Economy

Mnuchin-Powell split shows rare discord as US economy struggles – BNN

Published

4 years ago

November 20, 2020

The top two U.S. economic policymakers clashed over whether to preserve emergency lending programs designed to shore up the economy — a rare moment of discord as the nation confronts the risk of a renewed downturn spurred by the resurgent coronavirus.

The disagreement erupted late Thursday when outgoing Treasury Secretary Steven Mnuchin released a letter to Federal Reserve Chair Jerome Powell demanding the return of money the government provides the central bank so it can lend to certain markets in times of stress. Minutes later, the Fed issued a statement urging that “the full suite” of measures be maintained into 2021.

“This is a significant and disturbing breach at a critical time for the economy,” said Tony Fratto, who worked at the Treasury and the White House during the George W. Bush administration. “We need all the arms of government working together and instead we’re seeing a complete breakdown,” he said, noting that Washington remains at an impasse on fiscal stimulus as well.

Investor reaction to the split was swift amid fears the decision will unsettle markets and impede the economic recovery: futures on the S&P 500 Index were down 0.5 per cent in early Friday trading in Europe, with haven demand sending Treasuries higher and pulling down yields.

Treasury chiefs and Fed chairs typically coordinate closely at times of crisis, appearing jointly before Congress and working in lockstep to ensure funding markets run smoothly. The two agencies were tightly linked in the bailouts of the financial and auto industry more than a decade ago. And they united again in the March 2020 Cares Act economic rescue package, which appropriated cash for the government to finance Fed backstops for everything from municipal to corporate finance after markets buckled when the pandemic hit.

Now, Mnuchin wants some of the money back, arguing many markets are no longer at risk of seizing up and so don’t need further aid beyond next month. In his sights are facilities which sought to ease corporate credit and municipal-borrowing and also offered loans to small and medium-sized businesses. He asked that four other programs be kept in place for an additional 90 days.

“Financial conditions are quite strong,” Mnuchin said in an interview. “The good news is, the markets have recovered significantly,” he said. Companies don’t need more loans, and instead require more grant money, which requires action from Congress, he said.

The Fed has argued that the lack of take-up for some of the programs is a sign they’ve worked.

Mnuchin said that the purpose of his announcement was not to put the Treasury against the Fed, and that he was merely carrying out the law prescribed by the Cares Act. The facilities could be re-activated if needed with either congressional support or with other funds available to the Treasury, he said.

“It appears the Fed may be reading the legislation differently,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co.

The risk is that divisions between the key economic players undermines confidence at a time when growth is flagging. Fed Bank of Dallas President Robert Kaplan said on Bloomberg TV Thursday that there’s the potential for gross domestic product to shrink this quarter and even next.

The economy is also set to go without fiscal stimulus: Republicans and Democrats remain deadlocked on a new package, and measures including extended unemployment benefits are set to expire next month.

“I was a bit surprised” at the Treasury’s statement, Raphael Bostic, president of the Fed Bank of Atlanta, told Bloomberg TV. “Given where the economy is — and there’s so much uncertainty still out there — it’s prudent to keep those things open so that when people, if they do have stress, they can draw upon it.”

Among the initiatives that will now no longer be able to extend new credit are two Fed facilities that allowed it to buy corporate bonds for the first time. They helped to unfreeze that market, even before the effort was up and running, and businesses have since logged record amounts of debt issuance.

Another, the Main Street Lending Program, has had a slow start, and the Fed recently loosened its terms to help encourage banks and smaller businesses to participate.

Powell himself said at a virtual conference on Tuesday that the time to discontinue the lending facilities was “not soon,” highlighting that typically the central bank keeps its backstops in place for some time after a crisis hits. He has repeatedly praised the Cares Act for what he’s described as “essential” support amid the historic collapse in GDP in the spring.

The U.S. Chamber of Commerce called for a reconsideration of Mnuchin’s decision.

“We strongly urge these programs be extended for the foreseeable future and call on Congress to pass additional pandemic relief targeted at the American businesses, workers and industries that continue to suffer,” the chamber said in a statement.

The sun-setting of some of the facilities will now build expectations for the Fed to take some other policy action when it wraps its next meeting on Dec. 16, said Ben Emons, managing director of global macro strategy at Medley Global Advisors.

“The market will now speculate the Fed may have to increase Treasury purchases and/or extend maturities” of the securities it buys through its main asset-purchase program, Emons wrote in a note.

President-elect Joe Biden’s administration could seek to renew the facilities, or press Congress to authorize fresh funding for them, when it takes office in January. Biden said Thursday that he’s made a decision on who he will nominate as Treasury secretary. Republicans in Congress have said the billions of dollars sent to the central bank can be deployed better elsewhere.

Biden’s Treasury could agree to restart the facilities, as Mnuchin pointed to, using the Exchange Stabilization Fund. But meantime, markets may need to contend with going “without a net” for several weeks, Feroli wrote in a note.

“For about three weeks in January the markets will be operating without the backstop they’ve had since the spring,” Feroli wrote.

–With assistance from Kathleen Hays.

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Business

A timeline of events in the bread price-fixing scandal

Published

15 hours ago

September 19, 2024

Anne Joseph

Almost seven years since news broke of an alleged conspiracy to fix the price of packaged bread across Canada, the saga isn’t over: the Competition Bureau continues to investigate the companies that may have been involved, and two class-action lawsuits continue to work their way through the courts.

Here’s a timeline of key events in the bread price-fixing case.

Oct. 31, 2017: The Competition Bureau says it’s investigating allegations of bread price-fixing and that it was granted search warrants in the case. Several grocers confirm they are co-operating in the probe.

Dec. 19, 2017: Loblaw and George Weston say they participated in an “industry-wide price-fixing arrangement” to raise the price of packaged bread. The companies say they have been co-operating in the Competition Bureau’s investigation since March 2015, when they self-reported to the bureau upon discovering anti-competitive behaviour, and are receiving immunity from prosecution. They announce they are offering $25 gift cards to customers amid the ongoing investigation into alleged bread price-fixing.

Jan. 31, 2018: In court documents, the Competition Bureau says at least $1.50 was added to the price of a loaf of bread between about 2001 and 2016.

Dec. 20, 2019: A class-action lawsuit in a Quebec court against multiple grocers and food companies is certified against a number of companies allegedly involved in bread price-fixing, including Loblaw, George Weston, Metro, Sobeys, Walmart Canada, Canada Bread and Giant Tiger (which have all denied involvement, except for Loblaw and George Weston, which later settled with the plaintiffs).

Dec. 31, 2021: A class-action lawsuit in an Ontario court covering all Canadian residents except those in Quebec who bought packaged bread from a company named in the suit is certified against roughly the same group of companies.

June 21, 2023: Bakery giant Canada Bread Co. is fined $50 million after pleading guilty to four counts of price-fixing under the Competition Act as part of the Competition Bureau’s ongoing investigation.

Oct. 25 2023: Canada Bread files a statement of defence in the Ontario class action denying participating in the alleged conspiracy and saying any anti-competitive behaviour it participated in was at the direction and to the benefit of its then-majority owner Maple Leaf Foods, which is not a defendant in the case (neither is its current owner Grupo Bimbo). Maple Leaf calls Canada Bread’s accusations “baseless.”

Dec. 20, 2023: Metro files new documents in the Ontario class action accusing Loblaw and its parent company George Weston of conspiring to implicate it in the alleged scheme, denying involvement. Sobeys has made a similar claim. The two companies deny the allegations.

July 25, 2024: Loblaw and George Weston say they agreed to pay a combined $500 million to settle both the Ontario and Quebec class-action lawsuits. Loblaw’s share of the settlement includes a $96-million credit for the gift cards it gave out years earlier.

Sept. 12, 2024: Canada Bread files new documents in Ontario court as part of the class action, claiming Maple Leaf used it as a “shield” to avoid liability in the alleged scheme. Maple Leaf was a majority shareholder of Canada Bread until 2014, and the company claims it’s liable for any price-fixing activity. Maple Leaf refutes the claims.

This report by The Canadian Press was first published Sept. 19, 2024.

Companies in this story: (TSX:L, TSX:MFI, TSX:MRU, TSX:EMP.A, TSX:WN)

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Economy

S&P/TSX composite up more than 250 points, U.S. stock markets also higher

Published

15 hours ago

September 19, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 250 points in late-morning trading, led by strength in the base metal and technology sectors, while U.S. stock markets also charged higher.

The S&P/TSX composite index was up 254.62 points at 23,847.22.

In New York, the Dow Jones industrial average was up 432.77 points at 41,935.87. The S&P 500 index was up 96.38 points at 5,714.64, while the Nasdaq composite was up 486.12 points at 18,059.42.

The Canadian dollar traded for 73.68 cents US compared with 73.58 cents US on Thursday.

The November crude oil contract was up 89 cents at US$70.77 per barrel and the October natural gas contract was down a penny at US2.27 per mmBTU.

The December gold contract was up US$9.40 at US$2,608.00 an ounce and the December copper contract was up four cents at US$4.33 a pound.

This report by The Canadian Press was first published Sept. 19, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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Economy

Construction wraps on indoor supervised site for people who inhale drugs in Vancouver

Published

1 day ago

September 18, 2024

Anne Joseph

VANCOUVER – Supervised injection sites are saving the lives of drug users everyday, but the same support is not being offered to people who inhale illicit drugs, the head of the BC Centre for Excellence in HIV/AIDS says.

Dr. Julio Montaner said the construction of Vancouver’s first indoor supervised site for people who inhale drugs comes as the percentage of people who die from smoking drugs continues to climb.

The location in the Downtown Eastside at the Hope to Health Research and Innovation Centre was unveiled Wednesday after construction was complete, and Montaner said people could start using the specialized rooms in a matter of weeks after final approvals from the city and federal government.

“If we don’t create mechanisms for these individuals to be able to use safely and engage with the medical system, and generate points of entry into the medical system, we will never be able to solve the problem,” he said.

“Now, I’m not here to tell you that we will fix it tomorrow, but denying it or ignoring it, or throw it under the bus, or under the carpet is no way to fix it, so we need to take proactive action.”

Nearly two-thirds of overdose deaths in British Columbia in 2023 came after smoking illicit drugs, yet only 40 per cent of supervised consumption sites in the province offer a safe place to smoke, often outdoors, in a tent.

The centre has been running a supervised injection site for years which sees more than a thousand people monthly and last month resuscitated five people who were overdosing.

The new facilities offer indoor, individual, negative-pressure rooms that allow fresh air to circulate and can clear out smoke in 30 to 60 seconds while users are monitored by trained nurses.

Advocates calling for more supervised inhalation sites have previously said the rules for setting up sites are overly complicated at a time when the province is facing an overdose crisis.

More than 15,000 people have died of overdoses since the public health emergency was declared in B.C. in April 2016.

Kate Salters, a senior researcher at the centre, said they worked with mechanical and chemical engineers to make sure the site is up to code and abidies by the highest standard of occupational health and safety.

“This is just another tool in our tool box to make sure that we’re offering life-saving services to those who are using drugs,” she said.

Montaner acknowledged the process to get the site up and running took “an inordinate amount of time,” but said the centre worked hard to follow all regulations.

“We feel that doing this right, with appropriate scientific background, in a medically supervised environment, etc, etc, allows us to derive the data that ultimately will be sufficiently convincing for not just our leaders, but also the leaders across the country and across the world, to embrace the strategies that we are trying to develop.” he said.

Montaner said building the facility was possible thanks to a single $4-million donation from a longtime supporter.

Construction finished with less than a week before the launch of the next provincial election campaign and within a year of the next federal election.

Montaner said he is concerned about “some of the things that have been said publicly by some of the political leaders in the province and in the country.”

“We want to bring awareness to the people that this is a serious undertaking. This is a very massive investment, and we need to protect it for the benefit of people who are unfortunately drug dependent.” he said.

This report by The Canadian Press was first published Sept. 18, 2024.

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