Social Security Administration Commissioner Frank Bisignano was named to the newly created position of CEO of the IRS on Monday, making him the latest member of the Trump administration to be put in charge of multiple federal agencies.
As IRS CEO, Bisignano will report to Treasury Secretary Scott Bessent, who currently serves as acting commissioner of the IRS, the Treasury Department says. It is unclear whether Bisignano’s newly created role at the IRS will require Senate confirmation.
The Treasury Department said in a statement that Bisignano will be responsible for overseeing all day-to-day IRS operations while also continuing to serve in his role as commissioner of the Social Security Administration.
Bessent said in a statement that the IRS and SSA “share many of the same technological and customer service goals. This makes Mr. Bisignano a natural choice for this role.”
The move to install Bisignano at the IRS adds another layer to the leadership shuffling that has occurred at the agency since the beginning of Trump’s term. Bessent was named acting commissioner in August after Trump removed former U.S. Rep Billy Long from the role less than two months after his confirmation, and made him ambassador to Iceland.
The four acting commissioners who preceded Long in the job included one who resigned over a deal between the IRS and the Department of Homeland Security to share immigrants’ tax data with Immigration and Customs Enforcement and another whose appointment led to a fight between former Trump adviser Elon Musk and Bessent.
With two day jobs, Bisignano joins a number of other Trump administration officials to wear multiple hats, including Bessent, Marco Rubio, Sean Duffy, Jamieson Greer and Russell Vought.
IRS and Social Security advocates expressed concern about the new appointment.
Kathleen Romig, director of Social Security and Disability Policy at the Center on Budget and Policy Priorities, pointed to Bisignano being named to a position that appears to avoid Congressional approval.
“If the Trump Admin asked for the Senate’s advice & consent, would they really want the same person running the government’s biggest program AND overseeing the implementation of the extraordinarily complex new tax law?” she said on the Bluesky social media app.
And Nancy Altman, President of Social Security Works, an advocacy group for SSA recipients and future retirees, said Bisignano’s “divided attention will create a bottleneck that makes the inevitable problems that arise even harder to correct. Never in Social Security’s 90-year history has a commissioner held a second job. Bisiginano’s new role will leave a leadership vacuum at the top of the agency, especially since the Republican Senate hasn’t even confirmed a deputy commissioner.”
Bisignano has served as chair of Fiserv, a payments and financial services tech firm, since 2020. He is a onetime defender of corporate policies to protect LGBTQ+ people from discrimination.
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Royal Bank of Canada said it has proof that its former chief financial officer engaged in an intimate relationship with a colleague that she failed to disclose, citing exchanges between the two over text messages and emails.
Canada’s biggest lender filed a statement of defense and counterclaim on Friday in the wrongful dismissal lawsuit filed earlier this month by Nadine Ahn, the executive it fired in April after 25 years at the bank.
The legal filing said Ahn began a close personal relationship with a colleague, Ken Mason — an executive in the bank’s corporate treasury group — as early as 2013 and that it continued until the time of her departure.
The document offers a remarkably detailed look at how the bank alleges the relationship played out over more than a decade. It includes descriptions of how the two bankers frequently met outside work for cocktails, celebrated anniversaries, swapped romantic poetry, and called each other by pet names — “Prickly Pear” for Ahn and “KD” for Mason.
Their text messages “fantasized about a life together, such as reading in bed together,” RBC’s court filing states.
“Ms. Ahn forwarded romantic poetry to Mr. Mason, expressing that she had fallen in love with Mr. Mason when she first saw him,” according to the filing. “Ms. Ahn and Mr. Mason continued to regularly see each other outside of the office during this time period, arranging a lunch on August 18, 2017 to celebrate their ‘fourth anniversary.’”
The close relationship continued after she was promoted to CFO in 2021, according to the documents. RBC alleges that Ahn used her position within the company to orchestrate promotions and pay raises for Mason, an endeavor it says Mason referred to as “Project Ken” in a document he drew up. She also shared confidential information with Mason, the bank claims, such as a draft of a speech to be given by Chief Executive Officer Dave McKay.
The filing states that RBC doesn’t have access to their messages, “except to the extent that Ms. Ahn and Mr. Mason copied personal communications to RBC systems.”
Lawyers for Mason and Ahn didn’t reply to messages seeking comment. Ahn said in her lawsuit that she and Mason were friends but denied that they were romantic partners. Mason, who filed a separate wrongful dismissal lawsuit against RBC, also denied a romantic relationship and said the bank would have treated them differently if they had both been men.
‘I Love You Too’
The bank cites “intimate communications” exchanged between the two via text message. As one example, it states, “On March 11, 2019, Ms. Ahn messaged Mr. Mason to say, ‘I love you.’ Mr. Mason responded 15 seconds later, ‘I love you too.’”
The two allegedly used calendar invites to schedule “liquidity meetings,” which the bank said was code for going for cocktails. At one such meeting, the two scribbled notes about their drink orders and other topics such as “concert, night out, winery” on a coaster from Canoe, an upscale restaurant in Toronto’s financial district. Mason had the coaster encased in plexiglass and kept it in his office, RBC claims.
The bank said it began investigating in March after an anonymous whistleblower alleged that Ahn and Mason had been seen “hugging and kissing and exiting the elevators” at the Fairmont Royal York, a hotel that’s right beside RBC’s head office.
Bank officials “immediately commenced a thorough investigation conducted by external legal counsel,” RBC spokesperson Gillian McArdle said in an emailed statement on Friday. “We were disappointed to learn the allegations were true.”
The Globe and Mail newspaper earlier reported on RBC’s court filing.
Ahn’s lawsuit complained about the way Royal Bank handled the investigation, the speed with which she was fired after being confronted with the allegations on April 5, and the damage to her reputation when the bank put out a press release that same day.
“Contrary to the statements of claim from Ms. Ahn and Mr. Mason, the investigation showed there was an undisclosed close personal relationship, and that Ms. Ahn misused her authority as CFO to directly benefit Mr. Mason,” McArdle said. “As she was a Named Executive Officer, we had an obligation to disclose.”
Ahn’s lawsuit is seeking almost C$50 million ($37 million) in pay and damages while Mason is suing Royal Bank for more than C$20 million in pay and damages.
In its counterclaim against Ahn, RBC is seeking about C$4.5 million for “excess compensation” paid to Mason and to claw back bonuses paid to Ahn, plus other damages and costs.
RBC’s filing states that when another employee raised concerns about Mason’s pay, Ahn terminated that person’s employment without cause. The bank said that former employee “has demanded compensation from RBC for bad faith termination of his employment, because of Ms. Ahn’s conduct.”
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The U.S. economy continues to grow despite the 5.5% benchmark federal funds interest rate set by the Federal Reserve in 2023.
The Fed’s leaders expect their interest rate decisions to eventually slow that growth.
The increase in borrowing costs that stems from Fed decisions does not affect all consumers immediately. It typically affects people who need to take new loans — first-time homebuyers, for example. Other dynamics, such as the use of contracts in business, can slow the ripple of Fed decisions through an economy.
“It might not all hit at once, but the longer rates stay elevated, the more you’re going to feel those effects,” said Sarah House, managing director and senior economist at Wells Fargo.
“Consumers did have additional savings that we wouldn’t have expected if they had continued to save at the same pre-Covid rate. And so that’s giving some more insulation in terms of their need to borrow,” said House. “That’s an example of why this cycle might be different in terms of when those lags hit, versus compared to prior cycles.”
A 1% interest rate increase can reduce gross domestic product by 5% for 12 years after an unexpected hike, according to a research paper from the Federal Reserve Bank of San Francisco.
“It’s bad in the short term because we worry about unemployment, we worry about recessions,” said Douglas Holtz-Eakin, president of the American Action Forum, referring to the paper’s implications for central bank policymakers. “It’s bad in the long term because that’s where increases in your wages come from; we want to be more productive.”
Some economists say that financial markets may be responding to Federal Reserve policy more quickly, if not instantaneously. “Policy tightening occurs with the announcement of policy tightening, not when the rate change actually happens,” said Federal Reserve Governor Christopher Waller in remarks July 13 at an event in New York.
“We’ve seen this cycle where the stock market moved more quickly in some cases, more slowly in other cases,” said Roger Ferguson, former vice chair of the Federal Reserve. “So, you know, this question of variability comes into play, as in how long it’s going to take. We think it’s a long time, but sometimes it can be faster.”
Watch the video above to see why the Fed’s interest rate hikes take time to affect the economy.
Moody’s Investors Service turned negative on the US’s credit rating outlook Friday, citing risks to the nation’s fiscal strength and political polarization.
The rating assessor lowered the outlook from stable, even as it affirmed the nation’s rating at Aaa, the highest investment-grade notch.
“Downside risks to the US’ fiscal strength have increased and may no longer be fully offset by the sovereign’s unique credit strengths,” William Foster, a senior credit officer at Moody’s, wrote in a statement. “In the context of higher interest rates, without effective fiscal policy measures to reduce government spending or increase revenues, Moody’s expects that the US’ fiscal deficits will remain very large, significantly weakening debt affordability.”
Moody’s, which is the only remaining major credit grader to assign the US a top rating, said the Aaa affirmation reflects that the US’s formidable credit strengths still preserve its credit profile.
In a statement, White House Press Secretary Karine Jean-Pierre said the outlook change was a “consequence of congressional Republican extremism and dysfunction.” Deputy Secretary of the Treasury Wally Adeyemo, meanwhile, pushed back against the outlook change, saying the “American economy remains strong, and Treasury securities are the world’s preeminent safe and liquid asset.”
Moody’s had earlier hinted at a potential downgrade, saying in a Sept. 25 report that while “debt service payments would not be impacted and a short-lived shutdown would be unlikely to disrupt the economy, it would underscore the weakness of US institutional and governance strength relative to other Aaa-rated sovereigns.”
Fitch Ratings has the United States’ sovereign rating at a score of AA+, one notch below its highest mark, after the credit assessor downgraded the US government in August following the latest debt-ceiling battle. S&P Global Ratings has it at a score of AA+, also just below its top grade, having stripped the US of its top score in 2011 on the heels of an earlier debt-ceiling crisis.
Ten-year Treasury note futures dropped after the announcement, reaching fresh session lows. The yield on US 10-year Treasuries, meanwhile, extended back through 4.65% and ended the session matching the highs reached in the Asia session.
The government’s credit plans have been in particular focus after the Treasury last week announced that it would borrow $112 billion in quarterly refunding and said it expects one more step up in quarterly issuance of longer-term debt.
The US also faces a government shutdown on Nov. 18 if Congress doesn’t come to an agreement to pass short-term spending bills. These economic disruptions would come at a challenging time for investors, who already have to contend with a toxic mix of large US fiscal deficits and persistent inflation.
“Continued political polarization within US Congress raises the risk that successive governments will not be able to reach consensus on a fiscal plan to slow the decline in debt affordability,” according to Moody’s.
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WASHINGTON (AP) — Much of the theft was brazen, even simple.
Fraudsters used the Social Security numbers of dead people and federal prisoners to get unemployment checks. Cheaters collected those benefits in multiple states. And federal loan applicants weren’t cross-checked against a Treasury Department database that would have raised red flags about sketchy borrowers.
Criminals and gangs grabbed the money. But so did a U.S. soldier in Georgia, the pastors of a defunct church in Texas, a former state lawmaker in Missouri and a roofing contractor in Montana.
An Associated Press analysis found that fraudsters potentially stole more than $280 billion in COVID-19 relief funding; another $123 billion was wasted or misspent. Combined, the loss represents 10% of the $4.2 trillion the U.S. government has so far disbursed in COVID relief aid.
That number is certain to grow as investigators dig deeper into thousands of potential schemes.
How could so much be stolen? Investigators and outside experts say the government, in seeking to quickly spend trillions in relief aid, conducted too little oversight during the pandemic’s early stages and instituted too few restrictions on applicants. In short, they say, the grift was just way too easy.
“Here was this sort of endless pot of money that anyone could access,” said Dan Fruchter, chief of the fraud and white-collar crime unit at the U.S. Attorney’s office in the Eastern District of Washington. “Folks kind of fooled themselves into thinking that it was a socially acceptable thing to do, even though it wasn’t legal.”
The U.S. government has charged more than 2,230 defendants with pandemic-related fraud crimes and is conducting thousands of investigations.
Most of the looted money was swiped from three large pandemic-relief initiatives launched during the Trump administration and inherited by President Joe Biden. Those programs were designed to help small businesses and unemployed workers survive the economic upheaval caused by the pandemic.
The pilfering was wide but not always as deep as the eye-catching headlines about cases involving many millions of dollars. But all of the theft, big and small, illustrates an epidemic of scams and swindles at a time America was grappling with overrun hospitals, school closures and shuttered businesses. Since the pandemic began in early 2020, more than 1.13 million people in the U.S. have died from COVID-19, according to the Centers for Disease Control and Prevention.
Michael Horowitz, the U.S. Justice Department inspector general who chairs the federal Pandemic Response Accountability Committee, told Congress the fraud is “clearly in the tens of billions of dollars” and may eventually exceed $100 billion.
Horowitz told the AP he was sticking with that estimate, but won’t be certain about the number until he gets more solid data.
“I’m hesitant to get too far out on how much it is,” he said. “But clearly it’s substantial and the final accounting is still at least a couple of years away.”
Mike Galdo, the U.S. Justice Department’s acting director for COVID-19 Fraud Enforcement, said, “It is an unprecedented amount of fraud.”
Before leaving office, former President Donald Trump approved emergency aid measures totaling $3.2 trillion, according to figures from the Pandemic Response Accountability Committee. Biden’s 2021 American Rescue Plan authorized the spending of another $1.9 trillion. About a fifth of the $5.2 trillion has yet to be paid out, according to the committee’s most recent accounting.
Never has so much federal emergency aid been injected into the U.S. economy so quickly. “The largest rescue package in American history,” U.S. Comptroller General Gene Dodaro told Congress.
The enormous scale of that package has obscured multibillion-dollar mistakes.
An $837 billion IRS program, for example, succeeded 99% of the time in getting economic stimulus checks to the proper taxpayers, according to the tax agency. Nevertheless, that 1% failure rate translated into nearly $8 billion going to “ineligible individuals,” a Treasury Department inspector general told AP.
An IRS spokesman said the agency does not agree with all the figures cited by the watchdog and noted that, even if correct, the loss represented a tiny fraction of the program’s budget.
The health crisis thrust the Small Business Administration, an agency that typically gets little attention, into an unprecedented role. In the seven decades before the pandemic struck, for example, the SBA had doled out $67 billion in disaster loans.
When the pandemic struck, the agency was assigned to manage two massive relief efforts — the COVID-19 Economic Injury Disaster Loan and Paycheck Protection programs, which would swell to more than a trillion dollars. SBA’s workforce had to get money out the door, fast, to help struggling businesses and their employees. COVID-19 pushed SBA’s pace from a walk to an Olympic sprint. Between March 2020 and the end of July 2020, the agency granted 3.2 million COVID-19 economic injury disaster loans totaling $169 billion, according to an SBA inspector general’s report, while at the same time implementing the huge new Paycheck Protection Program.
In the haste, guardrails to protect federal money were dropped. Prospective borrowers were allowed to “self-certify” that their loan applications were true. The CARES Act also barred SBA from looking at tax return transcripts that could have weeded out shady or undeserving applicants, a decision eventually reversed at the end of 2020.
“If you open up the bank window and say, give me your application and just promise me you really are who you say you are, you attract a lot of fraudsters and that’s what happened here,” Horowitz said.
The SBA inspector general’s office has estimated fraud in the COVID-19 economic injury disaster loan program at $86 billion and the Paycheck Protection program at $20 billion. The watchdog is expected in coming weeks to release revised loss figures that are likely to be much higher.
In an interview, SBA Inspector General Hannibal “Mike” Ware declined to say what the new fraud estimate for both programs will be.
“It will be a figure that is fair, that is 1,000% defensible by my office, fully backed by our significant criminal investigative activity that is taking place in this space,” Ware said.
Ware and his staff are overwhelmed with pandemic-related audits and investigations. The office has a backlog of more than 80,000 actionable leads, close to a 100 years’ worth of work.
“Death by a thousand cuts might be death by 80,000 cuts for them,” Horowitz said of Ware’s workload. “It’s just the magnitude of it, the enormity of it.”
A 2022 study from the University of Texas at Austin found almost five times as many suspicious Paycheck Protection loans as the $20 billion SBA’s inspector general has reported so far. The research, led by finance professor John Griffin, found as much as $117 billion in questionable and possibly fraudulent loans, citing indicators such as non-registered businesses and multiple loans to the same address.
Horowitz, the pandemic watchdog chairman, criticized the government’s failure early on to use the “Do Not Pay” Treasury Department database, designed to keep government money from going to debarred contractors, fugitives, felons or people convicted of tax fraud. Those reviews, he said, could have been done quickly.
“It’s a false narrative that has been set out, that there are only two choices,” Horowitz said. “One choice is, get the money out right away. And that the only other choice was to spend weeks and months trying to figure out who was entitled to it.”
In less than a few days, a week at most, Horowitz said, SBA might have discovered thousands of ineligible applicants.
“24 hours? 48 hours? Would that really have upended the program?” Horowitz said. “I don’t think it would have. And it was data sitting there. It didn’t get checked.”
The Biden administration put in place stricter rules to stem pandemic fraud, including use of the “Do Not Pay” database. Biden also recently proposed a $1.6 billion plan to boost law enforcement efforts to go after pandemic relief fraudsters.
“I think the bottom line is regardless of what the number is, it emanates overwhelmingly from three programs that were designed and originated in 2020 with too many large holes that opened the door to criminal fraud,” Gene Sperling, the White House American Rescue Plan coordinator, said in an interview.
“We came into office when the largest amounts of fraud were already out of the barn,” Sperling added.
In a statement, an SBA spokesperson declined to say whether the agency agrees with the figures issued by Ware’s office, saying the federal government has not developed an accepted system for assessing fraud in government programs. Previous analyses have pointed to “potential fraud” or “fraud indicators” in a manner that conveys those numbers as a true fraud estimate when they are not, according to the statement.
Han Nguyen, a spokesman for the SBA, said Monday that “the vast majority of the likely fraud originated in the first nine months of the pandemic programs, under the Trump administration.” For the COVID-19 economic injury disaster loan program, Nguyen said, SBA’s “working estimate” found $28 billion in likely fraud.
The coronavirus pandemic plunged the U.S. economy into a short but devastating recession. Jobless rates soared into double digits and Washington sent hundreds of billions of dollars to states to help the suddenly unemployed.
For crooks, it was like tossing chum into the sea to lure fish. Many of these state unemployment agencies used antiquated computer systems or had too few staff to stop bogus claims from being paid.
00:00
<p>AP correspondent Donna Warder reports on Pandemic Aid Great Grift; the plundering of billions of dollars during the worst pandemic in a century.</p>
“Yes, the states were overwhelmed in terms of demand,” said Brent Parton, acting assistant secretary of the U.S. Labor Department’s Employment and Training Administration. “We had not seen a spike like this ever in a global event like a pandemic. The systems were underfunded. They were not resilient. And I would say, more importantly, were vulnerable to sophisticated attacks by fraudsters.”
Fraud in pandemic unemployment assistance programs stands at $76 billion, according to congressional testimony from Labor Department Inspector General Larry Turner. That’s a conservative estimate. Another $115 billion mistakenly went to people who should not have received the benefits, according to his testimony.
Turner declined AP’s request for an interview.
Turner’s task in identifying all of the pandemic unemployment insurance fraud has been complicated by a lack of cooperation from the federal Bureau of Prisons, according to a September “alert memo” issued by his office. Scam artists used Social Security numbers of federal prisoners to steal millions of dollars in benefits.
His office still doesn’t know exactly how much was swiped that way. The prison bureau had declined to provide current data about federal prisoners. The AP reached out to the bureau several times for comment, starting June 2. Bureau spokesperson Emery Nelson said on Monday the agency had provided in February and March “all the necessary data” to the Pandemic Response Accountability Committee. Turner is a member of the committee.
Ohio State Auditor Keith Faber saw trouble coming when safeguards to ensure the unemployment aid only went to people who legitimately qualified were lowered, making conditions ripe for fraud and waste. The state’s unemployment agency “took controls down because on the one hand, they literally were drinking from a firehose,” Faber said. “They had a year’s worth of claims in a couple of weeks. The second part of the problem was the (federal government) directed them to get the money out the door as quickly as possible and worry less about security. They took that to heart. I think that was a mistake.”
Ohio’s Department of Job and Family Services reported in February $1 billion in fraudulent pandemic unemployment claims and another $4.8 billion in overpayments.
The ubiquitous masks that became a symbol of the COVID-19 pandemic are seen on fewer and fewer faces. Hospitalizations for the virus have steadily declined, according to CDC data, and Biden in April ended the national emergency to respond to the pandemic.
But on politically divided Capitol Hill, lawmakers have not put the pandemic behind them and are engaged in a fierce debate over the success of the relief spending and who’s to blame for the theft.
Too much government money, Republicans argue, breeds fraud, waste and inflation. Democrats have countered that all the financial muscle from Washington saved lives, businesses and jobs.
The GOP-led House Oversight and Accountability Committee is investigating pandemic relief spending. “We must identify where this money went, how much ended up in the hands of fraudsters or ineligible participants, and what should be done to ensure it never happens again,” the panel’s chairman, Rep. James Comer of Kentucky, said in a statement Tuesday.
Republicans and Democrats did, however, find common ground last year on bills to give the federal government more time to catch fraudsters. Biden in August signed legislation to increase the statute of limitations from five to 10 years on crimes involving the two major programs managed by the SBA.
The extra time will help federal prosecutors untangle pandemic fraud cases, which often involve identity theft and crooks overseas. But there’s no guarantee they’ll catch everyone who jumped at the chance for an easy payday. They’re busy, too, with crimes unrelated to pandemic relief funds.
“Do we have enough cases and leads that we could be doing them in 2030? We absolutely could,” said Fruchter, the federal prosecutor in the Eastern District of Washington. “But my experience tells me that likely there will be other priorities that will come up and will need to be addressed. And unfortunately, in our office, we don’t have a dedicated pandemic fraud unit.”
Congress has not yet passed a measure that would give prosecutors the additional five years to go after unemployment fraudsters. That worries Turner, the Labor Department watchdog. Without the extension, he told Congress in a late May report, people who stole the benefits may escape justice.
Sperling, the White House official, said any future crisis that requires government intervention doesn’t have to be a choice between helping people in need and stopping fraudsters.
“The prevention strategy going forward is that in a crisis, you can focus on fast delivery to people in desperate situations without feeling that you can only get that speed by taking down commonsense anti-fraud guardrails,” he said.
WASHINGTON (AP) — Much of the theft was brazen, even simple.
Fraudsters used the Social Security numbers of dead people and federal prisoners to get unemployment checks. Cheaters collected those benefits in multiple states. And federal loan applicants weren’t cross-checked against a Treasury Department database that would have raised red flags about sketchy borrowers.
Criminals and gangs grabbed the money. But so did a U.S. soldier in Georgia, the pastors of a defunct church in Texas, a former state lawmaker in Missouri and a roofing contractor in Montana.
An Associated Press analysis found that fraudsters potentially stole more than $280 billion in COVID-19 relief funding; another $123 billion was wasted or misspent. Combined, the loss represents 10% of the $4.2 trillion the U.S. government has so far disbursed in COVID relief aid.
That number is certain to grow as investigators dig deeper into thousands of potential schemes.
How could so much be stolen? Investigators and outside experts say the government, in seeking to quickly spend trillions in relief aid, conducted too little oversight during the pandemic’s early stages and instituted too few restrictions on applicants. In short, they say, the grift was just way too easy.
“Here was this sort of endless pot of money that anyone could access,” said Dan Fruchter, chief of the fraud and white-collar crime unit at the U.S. Attorney’s office in the Eastern District of Washington. “Folks kind of fooled themselves into thinking that it was a socially acceptable thing to do, even though it wasn’t legal.”
The U.S. government has charged more than 2,230 defendants with pandemic-related fraud crimes and is conducting thousands of investigations.
Most of the looted money was swiped from three large pandemic-relief initiatives launched during the Trump administration and inherited by President Joe Biden. Those programs were designed to help small businesses and unemployed workers survive the economic upheaval caused by the pandemic.
The pilfering was wide but not always as deep as the eye-catching headlines about cases involving many millions of dollars. But all of the theft, big and small, illustrates an epidemic of scams and swindles at a time America was grappling with overrun hospitals, school closures and shuttered businesses. Since the pandemic began in early 2020, more than 1.13 million people in the U.S. have died from COVID-19, according to the Centers for Disease Control and Prevention.
Michael Horowitz, the U.S. Justice Department inspector general who chairs the federal Pandemic Response Accountability Committee, told Congress the fraud is “clearly in the tens of billions of dollars” and may eventually exceed $100 billion.
Horowitz told the AP he was sticking with that estimate, but won’t be certain about the number until he gets more solid data.
“I’m hesitant to get too far out on how much it is,” he said. “But clearly it’s substantial and the final accounting is still at least a couple of years away.”
Mike Galdo, the U.S. Justice Department’s acting director for COVID-19 Fraud Enforcement, said, “It is an unprecedented amount of fraud.”
Before leaving office, former President Donald Trump approved emergency aid measures totaling $3.2 trillion, according to figures from the Pandemic Response Accountability Committee. Biden’s 2021 American Rescue Plan authorized the spending of another $1.9 trillion. About a fifth of the $5.2 trillion has yet to be paid out, according to the committee’s most recent accounting.
Never has so much federal emergency aid been injected into the U.S. economy so quickly. “The largest rescue package in American history,” U.S. Comptroller General Gene Dodaro told Congress.
The enormous scale of that package has obscured multibillion-dollar mistakes.
An $837 billion IRS program, for example, succeeded 99% of the time in getting economic stimulus checks to the proper taxpayers, according to the tax agency. Nevertheless, that 1% failure rate translated into nearly $8 billion going to “ineligible individuals,” a Treasury Department inspector general told AP.
An IRS spokesman said the agency does not agree with all the figures cited by the watchdog and noted that, even if correct, the loss represented a tiny fraction of the program’s budget.
The health crisis thrust the Small Business Administration, an agency that typically gets little attention, into an unprecedented role. In the seven decades before the pandemic struck, for example, the SBA had doled out $67 billion in disaster loans.
When the pandemic struck, the agency was assigned to manage two massive relief efforts — the COVID-19 Economic Injury Disaster Loan and Paycheck Protection programs, which would swell to more than a trillion dollars. SBA’s workforce had to get money out the door, fast, to help struggling businesses and their employees. COVID-19 pushed SBA’s pace from a walk to an Olympic sprint. Between March 2020 and the end of July 2020, the agency granted 3.2 million COVID-19 economic injury disaster loans totaling $169 billion, according to an SBA inspector general’s report, while at the same time implementing the huge new Paycheck Protection Program.
In the haste, guardrails to protect federal money were dropped. Prospective borrowers were allowed to “self-certify” that their loan applications were true. The CARES Act also barred SBA from looking at tax return transcripts that could have weeded out shady or undeserving applicants, a decision eventually reversed at the end of 2020.
“If you open up the bank window and say, give me your application and just promise me you really are who you say you are, you attract a lot of fraudsters and that’s what happened here,” Horowitz said.
The SBA inspector general’s office has estimated fraud in the COVID-19 economic injury disaster loan program at $86 billion and the Paycheck Protection program at $20 billion. The watchdog is expected in coming weeks to release revised loss figures that are likely to be much higher.
In an interview, SBA Inspector General Hannibal “Mike” Ware declined to say what the new fraud estimate for both programs will be.
“It will be a figure that is fair, that is 1,000% defensible by my office, fully backed by our significant criminal investigative activity that is taking place in this space,” Ware said.
Ware and his staff are overwhelmed with pandemic-related audits and investigations. The office has a backlog of more than 80,000 actionable leads, close to a 100 years’ worth of work.
“Death by a thousand cuts might be death by 80,000 cuts for them,” Horowitz said of Ware’s workload. “It’s just the magnitude of it, the enormity of it.”
A 2022 study from the University of Texas at Austin found almost five times as many suspicious Paycheck Protection loans as the $20 billion SBA’s inspector general has reported so far. The research, led by finance professor John Griffin, found as much as $117 billion in questionable and possibly fraudulent loans, citing indicators such as non-registered businesses and multiple loans to the same address.
Horowitz, the pandemic watchdog chairman, criticized the government’s failure early on to use the “Do Not Pay” Treasury Department database, designed to keep government money from going to debarred contractors, fugitives, felons or people convicted of tax fraud. Those reviews, he said, could have been done quickly.
“It’s a false narrative that has been set out, that there are only two choices,” Horowitz said. “One choice is, get the money out right away. And that the only other choice was to spend weeks and months trying to figure out who was entitled to it.”
In less than a few days, a week at most, Horowitz said, SBA might have discovered thousands of ineligible applicants.
“24 hours? 48 hours? Would that really have upended the program?” Horowitz said. “I don’t think it would have. And it was data sitting there. It didn’t get checked.”
The Biden administration put in place stricter rules to stem pandemic fraud, including use of the “Do Not Pay” database. Biden also recently proposed a $1.6 billion plan to boost law enforcement efforts to go after pandemic relief fraudsters.
“I think the bottom line is regardless of what the number is, it emanates overwhelmingly from three programs that were designed and originated in 2020 with too many large holes that opened the door to criminal fraud,” Gene Sperling, the White House American Rescue Plan coordinator, said in an interview.
“We came into office when the largest amounts of fraud were already out of the barn,” Sperling added.
In a statement, an SBA spokesperson declined to say whether the agency agrees with the figures issued by Ware’s office, saying the federal government has not developed an accepted system for assessing fraud in government programs. Previous analyses have pointed to “potential fraud” or “fraud indicators” in a manner that conveys those numbers as a true fraud estimate when they are not, according to the statement.
Han Nguyen, a spokesman for the SBA, said Monday that “the vast majority of the likely fraud originated in the first nine months of the pandemic programs, under the Trump administration.” For the COVID-19 economic injury disaster loan program, Nguyen said, SBA’s “working estimate” found $28 billion in likely fraud.
The coronavirus pandemic plunged the U.S. economy into a short but devastating recession. Jobless rates soared into double digits and Washington sent hundreds of billions of dollars to states to help the suddenly unemployed.
For crooks, it was like tossing chum into the sea to lure fish. Many of these state unemployment agencies used antiquated computer systems or had too few staff to stop bogus claims from being paid.
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<p>AP correspondent Donna Warder reports on Pandemic Aid Great Grift; the plundering of billions of dollars during the worst pandemic in a century.</p>
“Yes, the states were overwhelmed in terms of demand,” said Brent Parton, acting assistant secretary of the U.S. Labor Department’s Employment and Training Administration. “We had not seen a spike like this ever in a global event like a pandemic. The systems were underfunded. They were not resilient. And I would say, more importantly, were vulnerable to sophisticated attacks by fraudsters.”
Fraud in pandemic unemployment assistance programs stands at $76 billion, according to congressional testimony from Labor Department Inspector General Larry Turner. That’s a conservative estimate. Another $115 billion mistakenly went to people who should not have received the benefits, according to his testimony.
Turner declined AP’s request for an interview.
Turner’s task in identifying all of the pandemic unemployment insurance fraud has been complicated by a lack of cooperation from the federal Bureau of Prisons, according to a September “alert memo” issued by his office. Scam artists used Social Security numbers of federal prisoners to steal millions of dollars in benefits.
His office still doesn’t know exactly how much was swiped that way. The prison bureau had declined to provide current data about federal prisoners. The AP reached out to the bureau several times for comment, starting June 2. Bureau spokesperson Emery Nelson said on Monday the agency had provided in February and March “all the necessary data” to the Pandemic Response Accountability Committee. Turner is a member of the committee.
Ohio State Auditor Keith Faber saw trouble coming when safeguards to ensure the unemployment aid only went to people who legitimately qualified were lowered, making conditions ripe for fraud and waste. The state’s unemployment agency “took controls down because on the one hand, they literally were drinking from a firehose,” Faber said. “They had a year’s worth of claims in a couple of weeks. The second part of the problem was the (federal government) directed them to get the money out the door as quickly as possible and worry less about security. They took that to heart. I think that was a mistake.”
Ohio’s Department of Job and Family Services reported in February $1 billion in fraudulent pandemic unemployment claims and another $4.8 billion in overpayments.
The ubiquitous masks that became a symbol of the COVID-19 pandemic are seen on fewer and fewer faces. Hospitalizations for the virus have steadily declined, according to CDC data, and Biden in April ended the national emergency to respond to the pandemic.
But on politically divided Capitol Hill, lawmakers have not put the pandemic behind them and are engaged in a fierce debate over the success of the relief spending and who’s to blame for the theft.
Too much government money, Republicans argue, breeds fraud, waste and inflation. Democrats have countered that all the financial muscle from Washington saved lives, businesses and jobs.
The GOP-led House Oversight and Accountability Committee is investigating pandemic relief spending. “We must identify where this money went, how much ended up in the hands of fraudsters or ineligible participants, and what should be done to ensure it never happens again,” the panel’s chairman, Rep. James Comer of Kentucky, said in a statement Tuesday.
Republicans and Democrats did, however, find common ground last year on bills to give the federal government more time to catch fraudsters. Biden in August signed legislation to increase the statute of limitations from five to 10 years on crimes involving the two major programs managed by the SBA.
The extra time will help federal prosecutors untangle pandemic fraud cases, which often involve identity theft and crooks overseas. But there’s no guarantee they’ll catch everyone who jumped at the chance for an easy payday. They’re busy, too, with crimes unrelated to pandemic relief funds.
“Do we have enough cases and leads that we could be doing them in 2030? We absolutely could,” said Fruchter, the federal prosecutor in the Eastern District of Washington. “But my experience tells me that likely there will be other priorities that will come up and will need to be addressed. And unfortunately, in our office, we don’t have a dedicated pandemic fraud unit.”
Congress has not yet passed a measure that would give prosecutors the additional five years to go after unemployment fraudsters. That worries Turner, the Labor Department watchdog. Without the extension, he told Congress in a late May report, people who stole the benefits may escape justice.
Sperling, the White House official, said any future crisis that requires government intervention doesn’t have to be a choice between helping people in need and stopping fraudsters.
“The prevention strategy going forward is that in a crisis, you can focus on fast delivery to people in desperate situations without feeling that you can only get that speed by taking down commonsense anti-fraud guardrails,” he said.
WASHINGTON (AP) — CIA Director William Burns went to Beijing in May to meet with Chinese counterparts, a U.S. official said Friday, in what is the highest level visit by a Biden administration official since a suspected Chinese spy balloon was shot down by American forces.
Burns’ visit, first reported by The Financial Times, comes as Washington tries to cool tensions with Beijing over the balloon and other recent conflicts between the world’s two largest economies and geopolitical rivals.
U.S. officials have long warned that China rejects their efforts at outreach. That raises the possibility of miscommunication spiraling into conflict, they say.
“Last month, Director Burns traveled to Beijing where he met with Chinese counterparts and emphasized the importance of maintaining open lines of communication in intelligence channels,” said a U.S. official who spoke on condition of anonymity to discuss Burns’ schedule, which is classified.
Burns only met with intelligence officials and not any of Beijing’s political or foreign policy leadership, according to a second person familiar with the visit who also spoke on condition of anonymity to discuss the trip.
President Joe Biden has often sent Burns on sensitive trips to meet U.S. adversaries. Burns went to Moscow in late 2021 to confront Russian President Vladimir Putin about indications that Russia was gearing up to launch a new invasion of Ukraine.
The U.S. is still trying to reschedule Secretary of State Antony Blinken’s trip to China after it was canceled as the Chinese balloon was flying over American territory.
Defense Secretary Lloyd Austin also spoke “briefly” on Friday with Li Shangfu, China’s minister of national defense, at the opening dinner of a security forum in Singapore. China had earlier rejected Austin’s request for a meeting on the sidelines of the forum.
Also on Friday, a top Treasury official, Undersecretary for International Affairs Jay Shambaugh, met with Xie Feng, China’s ambassador in Washington. According to the Treasury Department, Shambaugh spoke to Xie about the importance of “closely communicating on global macroeconomic and financial issues.”
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AP White House Correspondent Zeke Miller and Associated Press reporter Fatima Hussein contributed to this report.
WASHINGTON (AP) — President Joe Biden celebrated a “crisis averted” in his first speech to the nation from the Oval Office Friday evening, ready to sign a budget agreement that eliminates the potential for an unprecedented government default that he said would have been catastrophic for the U.S. and global economies.
The bipartisan measure was approved by the Senate late Thursday night after passing the House in yet another late session the night before. Biden is set to sign it at the White House on Saturday with just two days to spare until the Treasury Department has warned the U.S. wouldn’t be able to meet its obligations.
“Passing this budget agreement was critical. The stakes could not have been higher,” Biden said. “Nothing would have been more catastrophic,” he said, than defaulting on the country’s debt.
The agreement was hashed out by Biden and House Speaker Kevin McCarthy, giving Republicans some of their demanded federal spending cuts but holding the line on major Democratic priorities. It raises the debt limit until 2025 — after the 2024 presidential election — and gives legislators budget targets for the next two years, in hopes of assuring fiscal stability as the political season heats up.
“No one got everything they wanted but the American people got what they needed,” Biden said, highlighting the “compromise and consensus” in the deal. “We averted an economic crisis and an economic collapse.”
Biden used the opportunity to itemize the achievements of his first term as he runs for reelection, including support for high-tech manufacturing, infrastructure investments and financial incentives for fighting climate change — while at the same time highlighting how he forestalled steeper spending cuts pushed by the GOP that he said would have rolled back his agenda.
“We’re cutting spending and bringing deficits down at the same time,” Biden said. “We’re protecting important priorities from Social Security to Medicare to Medicaid to veterans to our transformational investments in infrastructure and clean energy.”
Even as he pledged to continue working with Republicans, Biden also drew contrasts with the opposing party, particularly when it comes to raising taxes on the wealthy, something the Democratic president has sought.
It’s something he suggested may need to wait until a second term.
“I’m going to be coming back,” he said. “With your help, I’m going to win.”
Biden’s remarks were the most detailed comments from the Democratic president on the compromise he and his staff negotiated. He largely remained quiet publicly during the high-stakes talks, a decision that frustrated some members of his party but was intended to give space for both sides to reach a deal and for lawmakers to vote it to his desk.
White House press secretary Karine Jean-Pierre said Friday that Biden was using the occasion to deliver his first address to the nation from behind the Resolute Desk in the Oval Office because “he just wanted to make sure that the American people understood how important it was to get this done, how important it was to do this in a bipartisan way.”
Biden praised McCarthy and his negotiators for operating in good faith, and all congressional leaders for ensuring swift passage of the legislation. “They acted responsibly, and put the good of the country ahead of politics,” he said.
And he made a renewed pitch for his governing style, which he described as less shouting and lower temperatures after four years of President Donald Trump.
“I know bipartisanship is hard,” he said. “And unity is hard. But we can never stop trying.”
Overall, the 99-page bill restricts spending for the next two years and changes some policies, including imposing new work requirements for older Americans receiving food aid and greenlighting an Appalachian natural gas pipeline that many Democrats oppose. Some environmental rules were modified to help streamline approvals for infrastructure and energy projects — a move long sought by moderates in Congress.
The Congressional Budget Office estimates it could actually expand total eligibility for federal food assistance, with the elimination of work requirements for veterans, homeless people and young people leaving foster care.
The legislation also bolsters funds for defense and veterans, cuts back some new money for Internal Revenue Service and rejects Biden’s call to roll back Trump-era tax breaks on corporations and the wealthy to help cover the nation’s deficits. But the White House said the IRS’ plans to step up enforcement of tax laws for high-income earners and corporations would continue.
The agreement also imposes an automatic overall 1% cut to spending programs if Congress fails approve its annual spending bills — a measure designed to pressure lawmakers of both parties to reach consensus before the end of the fiscal year in September.
In both chambers, more Democrats backed the legislation than Republicans, but both parties were critical to its passage. In the Senate the tally was 63-36 including 46 Democrats and independents and 17 Republicans in favor, 31 Republicans along with four Democrats and one independent who caucuses with the Democrats opposed.
The vote in the House was 314-117.
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AP Congressional Correspondent Lisa Mascaro contributed to this report.
WASHINGTON, DC – MAY 26: U.S. Speaker of the House Rep. Kevin McCarthy (R-CA) speaks to members of the media after arriving at the U.S. Capitol on May 26, 2023 in Washington, DC. Speaker McCarthy discussed the latest development of the debt ceiling negotiations with the White House. (Photo by Win McNamee/Getty Images)
Win Mcnamee | Getty Images News | Getty Images
Analysts are broadly optimistic that the deal to raise the U.S. debt ceiling will pass a divided Congress.
Their comments come after U.S. President Joe Biden and House Speaker Kevin McCarthy reached an agreement over the weekend to raise the debt ceiling to avoid a first-ever government default.
In the midst of this turmoil, investors may be able to find a “market opportunity,” according to Stephen Pavlick, partner and head of policy at Renaissance Macro Research.
Negotiators have agreed to some Republican demands, such as stricter work requirements for low-income Americans.
The compromise also sees the debt ceiling suspended until Jan. 1, 2025, pushing it past the 2024 presidential election. Spending will also be largely held flat for 2024, except for defense and veterans, while 2025 will see a 1% increase in spending.
Even though the in-principle deal has been reached between the two sides, it will still need congressional approval by both the House of Representatives and the Senate.
“I think it is virtually certain that it will be passed,” said Jeremy Siegal, professor of finance at Wharton School at the University of Pennsylvania. He said he had “very little doubt that they weren’t going to reach an agreement… this is going to be a done deal and voted positively on Wednesday.”
He called the suspension of the debt limit till 2025 a “good decision,” and said he had expected it would be only delayed for a year.
“I think that they decided that they wanted to go after the next election to raise that debt limit, and not have another debate that could distract the American public from the main issues that separate the country.”
Pavlick predicts that McCarthy has the support of a “majority of Republicans” in the House, “but that majority can vary significantly.”
Speaking to “Squawk Box Asia” on Monday, Pavlick noted that about 75 hardline Republicans will probably oppose the deal, pointing at the ultraconservative House Freedom Caucus, as well as hardline Democrats.
As such, with Republicans only holding a slim majority of 222-213 in the house, Pavlick said he thinks McCarthy will have to rely on moderate Democrats to get the bill to pass.
“So it’s really going to be on President Biden to deliver the 75 more moderate votes to make sure it has enough to pass the House. I think if it does that, then the Senate passage is probably assured.”
To Pavlick, the deal was a “Republican victory.”
“The fact that there was a negotiation is, in itself a win for Republicans,” he said pointing out that Biden said that he would not negotiate about the debt limit earlier this year, but was “forced into this.”
He said the Democratic Party could have “done away with this when they had control of Congress during the end of last year, two years ago. And they chose not to.”
David Roche, president and global strategist for Independent Strategy saw this as a “Democratic win.”
He expects the deal will pass the House with Democratic support, although, like Pavlick, he said right-wing Republicans will likely vote against it.
As the bill allows borrowing through 2024, the country will likely be able to put this issue behind until it comes up again in 2025, Roche said.
Pavlick said the U.S. Treasury is going to have to “refill their coffers”, and if investors are looking at a scenario where the Federal Reserve is going to cut rates, “this might actually provide [a] market opportunity,” he said.
Pavlick suggests investors could look at buying Treasury bonds to “lock in some of those higher yields.”
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Separately, Siegal pointed out that U.S. futures pointed to slight gains, and said it’s because a likely deal “does clear a little bit of uncertainty.”
However, the main worry ahead for investors will be the “tremendous tightening” that the Federal Reserve has done, Siegal warned.
“The bank problems, that will not lead to a crisis of bank deposits but tightening of lending standards, particularly for small- and mid-sized companies. And I am concerned about the second half of the year and possibly what we might see is now is a focus on those problems.”
WASHINGTON (AP) — President Joe Biden and House Speaker Kevin McCarthy met Monday after a weekend of on again, off again negotiations over raising the nation’s debt ceiling and mere days before the government could reach a “hard deadline” and run out of cash to pay its bills.
The two sides are working to reach a budget compromise before June 1, when Treasury Secretary Janet Yellen has said the country could default.
Speaking to reporters after Monday’s meeting, McCarthy said the two sides had not yet reached an agreement but the meeting was “productive.” In his own statement following the Oval Office sit-down, Biden echoed those sentiments.
“We reiterated once again that default is off the table and the only way to move forward is in good faith toward a bipartisan agreement,” Biden said. Their handpicked negotiators will continue to meet.
McCarthy and Republicans are insisting on spending cuts in exchange for raising the debt limit. Biden has come to the negotiating table after balking for months but says the GOP lawmakers will have to back off their “extreme positions.”
On Sunday evening, negotiators met again and appeared to be narrowing on a 2024 budget year cap that could resolve the standoff. After speaking with Biden by phone as the president traveled home from a trip to Asia, McCarthy sounded somewhat optimistic. But he warned that “there’s no agreement on anything.”
A look at the negotiations and why they are happening:
WHAT IS THE DEBT CEILING FIGHT ALL ABOUT?
Once a routine act by Congress, the vote to raise the debt ceiling allows the Treasury Department to continue borrowing money to pay the nation’s already incurred bills.
The vote in more recent times has been used as a political leverage point, a must-pass bill that can be loaded up with other priorities.
House Republicans, newly empowered in the majority this Congress, are refusing to raise the debt limit unless Biden and the Democrats impose federal spending cuts and restrictions on future spending.
The Republicans say the nation’s debt, now at $31 trillion, is unsustainable. They also want to attach other priorities, including stiffer work requirements on recipients of government cash aid, food stamps and the Medicaid health care program. Many Democrats oppose those requirements.
Biden had insisted on approving the debt ceiling with no strings attached, saying the U.S. always pays its bills and defaulting on debt is non-negotiable.
But facing a deadline as soon as June 1, when Treasury says it will run out of money, Biden launched negotiations with Republicans.
IS IT CLOSE TO BEING RESOLVED?
There are positive signs, though there have been rocky moments in the talks.
Start-stop negotiations were back on track late Sunday, and all sides appear to be racing toward a deal. Negotiators left the Capitol after 8 p.m. Sunday and said they would keep working.
McCarthy said after his call with Biden that “I think we can solve some of these problems if he understands what we’re looking at.”
The speaker added: “We have to spend less money than we spent last year.”
Biden, for his part, said at a press conference in Japan before departing: “I think that we can reach an agreement.”
But reaching an agreement is only part of the challenge. Any deal will also have to pass the House and Senate with significant bipartisan support. Many expect that buy-in from the White House and GOP leadership will be enough to muscle it over the finish line.
More debt ceiling coverage
WHAT ARE THE HANGUPS?
Republicans want to roll back spending to 2022 levels and cap future spending for the next decade.
Democrats aren’t willing to go that far to cut federal spending. The White House has instead proposed holding spending flat at the current 2023 levels.
There are also policy priorities under consideration, including steps that could help speed the construction and development of energy projects that both Republicans and some Democrats want.
Democrats have strenuously objected to a Republican push to impose stiffer work requirements on people who receive government aid through food stamps, Medicaid health care and the cash assistance programs.
Biden, though, has kept the door open to some discussion over work requirements.
WHAT HAPPENS IF THEY DON’T RAISE THE DEBT CEILING?
A government default would be unprecedented and devastating to the nation’s economy. Yellen and economic experts have said it could be “catastrophic.”
There isn’t really a blueprint for what would happen. But it would have far-reaching effects.
Yellen has said it would destroy jobs and businesses and leave millions of families who rely on federal government payments to “likely go unpaid,” including Social Security beneficiaries, veterans and military families.
More than 8 million people could lose their jobs, government officials estimate. The economy could nosedive into a recession.
“A default could cause widespread suffering as Americans lose the income that they need to get by,” she said. Disruptions to federal government operations would impact “air traffic control and law enforcement, border security and national defense, and food safety.”
IS THERE A BACKUP PLAN IF TALKS FAIL?
Some Democrats have proposed that they could raise the debt ceiling on their own, without help from Republicans.
Progressives have urged Biden to invoke a clause in the Constitution’s 14th Amendment that says the validity of the public debt in the United States “shall not be questioned.” Default, the argument goes, is therefore unconstitutional.
Supporters of unilateral action say Biden already has the authority to effectively nullify the debt limit if Congress won’t raise it, so that the validity of the country’s debt isn’t questioned. The president said Sunday that it’s a “question that I think is unresolved,” as to whether he could act alone, adding he hopes to try to get the judiciary to weigh in on the notion for the future.
In Congress, meanwhile, House Democratic leader Hakeem Jeffries has launched a process that would “discharge” the issue to the House floor and force a vote on raising the debt limit.
It’s a cumbersome legislative procedure, but Jeffries urged House Democrats to sign on to the measure in hopes of gathering the majority needed to trigger a vote.
The challenge for Democrats is that they have only 213 members on their side — five short of the 218 needed for a majority.
Getting five Republicans to cross over and join the effort won’t be easy. Signing onto a “discharge” petition from the minority is seen as a major affront to party leadership, particularly on an issue as important as the debt ceiling. Few Republicans, if any, may be willing to suffer the consequences.
WASHINGTON (AP) — It’s April 22, 2027, and 72 hours into a first-strike Chinese attack on Taiwan and the U.S. military response. Already, the toll on all sides is staggering.
It was a war game, but one with a serious purpose and high-profile players: members of the House select committee on China. The conflict unfolded on Risk board game-style tabletop maps and markers under a giant gold chandelier in the House Ways and Means Committee room.
The exercise explored American diplomatic, economic and military options if the United States and China were to reach the brink of war over Taiwan, a self-ruled island that Beijing claims as its own. The exercise played out one night last week and was observed by The Associated Press. It was part of the committee’s in-depth review of U.S. policies toward China as lawmakers, especially in the Republican-led House, focus on tensions with President Xi Jinping’s government.
In the war game, Beijing’s missiles and rockets cascade down on Taiwan and on U.S. forces as far away as Japan and Guam. Initial casualties include hundreds, possibly thousands, of U.S. troops. Taiwan’s and China’s losses are even higher.
Discouragingly for Washington, alarmed and alienated allies in the war game leave Americans to fight almost entirely alone in support of Taiwan.
And forget about a U.S. hotline call to Xi or one of his top generals to calm things down — not happening, at least not under this role-playing scenario.
The war game wasn’t about planning a war, lawmakers said. It was about figuring out how to strengthen U.S. deterrence, to keep a war involving the U.S., China and Taiwan from ever starting.
Ideally, the members of Congress would walk out of the war game with two convictions, the committee chairman, Rep. Mike Gallagher, R-Wis., told colleagues at the outset: “One is a sense of urgency.”
The second: “A sense … that there are meaningful things we can do in this Congress through legislative action to improve the prospect of peace and stability across the Taiwan Strait,” Gallagher said.
In reality, Rep. Raja Krishnamoorthi, the committee’s top Democrat, told lawmakers, “we cannot have a situation where we are faced with what we are going to be facing tonight.”
The “only way to do that is to deter aggression and to prevent a conflict from arising,” said Krishnamoorthi, D-Ill.
The U.S. doesn’t formally recognize the Taiwan government but is Taipei’s most vital provider of weapons and other security assistance. Xi has directed his military to be ready to reclaim Taiwan in 2027, by force if necessary.
Asked about lawmakers’ war game, Liu Pengyu, spokesperson for the Chinese Embassy, said China wants peaceful reunification with Taiwan but reserves “the option of taking all necessary measures.”
“The U.S. side’s so-called ‘war game’ is meant to support and embolden ‘Taiwan independence’ separatists and further fuel tensions in the Taiwan Strait, which we firmly oppose,” Liu said.
In the war game, lawmakers played the blue team, in the role of National Security Council advisers. Their directive from their (imaginary) president: Deter a Chinese takeover of Taiwan if possible, defeat it if not.
Experts for the Center for a New American Security think tank, whose research includes war-gaming possible conflicts using realistic scenarios and unclassified information, played the red team.
In the exercise, it all kicks off with opposition lawmakers in Taiwan talking about independence.
With the think tank’s defense program director Stacie Pettyjohn narrating, angry Chinese officials respond by heaping unacceptable demands on Taiwan. Meanwhile, China’s military moves invasion-capable forces into position. Steps such as bringing in blood supplies for treating troops suggest this is no ordinary military exercise.
Ultimately, China imposes a de facto blockade on Taiwan, intolerable for an island that produces more than 60 percent of the world’s semiconductors, as well as other high-tech gear.
While the U.S. military readies for a possible fight, U.S. presidential advisers — House committee members who are surrounding and studying the wooden tables with the map and troop markers spread out — assemble.
They lob questions at a retired general, Mike Holmes, playing the role of the Joint Chiefs of Staff chairman, before deciding courses of action.
What are the economic consequences if the U.S. goes maximalist on financial punishments, one lawmaker asks.
“Catastrophic” is the response, for both the United States and China. China will hit back at the U.S. economy as well.
“Who’s going to tell the president that he has to say to the American people, ‘Say goodbye to your iPhones?”’ Rep. Ashley Hinson, R-Iowa, asks.
Do American leaders have any way to communicate with their Chinese counterparts, lawmakers ask. No, China’s leaders have a history of shunning U.S. hotline calls, and that’s a problem, the exercise leaders tell them.
In the war game, U.S. officials are left trying to pass messages to their Chinese counterparts through China-based American business leaders, whose Dell, Apple, HP and other product operations China all subsequently seizes as one of its first moves in the attack.
Are potential military targets in China “near major metropolitan areas that are going to include millions and millions of people?” asks Rep. Mikie Sherrill, D-N.J.
Has Taiwan done all it can to try to calm the situation? All it can and will, lawmakers are told.
“It’s not clear to me we’ve exhausted all our diplomatic options,” Gallagher notes.
Then, on paper, U.S. and Chinese satellites, space weapons, drones, submarines, ground forces, warships, fighter squadrons, cyber warriors, communications experts, bankers, Treasury officials and diplomats all go to war.
At the end, before the lessons-learned part, the war-game operators reveal the toll of the first wave of fighting. Lawmakers study the tabletop map, wincing as they hear of particularly hard setbacks among U.S. successes.
U.S. stockpiles of very long-range missiles? Gone.
Global financial markets? Shaking.
U.S. allies? As it turns out, China’s diplomats did their advance work to keep American allies on the sidelines. And anyway, it seems the all-out U.S. economic measures against China’s economy have put allies off. They’re sitting this one out.
In the “hot-wash” debrief at the end, lawmakers point to a few key military weaknesses that the war game highlighted.
“Running out of long-missiles is bad,” said Rep. Dusty Johnson, R-S.D.
But the most glaring shortfalls appeared in diplomacy and in nonmilitary planning.
Becca Wasser, a think tank senior fellow who role-played a convincingly menacing Chinese official, pointed to lawmakers’ recurring frustration in the war game at the lack of direct, immediate leader-to-leader crisis communication. It’s something Beijing and Washington in the real world have never managed to consistently make happen.
“In peacetime, we should have those lines of communication,” Wasser said.
The exercise also underscored the risks of neglecting to put together a package of well-thought out economic penalties, and of failing to build consensus among allies, lawmakers said.
“As we get closer to 2027, they’re going to be trying to isolate us,” Rep. Rob Wittman, R-Va., said of Xi’s government.
Holmes, in the role of Joint Chiefs chairman, reassured lawmakers, after the first three days of fighting.
WASHINGTON (AP) — The Biden administration will propose strict new automobile pollution limits this week that would require at least 54% of new vehicles sold in the U.S. to be electric by 2030 and as many as two of every three by 2032, according to industry and environmental officials briefed on the plan.
The proposed regulation, to be released Wednesday by the Environmental Protection Agency, would set greenhouse gas emissions limits for the 2027 through 2032 model years for passenger vehicles that would be even stricter than goals the auto industry agreed to in 2021.
The EPA will offer a range of options that the agency can select after a public comment period, the officials said. They asked not to be identified because the proposal hasn’t been made public. The proposed regulation isn’t expected to become final until next year.
Environmental groups are applauding the ambitious numbers, which were first reported over the weekend by The New York Times. But the plan is likely to get strong pushback from the auto industry, which pledged in August 2021 to make EVs half of U.S. new car sales by 2030 as it moves toward a history-making transition away from internal combustion engines.
Even the low end of the EPA’s 2030 range is 4 percentage points higher than the 2021 goal, which came after strong pressure from President Joe Biden. An executive order signed by Biden set a target for half of all new vehicles sold in 2030 to be zero-emissions vehicles, including battery electric, plug-in hybrid electric or fuel cell electric vehicles.
Biden also wants automakers to raise gas mileage and cut tailpipe pollution between now and model year 2026. That would mark a significant step toward meeting his pledge to cut America’s planet-warming greenhouse gas emissions in half by 2030 as he pushes a once-almost-unthinkable shift from gasoline-powered engines to battery-powered vehicles.
With electric vehicles accounting for just 7.2% of U.S. vehicle sales in the first quarter of this year, the industry has a long way to go to even approach the administration’s targets. However, the percentage of EV sales is growing. Last year it was 5.8% of new vehicles sales.
The EPA declined to offer details ahead of Wednesday’s announcement, but said in a statement that as directed by Biden’s order, it is “developing new standards that will … accelerate the transition to a zero-emissions transportation future, protecting people and the planet.″
The EPA tailpipe pollution limits don’t actually require a specific number of electric vehicles to be sold every year, but instead mandate limits on greenhouse gas emissions. That amounts to roughly the same thing, according to agency calculations of the number of EVs that likely would be needed to comply with the stricter pollution limits.
The auto industry likely will need to sell a lot more EVs to meet the requirements. It’s already pushed up the mileage of gasoline vehicles with more efficient engines and transmissions, reducing weight and other measures. Many in the industry say they’d rather spend investment dollars developing new EVs that are likely to dominate the industry in coming years.
Suggesting a brake on the optimistic idea of vast emission improvements simply through rule making, however, the Alliance for Automotive Innovation, a trade association that includes Ford, General Motors and other automakers, said, “Regulatory mandates alone will not address the conditions that will determine the ultimate success of the EV transition.”
The EPA proposal “requires a massive, 100-year change to the U.S. industrial base and the way Americans drive,” the group said.
Supportive policies such as tax credits for EV purchases and funding of a nationwide network of charging stations are needed, the alliance said in a statement before the EPA rule was announced. EVs have to become more affordable, parts and domestic critical mineral supply chains have to be set up and utility generating capacity must be addressed, the statement said.
Transportation is the single largest source of carbon emissions in the U.S., but it is followed closely by electricity generation.
Environmental groups say stricter tailpipe pollution standards are needed, and provisions of the sweeping Inflation Reduction Act passed last year will help reach the tougher requirements. “Tailpipe emissions pollute the air we breathe and worsen severe weather,” Fred Krupp, president of the Environmental Defense Fund, said in a statement.
The Inflation Reduction Act, a climate and health care law passed with only Democratic votes, has tax credits for electric vehicle manufacturing and for purchases of new and used EVs.
At present, many new EVs manufactured in North America are eligible for a $7,500 tax credit, while used EVs can get up to $4,000.
However, there are price and purchaser income limits that make some vehicles ineligible. And starting April 18, new requirements by the Treasury Department will result in fewer new electric vehicles qualifying for a full $7,500 federal tax credit.
The rules require that certain percentages of battery parts and minerals come from North America or countries with which the U.S. has free trade agreements. Industry analysts say the requirements, announced March 31, could cut the $7,500 credit in half on many vehicles. A smaller credit may not be enough to attract new buyers for EVs that now cost an average of $58,600 according to Kelley Blue Book.
The price is down from $63,500 a year ago as more lower-priced EV models hit the market. Still, EVs are more expensive than the average vehicle sold in the U.S., which costs just under $46,000.
FRIDLEY, Minn. (AP) — President Joe Biden ventured to suburban Minneapolis on Monday to talk about factory jobs and contrast his agenda with “the last guy who had this job.” The “last guy,” as Biden calls Donald Trump, was simultaneously touching down in New York to become the first former president to be arrested.
The Biden White House, which has shied away from involvement in the legal spectacle surrounding Trump, hoped to turn the split-screen moment into a chance to showcase the president’s accomplishments and relatively drama-free administration. It represented a rehash of the choice that voters made in 2020 — and might have to make again in 2024 — as both men intend to seek the White House.
Biden offered himself as a veteran policymaker while Trump, ever the showman, aimed to use Tuesday’s arraignment on criminal charges to generate campaign donations and fire up Republican voters.
Biden sought to highlight job growth and investments nationwide while pushing clean energy and manufacturing in the U.S. during his visit to engine maker Cummins Inc. The company announced in conjunction with his visit that it’s investing more than $1 billion in its U.S. engine manufacturing network in Indiana, North Carolina and New York to update facilities so they can produce low- to zero-carbon engines.
Dogged by high inflation, Biden said his policies and spending will position the U.S. for greater prosperity in the future that boosts the middle class.
“The plan is to invest in America, in a literal sense,” Biden said. “Not overseas. In America. Invest in ourselves — and it’s working.”
Trump left his Florida home for New York City, posting on Truth Social that the indictment — tied to payments made during his 2016 campaign — was part of a “Witch Hunt” against him. He later sent out a message that tried to fundraise off his predicament.
Biden’s team saw Monday’s trip to the Cummins facility as a way to sharpen the contrast with Trump. If Trump gobbles up attention, administration officials say, Biden wants his message to be squarely focused on the American middle class.
“Stick to your message that you want to be talking about with discipline,” said Andrew Bates, deputy White House press secretary. “Whatever else is happening, you just have to keep talking about what it is that you want to talk about.”
The president regularly highlights the CHIPS Act, the $1.9 trillion COVID-19 relief bill, the $1 trillion infrastructure legislation and a roughly $375 billion climate bill — major bills that his administration steered into law before Democrats lost control of the House in last year’s elections to Republicans.
Other members of Biden’s administration are traveling to more than 20 states this week to buttress his message. Treasury Secretary Janet Yellen, for example, went to Connecticut on Monday for a fireside chat at Yale University on the economic agenda. While the president blasted Trump’s 2017 tax cuts for raising the deficit, Yellen panned them for failing to boost growth.
The treasury secretary said Trump’s signature achievement has “not been very successful, even at promoting investment spending and growth.” What the cuts did, instead, is tilt the tax code in favor of those with extreme degrees of wealth, according to Yellen.
“If you take something like the Tax Cuts and Jobs Act of 2017,” she said, “maybe that had some marginal impact on boosting private investment — not obvious that it did. But it certainly raised the incomes of the wealthy individuals who received those huge tax cuts, and so it made the tax burden a lot less fair.”
First lady Jill Biden was in Colorado to promote Biden’s efforts to promote job training at community colleges and had other stops this week planned in Maine and Vermont. Her plans to visit Michigan later Monday were postponed because of an aircraft issue.
As the president returned to Washington, a large TV on Air Force One ran Trump headlines as Biden stood facing the screen in a conference room with his staff.
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Boak reported from Washington. AP writers Fatima Hussein and Hannah Fingerhut in Washington contributed to this report.
Scores of luxury homes are coming to major cities across the United States.
Analysts at Yardi Matrix projected that more than 400,000 units were completed in 2022, and they expect another strong showing in 2023. Experts believe much of this new stock is built with upper-tier customers in mind.
“You often see new housing branded as ‘luxury,’ in part because it’s new,” said Ethan Handelman, deputy assistant secretary at the U.S. Department of Housing and Urban Development. “When you get to affordable housing, we need to be providing some additional capital and/or rental assistance to help make that housing affordable to the people who need it most.”
Market-rate rents for new apartments can easily be multiple thousands of dollars monthly. For many high-wage earners in cities, this is achievable. But for moderate-income Americans, the sky-high prices appear disconnected from reality.
“The marketplace is structured not to house certain people. We need to admit that,” said Dominic Moulden, a resource organizer at Organizing Neighborhood Equity DC.
Builders say the high cost of housing in the U.S. is related to the large amount of regulation in the housing sector. For example, they say, many U.S. cities are short on land due to restrictive zoning codes.
“Currently, 40% of the cost of multifamily development is in regulation,” said Sharon Wilson Géno, president at the National Multifamily Housing Council. “We have to do something about that if we’re going to build more housing.”
In 2022, the Biden administration announced a housing action plan that aims to shore up housing supply within five years. But these efforts may not have a material impact on prices for some time.
“Unfortunately, I don’t think we’re going to see rents going down a whole lot over the next one to two years,” said Al Otero, a portfolio manager at Armada ETF Advisors. “Developers cannot make a profit at those more affordable price points. Therefore, we see the development and the new construction at the much higher, higher end of the spectrum.”
Watch the video above to see why the United States is awash in new luxury apartments.
WASHINGTON (AP) — Fewer new electric vehicles will qualify for a full $7,500 federal tax credit later this year, and many will get only half that, under rules proposed Friday by the U.S. Treasury Department.
The rules, required under last year’s Inflation Reduction Act, are likely to slow consumer acceptance of electric vehicles and could delay President Joe Biden’s ambitious goal that half of new passenger vehicles sold in the U.S. run on electricity by 2030.
The new rules take effect April 18 and are aimed at reducing U.S. dependence on China and other countries for battery supply chains for electric vehicles.
Electric vehicles now cost an average of more than $58,000, according to Kelley Blue Book, a price that’s beyond the reach of many U.S. households. The tax credits are designed to bring prices down and attract more buyers. But $3,750, half the full credit, may not be enough to entice them away from less-costly gasoline-powered vehicles.
Biden administration officials concede that fewer electric vehicles will be eligible for tax credits in the short term because of the rules, which set standards for where EV battery parts and minerals come from. But they say that, over time, more EVs and parts will be manufactured in the U.S., creating a domestic supply chain and more jobs. The credits and other measures also will end U.S. dependence on China for parts and minerals, officials contend.
The new rules will help consumers save money on EVs “and hundreds of dollars per year on gas, while creating American manufacturing jobs and strengthening our energy and national security,” Treasury Secretary Janet Yellen said Friday.
But Sen. Joe Manchin, the West Virginia Democrat who negotiated terms in the new law that require battery sourcing in North America, said the guidance released by the Treasury Department “completely ignores the intent of the Inflation Reduction Act.″
Manchin called it “horrific” that the Biden administration “continues to ignore the purpose of the law, which is to bring manufacturing back to America and ensure we have reliable and secure supply chains.″
Referring to the proposal’s 60-day comment period, Manchin said, “My comment is simple: Stop this now. Just follow the law.”
Drivers looking to buy an EV must move quickly to get the full $7,500 tax credit. The Internal Revenue Service lists more than three dozen electric or plug-in hybrid passenger vehicles made in North America that now are eligible. But some won’t qualify or will get only half once the new Treasury Department rules take effect in less than three weeks.
A Treasury official wouldn’t give an estimate of how many EVs would be eligible under the new rules. The department plans to publish a list on April 18, the official said.
Automakers have to certify that their vehicles meet requirements for full or partial tax credits.
John Bozzella, CEO of the Alliance for Automotive Innovation, an industry trade group, said only a few of the 91 EV models now for sale in the U.S. likely will get the full credit, although some will qualify for half.
“We now know the EV tax credit playing field for the next year or so. March 2023 was as good as it gets,″ Bozzella said.
The big issue is new rules limiting the percentage of battery parts and minerals that come from countries that don’t have free trade or mineral agreements with the United States.
This year, at least 40% of the value of battery minerals must be mined, processed or recycled in the U.S. or countries with which it has trade deals. That rises 10% every year until it hits 80% after 2026.
Also, at least 50% of the value of battery parts must be manufactured or assembled in North America this year. That requirement rises to 60% next year and in 2025 and jumps 10% each year until it hits 100% after 2028.
Some automakers can meet the battery parts sourcing requirements, but few will be able to comply with the mineral provisions, said Guidehouse Research e-Mobility analyst Sam Abuelsamid. Much of the lithium used in EV batteries now comes from China.
“The minerals requirement is going to be the really challenging one,” Abuelsamid said. “Setting up refining for lithium in other locations is probably going to take the longest.”
General Motors, though, said Friday at least three of its EVs will qualify for the full credit. The Cadillac Lyriq, which is now on sale, will be eligible as of April 18, while the Chevrolet Blazer and Equinox will qualify when they reach showrooms later in the year. GM is working to get the full $7,500 for other EVs and intends to keep it as the battery content requirements get tougher, a spokesman said. The company said it has worked on a domestic supply chain and is building batteries in the U.S.
The Inflation Reduction Act also places price limits on new electric vehicles: $55,000 for cars and $80,000 for pickups, vans and SUVs. There also are income limits aimed to stop wealthier people from getting credits. Buyers cannot have an adjusted gross annual income above $150,000 if single, $300,000 if filing jointly and $225,000 if head of a household.
In addition, starting in 2025, battery minerals cannot come from a “foreign entity of concern,” mainly China and Russia. Battery parts cannot be sourced in those countries starting in 2024; minerals can’t come from those countries in 2025.
The Biden administration said rules governing that requirement are in the works.
The new rules define principles that countries must meet to be eligible. Australia, Bahrain, Canada, Chile, Colombia, Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, Israel, Jordan, Korea, Mexico, Morocco, Nicaragua, Oman, Panama, Peru, Singapore and Japan are on the list. Japan this week reached a deal with the U.S. on trading in critical minerals for EV batteries.
Even though the proposed rules are effective April 18, the Biden administration is taking public comments, and the rules can be modified later, including the addition of countries that negotiate trade agreements with the U.S.
The government says companies have announced at least $45 billion in U.S. investments since the Inflation Reduction Act was passed.
Senate Finance Committee Chairman Ron Wyden, D-Oregon, said he has concerns about the battery material provisions. “Free trade agreements cannot be unilaterally decided by the executive branch,” he said during a recent hearing. “They require consultation and consent from Congress. That includes any agreements on critical minerals.”
Federal Reserve Board Chairman Jerome Powell holds a news conference following a Federal Open Market Committee meeting at the Federal Reserve on March 22, 2023 in Washington, DC.
Alex Wong | Getty Images News | Getty Images
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Markets had expected the Fed’s quarter-point hike. Powell’s warnings on the economy caught them off guard.
Fed officials unanimously agreed to increase rates. But at the post-meeting press conference, Fed Chair Jerome Powell admitted the committee considered pausing hikes because “events in the banking system over the past two weeks are likely to result in tighter credit conditions.”
Asked by a senator if Treasury is considering guaranteeing all bank deposits without congressional approval, Treasury Secretary Janet Yellen said it is not.
PRO GameStop surged 35.24% on the news that the company’s had its first profitable quarter in two years. But analysts are warning investors not to jump into the stock because it’s still facing longer-term headwinds.
The last few Federal Open Markets Committee meetings have followed a pattern. The central bank would take a hawkish stance and hike rates aggressively, spooking markets. Then Powell’s comments at the press conference would soothe investors, who’d focus on his dovish remarks (probably unintentional and to his chagrin, I’d imagine).
This time, Powell flipped the script.
Markets had expected a hike of 25 basis points, and that’s what they got. Being right contributes to a sense of certainty, so all three major indexes actually rose after the Fed’s announcement. Indeed, Quincy Krosby, chief global strategist of LPL Financial, noted “markets are responding well to the expected 25 basis points rate hike.”
Then Powell started speaking. At first, his reassurances that the “banking system is sound and resilient” continued soothing markets. Then Powell started talking about “tighter credit conditions for households and businesses” that could “easily have a significant macroeconomic effect.” Worse, these conditions were not reflected in stock indexes since they “don’t necessarily capture lending conditions.” This signaled that the economy could be in a worse place than many had thought, wrote CNBC’s Patti Domm.
As if trying to prove Powell wrong, markets began sliding about an hour after Powell’s speech and couldn’t arrest their decline. By the end of the day, the Dow Jones Industrial Average lost 1.63%, the S&P 500 fell 1.65% and the Nasdaq Composite sank 1.6%.
They were certainly not helped by Treasury Secretary Janet Yellen’s clarification that, contrary to how markets took her Tuesday comments, the Federal Deposit Insurance Corporation was not considering “blanket insurance” for banking deposits — as I’d warned in this newsletter yesterday.
The good news is that the Fed forecast it’ll hike interest rates only one more time — probably by another 25 basis points — before pausing. A cut, however, is not on the table, if Powell is to be believed. Amid the ongoing banking turmoil, coupled with the Fed’s warning about the broader economy, it might be better for investors not to fight the Fed.
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WASHINGTON (AP) — Treasury Secretary Janet Yellen offered firm, upbeat reassurances to rattled bank depositors and investors Thursday, even as American financial institutions and European agencies ordered fresh rescue efforts following the second-largest bank collapse in U.S. history.
Questioned closely, sometimes aggressively, Yellen told senators at a Capitol hearing that the U.S. banking system “remains sound” and Americans “can feel confident” about the safety of their deposits.
Her remarks, against the backdrop of deepening concerns about the health of the global financial system, were an effort to signal to markets that there would be no broader contagion from the collapse of Silicon Valley Bank in California and Signature Bank in New York.
By the time her testimony was over, another major institution, First Republic Bank, received an emergency infusion of $30 billion in deposits from 11 banks, according to Treasury. And in Europe hours earlier, Credit Suisse, Switzerland’s second-largest lender, got a promise from the Swiss central bank of a loan of up to 50 billion francs ($54 billion).
Republican senators laid a big part of the blame for the problems on Democratic President Joe Biden’s administration.
“The reckless tax and spend agenda that was forced through Congress” contributed to record high inflation that the Federal Reserve is having to compensate for through increasing interest rates, said Sen. Mike Crapo of Idaho. And those surging rates have caused banks — as well as regular citizens — problems.
The Republicans also questioned Biden’s assurances that taxpayers won’t bear the brunt of the commitment to make depositors whole.
Yellen resisted that scenario, though she said, “We certainly need to analyze carefully what happened to trigger these bank failures and examine our rules and supervision” to prevent them from happening again. She defended the government’s argument that taxpayers will not end up paying the cost of protecting uninsured money at Silicon Valley and Signature.
The Treasury secretary was the first administration official to face lawmakers over the decision to protect uninsured money at the two failed regional banks, a move some have criticized as a bank “bailout.”
“The government took decisive and forceful actions to strengthen public confidence” in the U.S. banking system, Yellen testified. “I can reassure the members of the committee that our banking system remains sound, and that Americans can feel confident that their deposits will be there when they need them.”
The week has been a whirlwind for markets globally on worries about banks that may be bending under the weight of the fastest hikes to interest rates in decades, increasures intended to quell rising inflation on consumer goods.
In less than a week, Silicon Valley Bank, based in Santa Clara, California, failed after depositors rushed to withdraw money amid anxiety over the bank’s health. Then, regulators convened over the weekend and announced that New York-based Signature Bank also failed. They said that all depositors, including those holding uninsured funds exceeding $250,000, would be protected by federal deposit insurance.
The Justice Department and the Securities and Exchange Commission have since launched investigations into the Silicon Valley Bank collapse, and President Joe Biden has called on Congress to strengthen rules on regional banks.
White House press secretary Karine Jean-Pierre said Thursday, “There are things that we can do in the administration, but in order to really deal with this issue we have to act. Congress needs to act.”
Thursday’s hearing, originally scheduled to address Biden’s budget proposa for the fiscal year beginning next October, came after the sudden collapse of Silicon Valley, the nation’s 16th-biggest bank and a go-to financial institution for tech entrepreneurs. While lawmakers questioned Yellen on the federal deficit and upcoming debt ceiling negotiations, many focused instead on the bank failures and who was to blame.
The Biden administration’s “handling of the economy contributed to this,” insisted Sen. Tim Scott, R-S.C. “I plan to hold the regulators accountable.”
Sen. Mark Warner, D-Va., asked, “Where were the regulators in all of this?”
“Nerves are certainly frayed at this moment,” said Sen. Ron Wyden, D-Ore., who chairs the committee. “One of the most important steps the Congress can take now is make sure there are no questions about the full faith and credit of the United States,” he said, referring to raising the federal debt ceiling.
Sen. Mike Crapo of Idaho, the committee’s top Republican, said, “I’m concerned about the precedent of guaranteeing all deposits,” calling the federal rescue action a “moral hazard.”
Yellen said on CBS’ “Face the Nation” last Sunday that a banks bailout was not on the table.
“We’re not going to do that again,” she said, referring to the government’s response to the 2008 financial crisis, which led to massive government rescues for large U.S. banks.
Yellen, a former Federal Reserve chair and past president of the San Francisco Federal Reserve during the 2008 financial crisis, was a leading figure in the resolution this past weekend, which was engineered to prevent a wider systemic banking problem.
“This week’s actions demonstrate our resolute commitment to ensure that depositors’ savings remain safe,” she said.
Sen. Sherrod Brown, D-Ohio, compared the banks’ collapse to rail industry deregulation lobbying that Democrats say contributed to the East Palestine train derailment that rocked an Ohio community. “We see aggressive lobbying like this from banks as well,” he said.
In Europe, troubles at Credit Suisse deepened concerns about the global financial system.
The Swiss giant was having issues long before the U.S. banks collapsed, but the news Wednesday that the bank’s biggest shareholder would not inject more money led shares of European banks to plunge. On Thursday, they rose after the Swiss Central Bank’s action.
Regulators in the U.S. and abroad are trying to reassure depositors that their money is safe. They “don’t want anybody to be the person who sits in a darkened room or darkened cinema and shouts fire, because that’s what prompts a rush for the exits,” said Russ Mould, investment director at the online investment platform AJ Bell.
Despite the banking turmoil, the European Central Bank hiked interest rates by a half percentage point in its latest effort to curb stubbornly high inflation, saying Europe’s banking sector is “resilient,” with strong finances and plenty of available cash.
ECB President Christine Lagarde said the central bank would provide additional support to the banking system if necessary. She said banks “are in a completely different position from 2008” because of safeguards added after the financial crisis.
ECB Vice President Luis de Guindos also said Europe’s exposure to Credit Suisse, which is outside the European Union’s banking supervision structure, was “quite limited.”
The Swiss bank, which has seen its stock decline for years, has been pushing to raise money from investors and roll out a new strategy to overcome an array of troubles, including bad bets on hedge funds, repeated shake-ups of its top management and a spying scandal involving Zurich rival UBS.
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Associated Press writers Dave McHugh in Frankfurt, Germany, and Jamey Keaten in Geneva contributed to this report.
WASHINGTON (AP) — The U.S. has begun an aggressive new push to inflict pain on Russia’s economy and specifically its oligarchs with the intent of thwarting the Kremlin’s invasion of Ukraine.
From the Treasury Department to the Justice Department, U.S. officials will focus on efforts to legally liquidate the property of Russian oligarchs, expand financial penalties on those who facilitate the evasion of sanctions, and close loopholes in the law that allow oligarchs to use shell companies to move through the U.S. financial system.
Andrew Adams, who heads the U.S. government’s KleptoCapture task force, designed to enforce the economic restrictions within the U.S. imposed on Russia and its billionaires, told The Associated Press that the group is prioritizing its efforts to identify those who help Russians evade sanctions and violate export controls.
“These illicit procurement networks will continue to take up an ever-increasing amount of our bandwidth,” said Adams, who also serves as acting deputy assistant attorney general.
So far, more than $58 billion worth of sanctioned Russians’ assets have been blocked or frozen worldwide, according to a report last week from the Treasury Department. That includes two luxury yachts each worth $300 million in San Diego and Fiji, and six New York and Florida properties worth $75 million owned by sanctioned oligarch Viktor Vekselberg.
The U.S. has begun attempts to punish the associates and wealth managers of oligarchs — in Vekselberg’s case, a federal court in New York indicted Vladimir Voronchenko after he helped maintain Vekselberg’s properties. He was charged in February with conspiring to violate and evade U.S. sanctions.
The case was coordinated through the KleptoCapture group.
“I think it can be quite effective to be sanctioning facilitators,” Adams said, calling them “professional sanctions evasion brokers.”
A February study led by Dartmouth University researchers showed that targeting a few key wealth managers would cause far greater damage to Russia than sanctioning oligarchs individually.
Other attempts to inflict pain on the Russian economy will come from the efforts to liquidate yachts and other property owned by Russian oligarchs and the Kremlin, turning them into cash to benefit Ukraine.
Ukrainian President Volodymyr Zelenskyy has long called for Russian assets to be transferred to Ukraine, and former Biden administration official Daleep Singh told the Senate Banking Committee on Feb. 28 that forfeiting Russia’s billions in assets held by the U.S. is “something we ought to pursue.”
Singh suggested the U.S. should “use the reserves that we have immobilized at the New York Fed, transfer them to Ukraine and allow them to put them up as collateral to raise money.” He ran the White House’s Russia sanctions program when he was national security adviser for international economics.
Adams said the KleptoCapture task force is pursuing efforts to sell Russians’ yachts and other property, despite the legal difficulties of turning property whose owners’ access has been blocked into forfeited assets that the government can take and sell for the benefit of Ukraine.
He stressed that the U.S. will operate under the rule of law. “Part of what that means is that we will not take assets that are not fully, totally forfeited through the judicial procedures and begin confiscating them without a legal basis,” Adams said.
He added that the task force has had “success in working with Congress and working with folks around the executive branch in obtaining authorization to transfer certain forfeited funds to the State Department.”
The Treasury Department said on Thursday that the government is “paving the way” for $5.4 million in seized funds to be sent as foreign assistance to Ukraine.
Additionally, strengthening laws that serve as loopholes for sanctions evaders will also be a priority across federal departments, officials say.
The Financial Crimes Enforcement Network, under Treasury, is expected to roll out rules to address the use of the U.S. real estate market to launder money, including a requirement on disclosing the true ownership of real estate.
Steven Tian, director of research at the Yale Chief Executive Leadership Institute, who tracks companies’ disengagement from Russia, said the new real estate rule is long overdue.
“I would point out that it’s not just unique to Russian oligarchs. As you know, the real estate market makes use of shell companies in the United States, period,” Tian said.
Erica Hanichak, the government affairs director at the FACT Coalition, a nonprofit that promotes corporate transparency, urged the administration to put the rule forward by late March, when the U.S. co-hosts the second Summit for Democracy with the governments of Costa Rica, Netherlands, South Korea and Zambia.
“We’re viewing this as an opportunity for the United States to demonstrate leadership not only in addressing corrupt practices abroad, but looking to our own backyard and addressing the loopholes in our system that facilitate corruption internationally,” she said.
WASHINGTON (AP) — In a sign of a deepening rift among Democrats on energy issues, conservative Democratic Sen. Joe Manchin says he will not move forward on President Joe Biden’s nominee to oversee oil and gas leasing at the Interior Department.
Manchin, of West Virginia, chairs the Senate Energy and Natural Resources Committee and has great influence on energy and environmental issues in the closely divided Senate. In an op-ed Friday, he cited a leaked memo signed by nominee Laura Daniel-Davis that proposed charging oil companies higher rates for drilling off the Alaska coast.
Manchin said the higher rates backed by Daniel-Davis for the proposed drilling project in Alaska’s Cook Inlet “were explicitly designed to decrease fossil energy production at the expense of our energy security.″
Even though he had supported Daniel-Davis in the past, “I cannot, in good conscience, support her or anyone else who will play partisan politics and agree with this misguided and dangerous manipulation of the law,″ Manchin wrote in the Houston Chronicle.
The dispute over Daniel-Davis’s nomination comes as the Biden administration nears a decision on a major oil project in Alaska that many environmental groups say would be a blight on Biden’s climate legacy.
Climate activists are outraged that Biden appears open to the huge Willow project on Alaska’s North Slope, which they call a “carbon bomb” that would break his campaign pledge to curtail oil drilling on public lands and waters.
Approval of the project would risk alienating young voters who have urged stronger climate action by the White House as Biden approaches a 2024 reelection campaign.
At the same time, Alaska Native leaders with ties to the petroleum-rich North Slope support ConocoPhillips Alaska’s proposal. They say the Willow Project would bring much-needed jobs and billions of dollars in taxes and mitigation funds to the vast, snow- and ice-covered region nearly 600 miles (965 kilometers) from Anchorage.
Alaska’s bipartisan congressional delegation, Republican Gov. Mike Dunleavy and state lawmakers also support the project.
Daniel-Davis, who currently serves as Interior’s principal deputy assistant secretary for lands and minerals management, would not directly decide the fate of the Willow project, but Manchin and Alaska’s two Republican senators have criticized what they consider her lukewarm support for oil drilling on public lands and water. Daniel-Davis oversees Interior’s Bureau of Land Management, Bureau of Ocean Energy Management, Bureau of Safety and Environmental Enforcement and Office of Surface Mining Reclamation and Enforcement.
She was first nominated for the assistant secretary position nearly two years ago, but her bid has stalled because of the concerns of Manchin and Senate Republicans. Biden renominated her for the post in January.
In a statement Friday, the White House said Biden “nominated Laura Daniel-Davis because she has worked to conserve public lands, protect wildlife and address climate change for three decades, while prioritizing a collaborative and partnership-based approach. She is well-qualified for this position and we look forward to her moving forward in the confirmation process.″
Melissa Schwartz, a spokeswoman for Interior Secretary Deb Haaland, said Interior was “very disappointed” to learn of Manchin’s opposition to Daniel-Davis after he supported her during two committee hearings and votes over the past two years.
“Laura Daniel-Davis has served this administration, as she has two others, with a dedication that we should aspire to see in every public servant,″ Schwartz said in an email. “She will continue to lead this portfolio at Interior and implement President Biden’s direction, stated consistently and clearly since Day One, with respect to carefully balancing the role that public lands and waters play as we face the climate crisis.”
Daniel-Davis is one of several Biden nominees whom Manchin has opposed. Another is Gigi Sohn, who withdrew her nomination to the Federal Communications Commission after Manchin opposed her.
Manchin also voted against Daniel Werfel’s nomination to lead the Internal Revenue Service. Werfel was confirmed Thursday with support from several Republicans.
Wyoming Sen. John Barrasso, the top Republican on the energy panel, hailed Manchin’s latest announcement. “Laura Daniel-Davis has done everything she can to undermine American energy production. As I have said before, her nomination should be withdrawn,″ Barrasso tweeted.
But Jennifer Rokala, executive director of the liberal Center for Western Priorities, called Manchin’s “flip-flop” on Daniel-Davis “baffling, hypocritical and short-sighted.″ Daniel-Davis will continue to oversee oil and gas leasing in her current role, “with or without Manchin’s support for a promotion,″ Rokala said. “But now the White House and Interior Department have no reason to keep catering to Manchin’s whims.″
In his op-ed, Manchin sharply criticized the Biden administration’s implementation of the Inflation Reduction Act, or IRA, a key climate, tax and health care bill that Manchin helped craft.
“While the Biden administration has continued to play political games and incorrectly frame the IRA as a climate change legislation, the truth is that the IRA is about securing America’s energy independence for the coming century,″ Manchin wrote.
“The Biden administration continues to ignore congressional intent on critical components of the IRA … to illogically advance a partisan climate agenda and appease radical activists,″ Manchin added. He said the Interior and Treasury departments “have explicitly and unabashedly violated the letter of the law … in an effort to elevate climate goals above the energy and national security of this nation.”
Manchin has repeatedly slammed Treasury for issuing guidelines that allow car makers in Europe and Asia to bypass requirements that significant portions of electric-vehicle batteries be produced in North America.
WILMINGTON, Del. (AP) — The Biden administration is close to tightening rules on some overseas investments by U.S. companies in an effort to limit China’s ability to acquire technologies that could improve its military prowess, according to a U.S. official familiar with the deliberations.
The soon-to-be-issued executive order from President Joe Biden will limit American investment in advanced technologies that have national security applications — such as next-generation military capabilities that could help China improve the speed and accuracy of military decision making, according to the official, who was not authorized to comment and spoke on the condition of anonymity.
The expected action is the latest effort by the White House to target China’s military and technology sectors at a time of increasingly fraught relations between the world’s two biggest economies.
In October, the Biden administration imposed export controls to limit China’s ability to access advanced chips, which it says can be used to make weapons, commit human rights abuses and improve the speed and accuracy of its military logistics.
The complicated relationship has become further strained in recent weeks after the U.S. shot down a Chinese spy balloon last month that traversed the country. The Biden administration has also publicized U.S. intelligence findings that raise concern Beijing is weighing providing Russia weaponry for its ongoing war on Ukraine.
The tensions were on display as top diplomats from the Group of 20 industrialized and developing nations ended a contentious meeting in New Delhi on Thursday with no consensus on the Ukraine war and concerns about China’s widening global influence dominating much of the talks.
Meanwhile, China this past week blasted the new House Select Committee on the Chinese Communist Party after it held its first hearing on countering Beijing’s influence. Foreign Ministry spokesperson Mao Ning demanded its members “discard their ideological bias and zero-sum Cold War mentality.”
Administration officials have been consulting with allies as they’ve worked on formulating the new regulations on U.S. investment, according to the official.
The Wall Street Journal first reported on Saturday that the Treasury and Commerce departments delivered reports to lawmakers on Friday detailing plans for the new regulatory system to address U.S. overseas investment in advanced technologies. The agencies said they expected to seek additional money for the investment screening program in the White House budget, which is scheduled to be released on March 9, according to the Journal.
A White House National Security Council spokesperson declined to comment on the Treasury and Commerce reports, but noted that administration officials have kept Congress apprised on its progress in crafting an approach to overseas investment.
The expected action is certain to face pushback from U.S. firms. Administration officials have sought to signal to the business community that even as they look to examine rules on U.S. investment in China, they are mindful of not overreaching.
“One of the most important things we can do, from my perspective, is make sure that we draw clear lines between what is competition and what is national security because, fundamentally, my view is that the United States does well when we’re competing on a level playing field with any country in the world,” Deputy Treasury Secretary Wally Adeyemo said at recent Council on Foreign Relations event. “But we also want, in the narrow spaces where we see national security risk, be able to use the tools at our disposal to protect the national security of the United States of America.”
A bipartisan group of lawmakers last year urged Biden to establish a tougher screening system for investments in foreign adversaries with China being top of mind.
