from the U.S.,” Chinese Foreign Ministry spokesperson Mao Ning said of Yellen’s recent comments. “China has always carried out investment and financing cooperation with developing countries based on international rules and the principle of openness and transparency. We never attach any political strings, or seek any selfish political interests.”
A senior Chinese central bank official said last month that China is reluctant to participate in sovereign debt restructuring unless the World Bank and other regional development banks also agree to write down their own loans. The World Bank dismisses that demand, arguing that development bank financing already comes with low interest rates and does not add significantly to a country’s debt burden.
China’s new approach
There are no set international rules that govern when a country defaults on its debt, unlike the specific legal processes that companies and individuals can rely on in many countries.
Instead, wealthy countries that have traditionally lent to developing nations formed what’s known as the Paris Club and would negotiate with governments in distress to write down their debt. That group, along with the IMF and World Bank, was able to help a number of highly indebted countries, primarily in Africa, restructure their debt in the 1990s and early 2000s.
That changed when China started massively lending to developing countries as part of its Belt and Road Initiative more than a decade ago. Chinese lenders were followed into riskier yet lucrative markets by private bondholders seeking to make money outside of the then ultra-low interest rate environment in advanced economies.
Since 2017, China has become the world’s largest official creditor, surpassing the World Bank, IMF and 22-member Paris Club combined, Brent Neiman, a counselor to Yellen, said last September. China’s financing of projects in other countries between 2000 and 2017 totaled more than $800 billion, most of that in the form of loans, according to one estimate.
China’s lending has tapered in the past five years but has left a legacy of unsustainable debt in a number of countries whose finances were hit hard by pandemic spending.
Lending from China often comes at commercial rates higher than those offered by other governments and development banks. Borrowing countries in many cases are required to sign non-disclosure agreements that prevent them from sharing with other creditors what they owe Chinese institutions. And when China does offer debt relief, it often comes in the form of offering a grace period on payments rather than taking a so-called haircut on the value of the loan.
Despite underlying state control, China’s lending is decentralized among various institutions reluctant to take losses on their loans. And while state-owned institutions like the China Development Bank are viewed by many as official government lenders, Beijing considers them corporate entities on par with the private sector and not subject to the same restructuring terms.
New research from a group of leading economists has also shown that China is becoming a growing lender of last resort in bailing out countries through credit swap lines from the People’s Bank of China, the central bank.
That has given borrower countries the space to continue servicing the debt they’ve taken on from Chinese institutions. In doing so, Beijing is drawing up a parallel system separate from the postwar economic order, where the IMF takes on the role of helping poorer nations restructure their economies to attain sustainable finances.
Quiet diplomacy
Beijing’s inaction has made it so that other official creditors and private sector bondholders are reluctant to make a move. The fear is that if one party agrees to write down its debt, the borrowing country would just turn around and use the savings to pay off the debt it owes to another creditor, such as China.
That’s raised the political stakes in Washington, where lawmakers are loath to see the U.S. write off debt and have the borrower give those payments to Chinese creditors.
The impasse has effectively prevented the IMF from being able to dole out financial support to desperate countries, as those mired in debt have to show they have achieved a sustainable strategy to address it.
But there is some hope that the issue can be approached in a practical manner.
“The administration is basically taking the view that this is a financial problem that needs a financial solution, and China as a big player in the countries’ debt structure obviously has to participate,” said Brad Setser, a senior fellow at the Council on Foreign Relations and former Treasury official.
“To be honest, the U.S. doesn’t have to convince China to participate in this process,” he said. “The countries defaulted. China has to participate in order to get repaid.”
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( With inputs from : www.politico.com )
Hyderabad: After Bharat Rashtra Samithi (BRS) working president and Telangana IT minister KT Rama Rao called for protests during Prime Minister Narendra Modi’s visit to Hyderabad on Saturday, BJP MLA Eatala Rajender held that the state government was responsible for the debts incurred by Singereni Collieries Company Limited (SCCL).
While talking to the media at the BJP party office, Rajender questioned chief minister K Chandrasekhar Rao on the reduction of the headcount in Singareni after the number of its employees dropped from 63,000 in 2014 to 43,000 employees in 2023.
Criticising the BRS-led state government, Eatala went on to ask, “While the workers in Coal India are getting Rs 930 per day as wages, Singareni workers are getting 430. Who is exploiting the workers?”
“After the amendment of the Mines and Minerals Regulation Act in 2015 that gave leverage to the Telangana government to get coal blocks allocated through Coal India, it failed to apply and secure even one of the four coal blocks directly under its control since 2017,” said Eatala.
Rajender further alleged that the BRS willfully made the Singareni write to the Centre that mining the Tadicherla block wasn’t feasible.
“Genco was allocated the Tadicherla coal block, and it requested Singareni to do the mining. But Singareni was asked to submit that it wasn’t viable,” said Eatala.
FRANKFURT ― The markets are jittery and inflation still needs taming. Coming together, those two things put the European Central Bank in a real bind.
Fight one fire and it could cause the other to flare. The ECB can keep raising interest rates to try to get inflation under control, but that risks fueling financial market tensions. Conversely, it can give banks some breathing space by slowing its rate-hiking, but that carries the danger of prolonging the region’s economic malaise.
Frankfurt’s official line is that it can do both with no serious consequences. Many economists in the eurozone don’t buy that.
In private, it’s a dilemma that splits the ECB’s decision-makers, and even in public differences of opinion are bubbling to the surface. Here’s what’s at stake:
Why is the ECB raising rates?
The idea is that increasing interest rates subdues inflation because it makes consumers and businesses less likely to borrow ― so that results in reduced spending.
As inflation has started to pick up since last summer, the ECB has raised interest rates at a record pace. They’ve gone from -0.5 to 3 percent as the annual rate of price rises has surged to a eurozone record 10.6 percent inOctober.
The Bank tries to keep inflation at 2 percent so it’s currently way off target.
How this contributed to the crisis
The unpleasant side effect is that with rising borrowing costs (because of higher interest rates), the value of bonds that banks hold usually fall. This gives investors a bad case of the jitters. After the collapse in March of lenders like Silicon Valley Bank and Credit Suisse ― though their problems seemed unconnected ― it was this that prompted concerns they might not be the only institutions with troubles, and fueled contagion fears around the globe.
But Lagarde plowed on regardless
The ECB remained unfazed in the face of emerging banking troubles: It delivered a previously signaled 0.5 percentage-point rate increase in March, less than a week after SVB failed and at a time when Swiss banking giant Credit Suisse was teetering.
Following that decision, ECB President Christine Lagarde stressed that she sees no trade-off between ensuring price stability and financial stability.
In fact, she said the Bank could continue to lift rates while addressing banking troubles with other tools.
The case against
Many economists disagree with Lagarde that the battle for price stability can be pursued without risking financial stability.
The ECB delivered 0.5 percentage-point rate increase in March, less than a week after SVB failed | Patrick T. Fallon/AFP via Getty Images
Claiming so “should be a career-ending statement,” said Stefan Gerlach, chief economist at EFG Bank in Zurich and a former deputy governor of the Central Bank of Ireland. “This is the idea of the ‘separation principle’ of 2008 revisited. That wasn’t a good idea then, and isn’t now either,” he added.
What’s the separation principle?
In 2008, at the start of the financial crisis, as well as in 2011, when the sovereign debt crisis hit, the ECB adhered to the idea that interest rates could be used to ensure price stability at the same time as other measures, such as generous liquidity injections, could ease market tension.
But this just added to the problems and had to be unwound quickly.
This time around, the Portuguese member on the ECB Governing Council, whose country suffered particularly under the consequences of the sovereign debt crisis, is less blasé than Lagarde.
“Our history tells us that we had to backtrack a couple of times already during processes of tightening given threats to financial stability. We cannot risk that this time,” Mario Centeno told POLITICO in an interview.
The case for Lagarde
After the initial fears that troubles could spread across the eurozone, investor nerves have calmed and bank shares started to recover. At the same time, new data showed that underlying inflation pressures kept rising, suggesting that Lagarde and her colleagues were right to stick to their guns ― at least for now.
If that’s the case, March’s interest rate rise ― what Commerzbank economist Jörg Krämer described as “necessary” investment in the central bank’s credibility ― will have paid off.
Market turmoil actually helps
The nervous markets could help the ECB to reach its inflation target without having to raise interest rates as aggressively as previously thought.
Banks tend to slap an additional risk premium on their lending rates which raises the cost of borrowing money for consumers and business. So banks end up doing part of the tightening job for the central bank.
ECB Vice President Luis de Guindos suggested as much in an interview released last month, though he cautioned that it was too early to assess how much impact exactly it may have.
What’s the endgame?
The challenge for the ECB is to strike the right balance. If it doesn’t it risks either the repeat of 2008-style financial troubles or a return to the stagflationary period (low growth on top of high inflation) that roiled the Continent in the 1970s.
If it raises rates too aggressively, bank failures followed by a recession risks forcing the ECB into an interest rate U-turn for the third time, creating massive credibility risks. Conversely, if they don’t hike enough, the central bank may lose a grip on inflation, which is its main mandate.
The only way Lagarde can win is to deliver both price stability and financial stability. In that sense, there is no trade-off ― one without the other just won’t be enough.
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( With inputs from : www.politico.eu )
But Biden officials and party leaders, however, see it far differently and are bristling at the attempts at a compromise, according to four lawmakers familiar with the discussions. Their party’s message to those plotting centrists: Your efforts are unlikely to succeed and risk hurting our goal of a clean debt ceiling increase.
The intraparty friction is growing as Washington’s debt crisis gets less theoretical and more urgent with each passing week. And the freelancing Democratic centrists may not have helped their cause by getting involved just as party leaders began seeing a political advantage in the fiscal fight — as long as they can keep the onus on Speaker Kevin McCarthy to unveil a plan that might pass the GOP-controlled House, with unpopular spending cuts likely to be attached.
“We’re gaining ground because of [House Republicans’] inability to put together a plan,” Senate Majority Leader Chuck Schumer said in a brief interview. “I’m certainly willing to entertain a mix of things on the budget. Not on the debt ceiling.”
A White House official said the administration has “not spoken to the Problem Solvers about this.” Centrist Democrats, however, say they’ve been made well aware the effort isn’t likely to win any endorsements from party leaders — and have decided to forge ahead anyway as the debt impasse sparks high anxiety, with Congress gone until April 17.
Biden and McCarthy have had zero recent contact on the debt other than jabs exchanged through the press, despite the jittery U.S. banking sector further rattling the situation. Democratic leaders say they’ll accept only a clean debt limit bill, but emboldened House Republicans insist that would never pass their chamber.
Complicating it all: Republican leaders won’t yet describe precisely what they want in exchange for their votes to raise the nation’s borrowing ceiling. Schumer, in response, has taken up the chant “show us your plan” for more than two months and counting.
Enter that group of moderate Democrats, who have privately met with GOP centrists since February, in defiance of their leadership. Their talks remain in the early stages, and two lawmakers familiar with the discussions said they have not honed specific details yet.
One centrist Democrat, who along with others addressed the talks on condition of anonymity, observed that “you’ve got party leaders in both houses that don’t want us to talk to one another.”
They’re not listening to those nudges to stop talking: “None of us work for the White House. We work for our constituents. And they should start talking and negotiating,” said Rep. Jared Golden (D-Maine), who co-leads the centrist Blue Dog Coalition.
Centrist Republicans involved in the discussions call them a recognition of what Biden and most Hill Democrats have denied — McCarthy’s GOP simply won’t accept a clean debt hike. And as two months have passed since McCarthy’s last sitdown with Biden, moderate Rep. Don Bacon (R-Neb.) said he’s one of those working within the bipartisan Problem Solvers Caucus because “we’ve got to have a plan B.”
With debt limit talks stuck in a mud puddle, House Republicans have seemingly abandoned plans to introduce a budget this spring, which could springboard the talks. That’s because GOP leaders are struggling to coalesce around a viable blueprint thanks to their members’ ever-expanding wish list and the realization that, for some hardline conservatives, there may be no level of austerity that would cut deep enough.
McCarthy and his team still want to draft their own package of deficit-reducing proposals, which his advisers say would mix ideas such as social program cuts with policies to increase U.S. energy production or tighten border security. Even so, the House GOP may not be able to unify behind such a plan.
“They don’t have a working majority,” Senate Majority Whip Dick Durbin (D-Ill.) said.
Those dynamics have convinced Schumer and Biden administration officials that they’re winning the public messaging battle over the debt ceiling. And so they’re increasingly content to hold the line on their demand for a clean increase to the borrowing limit.
The White House has jumped at opportunities to hammer Republicans over their proposed spending cuts, terming one set of demands from the House Freedom Caucus a “five-alarm fire.”
While most lawmakers expect the standoff will drag into the summer, Biden allies have circulated recent remarks from centrist members like Sen. Mitt Romney (R-Utah) expressing concern over the prospect of a debt ceiling crisis — hopeful that more Republicans are deciding it’s not worth the fight.
“There’s starting to be more appreciation that the full faith and credit of the United States is not a source of leverage,” a White House official said.
But Senate Republicans across the Capitol aren’t fleeing McCarthy’s foxhole yet. The most active deal-cutting senators are either sitting out or in the dark.
“The only hints of an idea I hear is an effort among [House] Republicans to come up with something they can vote for and send it over here,” said Romney. “I don’t know of any bipartisan [effort] here. Not with me.”
Sen. Susan Collins (R-Maine) also said she’d heard nothing of the Problem Solvers’ work.
“I don’t think you can expect a lot of movement on an issue like that until you start getting a little bit closer,” Senate Minority Whip John Thune (R-S.D.) said, adding that Democrats “want to run out the clock” but the strategy might not work: “I don’t think that they have that option.”
The Biden administration insists it won’t shift course. In a sign of the White House’s growing confidence, aides quickly brushed off McCarthy’s demand for a second meeting, arguing that there’s little point in the two men sitting down until Republicans decide among themselves what they want.
While Biden has not completely ruled out talking with McCarthy before Republicans publish their own budget, there’s little desire among aides to do anything that might help the speaker unite his fractious conference.
“How does he win here?” one economic adviser to the White House said of McCarthy. “They don’t really have a strategic plan.”
The White House has yet to weigh in formally on the ongoing centrist discussions about a backup approach. But there’s little doubt that it’s at odds with Biden’s preferred strategy. If anything, one adviser suggested, the likelihood that the moderates’ effort implodes or fails to win over either party’s leadership may only end up illustrating how far apart the two sides are.
Back in the Capitol, several Democrats said it’s worthwhile to discuss alternatives and broadly urged Biden to restart talks with the GOP.
Rep. Vicente Gonzalez (D-Texas), another member of the Problem Solvers, said it’s on both Biden and McCarthy to come up with a plan. ”Otherwise, it’s going to be a disaster. It already is, right?”
Jennifer Scholtes and Caitlin Emma contributed to this report.
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( With inputs from : www.politico.com )
Swiss prosecutors have opened an investigation into possible illegal activity in connection with government support for UBS’s rushed takeover of Credit Suisse.
The two banks agreed to merge in March as part of an emergency deal targeted at avoiding a national financial crisis that could have had a knock-on effect globally.
“The Federal Prosecutor’s office wants to proactively fulfill its mission and responsibility to contribute to a clean Swiss financial center and has set up monitoring in order to take immediate action in any situation that falls within its field of activity,” the authority said in a statement.
Last month, Zurich-based UBS was forced by Swiss authorities to take over its longtime domestic rival Credit Suisse in a deal that creates a new bank.
The prosecutor’s statement said that the intention of the probe was to “analyze and identify any criminal offenses” associated with the deal, adding that various bodies had been contacted to provide clarifications and information.
The deal has been unpopular locally and on Sunday, Swiss daily Tages-Anzeiger reported that the new entity could slash jobs by up to 30 percent.
“If we had done nothing, [Credit Suisse] shares would have been worthless on Monday and the shareholders would have gone home empty-handed,” Swiss Finance Minister Karin Keller-Sutter said last weekend in justifying the deal.
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( With inputs from : www.politico.eu )
