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An investment bank to help the US prosper – Financial Times

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The writer is a professor at Sussex University

US president-elect Joe Biden wants to massively increase investment in everything from clean energy to healthcare and housing. But his efforts will be hampered because the US lacks vital tools that its major competitors and allies rely on.

To address the challenges America is facing — Covid-19, recession, inequality and climate change — Mr Biden should create a public investment bank. Without one, the US is trying to respond with one arm tied behind its back.

Well-capitalised, vigorous public financial institutions can work with the private sector to soften the blows during downturns and extend prosperity in upturns. They support infrastructure investment and small and medium enterprises, especially in innovative sectors or serving vulnerable communities.

It is a paradox that while the US government, in an act of idealism after the second world war, provided funds via the Marshall Plan to create and capitalise the very successful German public bank KfW, it has not created a similar institution at home.

Today, KfW has turned the initial investment into more than $500bn in assets, the second-largest German bank, and is a critical source of domestic capital for small business, clean energy, exports, innovation and start-ups. It was a driving force for reconstruction after the war, for integrating East Germany after reunification and for recovery from the 2008 financial crisis. During Covid-19, KfW and local public banks are providing finance to individuals and businesses, helping save companies and jobs more quickly than the inefficient US system.

The US government should create such an institution now.

A National Climate Bank, based on green banks in countries such as Australia as well as in the states of New York and Michigan, passed the House of Representatives as part of the Moving Forward Act. The proposal for a national infrastructure authority with a broader mission could expand, complement or even absorb that climate bank.

Such an American Investment Bank would be a lead investor in critical projects serving the public good, which many private institutions may not at first find attractive. Electricity grids suited to renewable energy, rural broadband and coastal high-speed railways are all candidates. Such investment creates key preconditions for private investment.

We propose that an AIB should be independent, non-partisan and subject to rigorous regulation and government audit. It should be capitalised initially with up to $100bn to assure sufficient resources for its activities and aim at a high investment grade credit rating to access private capital markets at low cost.

It would be financially self-sustaining and profitmaking, but not profit- driven, aiming to maximise its contribution to create a more dynamic, sustainable and fairer economy. Because specific opportunities and challenges differ across the country, it should have regional branches and work with municipal bond issuers and local financial institutions, such as state green banks and commercial banks.

During a crisis, the bank would increase provision of low-cost, long-term credit to support essential services — like hospitals, the manufacturing of critical equipment and transport companies. It would also channel general working capital and payroll support to eligible companies and local governments, acting counter-cyclically to support recovery.

At all times, it would allow grant resources and technical assistance to reach vulnerable communities. Those with significant populations of black, brown, indigenous people and others, are often marginalised and face a lack of access to credit, and disinvestment because of loss of industry or transition to clean energy, for example.

The AIB would also accelerate the pace at which new low carbon technologies become bankable by investing in very innovative technologies. Working alongside commercial banks and institutional investors, it would share knowledge as a public not a proprietary good, so critical risk and performance data make it to market quickly. It would make loans, take equity stakes and mitigate risk via guarantees.

There is no time to lose and no reason to wait. Both for helping the recovery from Covid-19-induced recession and building back better, by providing finance for investment in the most dynamic, innovative, competitive and inclusive sectors and companies, an American Investment Bank is essential for the US economy to prosper in the 21st century.

Doug Sims, a senior adviser at the Natural Resources Defense Council, contributed to this article

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U.S. stocks rebound following rout, bond yields dip

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U.S. shares rebounded on Thursday after falling for three consecutive days and benchmark Treasury yields dipped, as investors snapped up technology stocks and shrugged off worries about rising prices, for now.

After posting their biggest slump in at least 11 weeks on Wednesday, U.S. shares bounced back as cash-flush investors looked past concerns that accelerating inflation may prompt quicker interest rate hikes, and deployed their funds once more.

So intent were investors on leaving inflation worries aside that financial markets barely responded to Thursday’s data, which showed U.S. producer prices posting their biggest annual gain since 2010 in April.

“It’s rebound Thursday,” said John Augustine, chief investment officer at Huntington Private Bank, which manages $20 billion. “Given the money on the sidelines, investors are going to be coming back in.”

Still, Augustine said investors should re-deploy their funds in a measured way because “inflation concerns are not going away”.

By midday, the Dow Jones Industrial Average had added 1.4%, while the S&P 500 and the Nasdaq Composite narrowed earlier gains to be up 1.3% and 0.9%, respectively.

The MSCI world equity index, which includes 50 countries, also bounced slightly, gaining 0.2%.

U.S. stocks had tumbled earlier this week after data showed U.S. consumer prices unexpectedly jumped by the most in almost 12 years in April.

Some investors now worry that quickening price pressures could lead the Federal Reserve to tighten monetary policy sooner than expected, and reduce its supply of cheap money that has been propelling financial markets higher.

For now, however, inflation woes took a backseat.

Benchmark 10-year Treasury yields, which had spiked 7 basis points overnight in the biggest daily rise in two months, edged down by more than 3 basis points to 1.6625% as investors took a breather.

Benchmark two-year Treasury yields also pulled back to 0.1589%.

Against a basket of major currencies, the dollar was steady at 90.727, holding gains eked out on Wednesday when expectations of rate hikes burnished the currency’s appeal.

A firm dollar capped gains in the euro, which edged up 0.1% to $1.20875. [USD/]

The pull-back in Treasury yields helped gold to recoup some of Wednesday’s losses, when the jump in bond yields dampened the allure of non-yielding bullion. Spot gold climbed 0.7% off a one-week low to $1,825.61 per ounce.

A recent rally in oil prices also paused on Thursday as investors turned their attention to the coronavirus crisis in India, and as a key U.S. fuel pipeline resumed operations.

Brent crude slumped 3.5% to $66.93 a barrel, while U.S. West Texas Intermediate crude lost 3.8% to $63.53 a barrel.

Among cryptocurrencies, bitcoin, which tumbled 13% overnight when Elon Musk said Tesla would stop accepting it as payment because of its high energy use, fell below $50,000 again on Thursday following reports that the U.S. Justice Department is investigating crypto exchange Binance.

By midday, bitcoin had dropped 2.2% to $48.314.

(Reporting by Koh Gui Qing; additional reporting by Tom Wilson and Marc Jones in London; Wayne Cole in Sydney; Editing Nick Macfie, Dan Grebler and Cynthia Osterman)

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Dogecoin dropped after Elon Musk calls it a ‘hustle’ on ‘SNL’ show

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By Alden Bentley and Gertrude Chavez-Dreyfuss

NEW YORK (Reuters) -The value of dogecoin dropped sharply in early U.S. hours on Sunday, after Tesla chief and cryptocurrency supporter Elon Musk called it a ‘hustle’ during his guest-host spot on the “Saturday Night Live” comedy sketch TV show.

Dogecoin was quoted as low as $0.47 on crypto exchange Binance, down 28% from levels around $0.65 before the show.

The billionaire Tesla Inc chief executive hosted the show at 11:30 p.m. EDT on Saturday (0330 GMT on Sunday).

Cryptocurrency enthusiasts had for days been eager to see what he would say, after his tweets this year turned the once-obscure digital currency into a speculator’s dream.

Asked ‘what is dogecoin’, Musk replied, “It’s the future of currency. It’s an unstoppable financial vehicle that’s going to take over the world.”

When a show cast member Michael Che countered, “So, it’s a hustle?”, Musk replied, “Yeah, it’s a hustle.” And laughed.

Musk is the rare business mogul to have been asked to host the venerable comedy TV show. The timing puts Musk back in the spotlight just as Tesla’s stock is losing steam following last year’s monster rally.

The unconventional CEO has posted numerous comments about cryptocurrencies on Twitter and criticized regular old cash for having negative real interest rates.

“Only a fool wouldn’t look elsewhere,” he said in February.

His cryptic tweets “Doge” and “Dogecoin is the people’s crypto” that month kicked off a rally in dogecoin – created as a parody on the more mainstream bitcoin and ethereum.

On Thursday, Musk tweeted: “Cryptocurrency is promising, but please invest with caution!” with a video clip attached in which he said, “it should be considered speculation at this point. And so, you know, don’t don’t go too far in the crypto speculation …”

But he also said, in the video, that cryptocurrency has a “good chance” of becoming what he called “the future currency of the Earth.”

On crypto data tracker CoinGecko.com, dogecoin has jumped more than 800% over the last month and is now the fourth-largest digital currency, with a market capitalization of $73 billion. It hit a record high Thursday above $0.73.

It has overtaken more widely used cryptocurrencies such as litecoin and tether.

Tesla said in February it bought $1.5 billion worth of bitcoin and would soon accept it as a form of payment for its electric cars, a large stride toward mainstream acceptance that sent bitcoin soaring to a record high of nearly $62,000.

Tesla shares closed 1.3% higher at $672.37 on Friday.

(Reporting by Gertrude Chavez-Dreyfuss and Alden Bentley in New York, and Noel Randewich and Hyunjoo Jin in San Francisco Additional reporting by Joe White and Vidya RanganathanEditing by Matthew Lewis & Simon Cameron-Moore)

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Wealthsimple hits $4 billion valuation on funding from Ryan Reynolds, Drake

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Wealthsimple

(Reuters) -Wealthsimple said on Monday it has raised C$750 million ($610.40 million) in its latest funding round, which more than doubled the Canadian fintech company‘s valuation to C$5 billion.

The latest funding round included participation from celebrities Drake, Michael Fox and Ryan Reynolds, according to the company.

The Toronto-based company that has helped make stock trading, peer-to-peer money transfers and tax filing easily accessible, said it will use the amount raised to further expand its market position, product suite and team.

The latest funding round, led by venture capital firms Meritech and Greylock, also includes investments from iNovia, Sagard, TSV and Redpoint.

The funding consists of C$250 million primary fundraising by Wealthsimple and a C$500 million secondary offering by holding company Power Corp of Canada, its largest shareholder.

Wealthsimple said it has seen rapid growth in the past 14 months as Canadians took an interest in stock trading during the COVID-19 pandemic.

Earlier this year, the company said it plans to grow revenue by adding premium features for its clients.

($1 = 1.2288 Canadian dollars)

(Reporting by Eva Mathews and Tiyashi Datta in Bengaluru; Editing by Shailesh Kuber and Shounak Dasgupta)

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