Healthcare workers strike in front of Kaiser Permanente Los Angeles Medical Center, as more than 75,000 Kaiser Permanente healthcare workers go on strike from October 4 to 7 across the United States, in Los Angeles, California, October 4, 2023.
Aude Guerrucci | Reuters
More than 85,000 health workers reached a tentative labor agreement with Kaiser Permanente on Friday that will avoid more strikes after the Biden administration intervened in the negotiations.
President Joe Biden praised the health workers and reiterated his support for organized labor in a statement Friday.
“Health care workers and support staff kept our hospitals – and our nation– going during the dark months of the pandemic,” Biden said in a statement Friday. “They had our backs during one of our nation’s toughest times. We must continue to have theirs.”
“I always say that collective bargaining works,” Biden said. “It works for UPS drivers and dock workers, writers, and millions of American workers who exercise their right to participate in a union.”
Biden has touted himself as the most pro-union president in American history. He recently joined the picket line in Detroit to support the United Auto Workers in their strike against Ford Motor, General Motors and Stellantis.
Tens of thousands of health workers walked out of Kaiser hospitals and facilities last week to protest short staffing and demand better pay. The strike lasted three days in California, Colorado, Oregon and Washington state. The walkout was said to be the largest health-care worker strike in U.S. history.
The Coalition of Kaiser Permanente Unions had threatened additional strikes if management did not meet their demands, particularly over short staffing and the outsourcing of jobs.
Julie Su, acting labor secretary, arrives to testify during the House Education and the Workforce Committee hearing titled “Examining the Policies and Priorities of the Department of Labor,” in Rayburn Building on Wednesday, June 7, 2023.
Tom Williams | CQ-Roll Call, Inc. | Getty Images
The union coalition and Kaiser executives met for bargaining sessions this week. The sides reached a tentative labor contract to avoid further strikes after the intervention of acting Labor Secretary Julie Su.
The agreement includes a 21% pay hike over four years, a minimum wage of $25 in California and $23 in other states, protections against outsourcing, and numerous investments to address short staffing.
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Su flew to California on Thursday evening to help facilitate the deal, according to the union coalition. Sarah Levesque, secretary-treasurer of OPEIU Local 2, said Su was instrumental in brokering the deal.
“We’re incredibly grateful to acting U.S. Labor Secretary Julie Su and the Biden administration for supporting workers’ right to collective bargaining,” Levesque said.
Biden also praised Su’s role, “She continues to play an integral role helping my administration and workers across this country build an economy that works for everyone,” the president said.
Representative Jim Jordan, a Republican from Ohio, during a news conference at the US Capitol in Washington, DC, US, on Thursday, April 27, 2023.
Ting Shen | Bloomberg | Getty Images
Republican lawmakers are expected to vote Wednesday morning to nominate a candidate for speaker of the House of Representatives, a week after Kevin McCarthy was ousted by rebel GOP members in a historic no-confidence vote.
House Republicans are scheduled to hold a closed-door meeting at 10 a.m. ET to vote on who should succeed McCarthy as speaker. House Majority Leader Steve Scalise of Louisiana and Judiciary Committee Chairman Jim Jordan of Ohio are considered the top candidates for the post.
The candidate who wins the backing of the House Republicans will still have to face a full vote on the chamber’s floor to secure the speakership.
It is unclear if either Scalise or Jordan can win the 217 votes needed to become the next speaker. McCarthy faced a grueling 15 ballots before he was finally elected speaker in January.
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The House remains leaderless more than a week after Rep. Matt Gaetz of Florida and seven other Republicans who engineered the ousting of McCarthy, who ran afoul of hard-right members of the GOP for working with Democrats to pass spending legislation last month to avoid a government shutdown.
The House is effectively in a state of paralysis until someone is elected to take the speaker’s gavel.
The race to find a new speaker has become urgent as Israel wages war on Hamas after the militant group launched a series of devastating terrorist attacks on towns that border the Gaza Strip.
President Joe Biden said Tuesday that he will ask Congress to take “urgent action” to fund the national security needs of U.S. partners as the Middle East descends into war and Ukraine wages its grinding counteroffensive to push Russia out of its eastern territories.
Congress also needs to pass spending legislation by Nov. 17 to avoid a government shutdown.
This is a developing story. Please check back for updates.
Attendees arrive at the event campus on the opening day of the annual meetings of the International Monetary Fund (IMF) and World Bank in Marrakesh, Morocco, on Monday, Oct. 9, 2023.
Bloomberg | Bloomberg | Getty Images
The International Monetary Fund on Tuesday released its latest World Economic Outlook, which revised its forecast for U.S. growth higher while predicting slower expansion for the euro zone.
The IMF raised its U.S. growth projection for this year by 0.3 percentage points, compared with its July update, to 2.1%. It hiked next year’s forecast by 0.5 percentage points, to 1.5%.
Its euro area growth forecast for 2023 was revised down by 0.2 percentage points to 0.7%, meanwhile, and for 2024 was lowered by 0.3 percentage points to 1.2%.
It attributed the U.S. upgrade to stronger business investment in the second quarter, resilient consumption growth amid a tight labor market, and an expansionary government fiscal stance. Growth is nonetheless expected to slow in the second half of 2023 and into 2024, it added, due to slower wage growth, dwindling pandemic savings, tight monetary policy and higher unemployment.
In the euro zone, the IMF flagged divergence across its major economies this year — with the German economy expected to contract as trade slows and higher interest rates drag, as French external demand has outperformed and industrial production has caught up.
Its growth forecast for the United Kingdom was brought slightly higher to 0.5% for 2023, but lowered by 0.4 percentage points to 0.6% for 2024 as it expects “lingering impacts of the terms-of-trade shock from high energy prices.”
The IMF reiterated a global growth forecast of 3% for the year, and nudged its 2024 forecast by 0.1 percentage points to 2.9%.
“Several headwinds to global growth subsided earlier this year,” the IMF’s outlook said, as the World Health Organization said Covid-19 was no longer a global health emergency, supply chains largely normalized, and global financial conditions eased after turbulence in the Swiss and U.S. banking sectors was contained.
Challenges nonetheless remain, it continued, particularly a slowdown in manufacturing, a slow catch-up in services in some areas, and “globally synchronous” central bank tightening to cool inflation.
China’s growth momentum following its strict lockdown is fading, the IMF said, as it also deals with a property crisis. The body sees Chinese growth of 5% this year and 4.2% next year.
For households, that offers little relief from sky-high borrowing costs.
Altogether, Fed officials have raised rates 11 times in a year and a half, pushing the key interest rate to a target range of 5.25% to 5.5%, the highest level in more than 22 years.
“I’m worried for the consumer,” said Tomas Philipson, University of Chicago economist and a former chair of the White House Council of Economic Advisers. “People are hit on both fronts — lower real wages and higher rates.”
Since wage growth for many Americans hasn’t been able to keep pace with higher prices, those households are getting squeezed and are going into debt just when borrowing rates are spiking, Philipson said.
Real average hourly earnings fell 0.5% in August, while borrowers are paying more on credit cards, student loans and other types of debt.
“Borrowing is very expensive, period,” Philipson said.
The federal funds rate, which is set by the central bank, is the interest rate at which banks borrow and lend to one another overnight. Although that’s not the rate consumers pay, the Fed’s moves still affect the borrowing and savings rates they see every day.
Here’s a breakdown of how the central bank’s increases so far have affected consumers:
Since most credit cards have a variable rate, there’s a direct connection to the Fed’s benchmark. As the federal funds rate rose, the prime rate did as well, and credit card rates followed suit.
Credit card annual percentage rates are now more than 20%, on average — an all-time high. Further, with most people feeling strained by higher prices, more cardholders carry debt from month to month.
For those who carry a balance, there’s not much relief in sight, according to Matt Schulz, chief credit analyst at LendingTree.
“Even though the Fed chose not to raise rates in September, the truth is that no one should expect credit card interest rates to stop rising anytime soon,” he said.
In the meantime, knocking down that debt “should absolutely be the goal,” he said.
Although 15-year and 30-year mortgage rates are fixed, and tied to Treasury yields and the economy, anyone shopping for a new home has lost considerable purchasing power, partly because of inflation and the Fed’s policy moves.
The average rates for a 30-year, fixed-rate mortgage “remain anchored north of 7%,” said Sam Khater, Freddie Mac’s chief economist.
“The reacceleration of inflation and strength in the economy is keeping mortgage rates elevated,” he said.
Other home loans are more closely tied to the Fed’s actions. Adjustable-rate mortgages and home equity lines of credit, or HELOCs, are pegged to the prime rate. Most ARMs adjust once a year after an initial fixed-rate period. But a HELOC rate adjusts right away. Already, the average rate for a HELOC is up to 9.12%, the highest in 22 years, according to Bankrate.
“That HELOC is no longer low-cost debt and it warrants a much higher focus on repayment than it has for a long time,” said Greg McBride, chief financial analyst at Bankrate.com.
Even though auto loans are fixed, payments are getting bigger because the price for all cars is rising along with the interest rates on new loans.
The average rate on a five-year new car loan is now 7.46%, the highest in 15 years, according to Bankrate.
Experts say consumers with higher credit scores may be able to secure better loan terms or shop around for better deals. Car buyers could save an average of $5,198 by choosing the offer with the lowest APR over the one with the highest, according to a recent report from LendingTree.
Federal student loan rates are also fixed, so most borrowers aren’t immediately affected by the Fed’s moves. But undergraduate students who take out new direct federal student loans are now paying 5.50% — up from 4.99% in the 2022-23 academic year and 3.73% in 2021-22.
For those with existing debt, interest is now accruing again as of Sept. 1. In October, millions of borrowers will make their first student loan payment after a three-year pause.
Private student loans tend to have a variable rate tied to the Libor, prime or Treasury bill rates — and that means that those borrowers are already paying more in interest. How much more, however, varies with the benchmark.
While the central bank has no direct influence on deposit rates, the yields tend to be correlated to changes in the target federal funds rate. The savings account rates at some of the largest retail banks, which were near rock bottom during most of the Covid pandemic, are currently up to 0.43%, on average, according to the Federal Deposit Insurance Corp.
Thanks, in part, to lower overhead expenses, top-yielding online savings account rates are now paying over 5%, according to Bankrate, which is the most savers have been able to earn in more than 15 years.
Because the top online savings accounts are currently beating inflation, “money in a savings account is no longer a drag on your portfolio,” McBride said. And yet, only 22% of savers are earning 3% or more on their accounts, according to another Bankrate report.
“Boosting emergency savings is rewarded with returns exceeding 5%, if you’re putting the money in the right place,” McBride said.
The Federal Reserve is likely to skip an interest rate hike when it meets this week, experts predict. But consumers may not feel any relief.
The central bank has already raised interest rates 11 times since last year — the fastest pace of tightening since the early 1980s.
Yet recent data is still painting a mixed picture of where the economy stands. Overall growth is holding steady as consumers continue to spend, but the labor market is beginning to loosen from historically tight conditions.
At the same time, inflation has shown some signs of cooling even though it remains well above the Fed’s 2% target.
Even with a break in rate hikes, “the one thing that remains very clear is that the Fed is nowhere close to cutting rates,” said Greg McBride, chief financial analyst at Bankrate.com. “Rates remain really high and will stay there for a while.”
The federal funds rate, which is set by the U.S. central bank, is the interest rate at which banks borrow and lend to one another overnight. Although that’s not the rate consumers pay, the Fed’s moves still affect the borrowing and savings rates they see every day.
Here’s a breakdown of how the impact has already been felt:
Most credit cards come with a variable rate, which hasa direct connection to the Fed’s benchmark rate.
After the previous rate hikes, the average credit card rate is now more than 20% — an all-time high, while balances are higher and nearly half of credit card holders carry the debt from month to month, according to an earlier Bankrate report.
Although 15-year and 30-year mortgage rates are fixed, and tied to Treasury yields and the economy, anyone shopping for a new home has lost considerable purchasing power, partly because of inflation and the Fed’s policy moves.
The average rates for a 30-year, fixed-rate mortgage “remain anchored north of 7%,” said Sam Khater, Freddie Mac’s chief economist. “The reacceleration of inflation and strength in the economy is keeping mortgage rates elevated.”
Now, the average rate for a HELOC is up to 9.12%, the highest in 22 years, according to Bankrate. “That HELOC is no longer low-cost debt and it warrants a much higher focus on repayment than it has for a long time,” McBride said.
Even though auto loans are fixed, payments are getting bigger because the price for all cars is rising along with the interest rates on new loans.
The average rate on a five-year new car loan is now 7.46%, the highest in 15 years, according to Bankrate.
Experts say consumers with higher credit scores may be able to secure better loan terms or shop around for better deals. Car buyers could save an average of $5,198 by choosing the offer with the lowest APR over the one with the highest, according to a recent report from LendingTree.
Federal student loan rates are also fixed, so most borrowers aren’t immediately affected by the Fed’s moves. But undergraduate students who take out new direct federal student loans are now paying 5.50% — up from 4.99% in the 2022-23 academic year and 3.73% in 2021-22.
For those with existing debt, interest is now accruing again as of Sept. 1. In October, millions of borrowers will make their first student loan payment after a three-year pause.
Private student loans tend to have a variable rate tied to the Libor, prime or Treasury bill rates — and that means that those borrowers are already paying more in interest. How much more, however, varies with the benchmark.
While the Fed has no direct influence on deposit rates, the yields tend to be correlated to changes in the target federal funds rate. The savings account rates at some of the largest retail banks, which were near rock bottom during most of the Covid pandemic, are currently up to 0.43%, on average, according to the Federal Deposit Insurance Corporation, or FDIC.
Average rates have risen significantly in the last year, but they are still very low compared to online rates, according to Ken Tumin, founder of DepositAccounts.com.
Thanks, in part, to lower overhead expenses, top-yielding online savings account rates are now paying over 5%, according to Bankrate, which is the most savers have been able to earn in more than 15 years.
However, if the Fed skips a rate hike at its September meeting, then those deposit rate increases are likely to slow, Tumin said.
Tesla CEO Elon Musk arrives for a U.S. Senate bipartisan Artificial Intelligence Insight Forum at the U.S. Capitol in Washington, D.C., Sept. 13, 2023.
Andrew Caballero-Reynolds | AFP | Getty Images
WASHINGTON — Three Democratic members of the Senate Committee on Armed Services have asked the Pentagon for information about SpaceX CEO Elon Musk, and whether he “directed the unilateral disabling or impediment of function of Starlink satellite communications terminals used by the Ukrainian Armed Forces in southern Ukraine in 2022,” or ever had the authority to do so.
Democratic Sens. Jeanne Shaheen of New Hampshire, Elizabeth Warren of Massachusetts and Tammy Duckworth of Illinois wrote a letter Friday to Defense Secretary Lloyd Austin to express their “serious concerns about whether Musk has personally intervened to undermine a key U.S. partner at a critical juncture.”
Their questions follow the publication of a biography of Elon Musk, who is CEO of SpaceX and automaker Tesla, and owner and chief technology officer of the social network X, formerly known as Twitter. In the book, author Walter Isaacson wrote that a Ukrainian drone submarine attack on Russian warships was disrupted by a disconnect from Starlink, ordered by Musk.
Excerpts from the book raised alarm bells in Washington, among NATO allies and in the Ukrainian capital. After they were published, Musk painted himself as a peacekeeper and wrote on social media that he did not disconnect Starlink over Crimea, but rather denied a request by Ukraine to provide it there. He wrote, “If I had agreed to their request, then SpaceX would be explicitly complicit in a major act of war and conflict escalation.” Isaacson has issued a correction to his biography stating that connectivity had already been disabled in the affected area, and that Musk had simply refused a request to turn it on.
Musk also argued, as he has in the past, that Ukraine should strike a “truce” with Russia. Musk’s “peace plan” argument was shouted down by Ukraine officials, politicians and Putin experts.
On Tuesday, in an interview with CNBC’s “Squawk Box,” Isaacson discussed SpaceX developing a military-grade version of Starlink, which would help resolve concerns expressed by Musk regarding the satellite networks’ use in war.
CNBC asked the U.S. Department of Defense several questions pertaining to SpaceX, including whether the department would be re-evaluating any of the company’s government contracts, whether Musk’s calls for a truce between Ukraine and Russia reflect the U.S. government’s position and whether Musk’s conduct, including taking personal meetings with Putin in the past, had been in line with the terms of contracts awarded to his company.
A spokesperson for the department, Jeff Jurgensen, told CNBC via email, “The Department does contract with Starlink for satellite communication services in support of our Ukrainian partners,” but declined to offer further details or answer the specific questions posed.
He added that the Department of Defense “continues to work closely with commercial industry to ensure we have the right capabilities the Ukrainians need to defend themselves — and more broadly — the kind of communication and space-related capabilities necessary to accomplish our own global missions and support our national defense strategy.”
Earlier in the week, Sen. Warren called for a Congressional probe of Musk and SpaceX. “Congress needs to investigate what’s happened here, and whether we have adequate tools to make sure foreign policy is conducted by the government and not by one billionaire,” Warren said Monday, Bloomberg first reported.
SpaceX is currently working to obtain a new license from the Federal Aviation Administration and approvals from the U.S. Fish and Wildlife Service to resume test flights for its Starship Super Heavy launch vehicle from its Boca Chica, Texas, facility. An earlier test flight this year resulted in an explosion and a mishap investigation overseen and recently completed by the FAA.
The company plans to use Starship to launch and deploy its next generation Starlink satellites. Musk also envisions Starship taking astronauts and supplies to the moon, and eventually, Mars.
Members of the United Auto Workers union hold a rally and practice picket near a Stellantis plant in Detroit, Aug. 23, 2023.
Michael Wayland / CNBC
DETROIT – Thousands of members of the United Auto Workers went on strike at three U.S. assembly plants of General Motors, Ford Motor and Stellantis, after the union and the automakers failed to reach a deal on a new labor contract Thursday night.
“The UAW Stand Up Strike begins at all three of the Big Three,” the union said in a post on X, the site formerly known as Twitter, just after midnight Friday.
The facilities are GM’s midsize truck and full-size van plant in Wentzville, Missouri; Ford’s Ranger midsize pickup and Bronco SUV plant in Wayne, Michigan; and Stellantis’ Jeep Wrangler and Gladiator plant in Toledo, Ohio. For Ford, UAW President Shawn Fain said only workers in paint and final assembly will be on strike.
“We got to do what we got to do to get our share of economic and social justice in this this strike,” Fain said outside the Ford facility in Wayne, minutes after the strike began. “We’re going to be out here until we get our share of economic justice. And it doesn’t matter how long it takes.”
The selected plants produce highly profitable vehicles for the automakers that largely continue to be in high-demand. About 12,700 workers – 5,800 at Stellantis, 3,600 at GM and 3,300 at Ford – will be on strike at the plants in total, the union said. The UAW represents about 146,000 workers across Ford, GM and Stellantis.
UAW President Shawn Fain, center, talks to reporters as union members strike outside a Ford plant in Wayne, Michigan, Sept. 15, 2023.
CNBC | Michael Wayland
“If they come to the pump and they take care of their workers, we’ll be back to work,” Fain said early Friday, referring to the automakers. “But if they don’t, we’ll keep amping it up.”
The union selected the plants as part of targeted strike plans initially announced Wednesday night by Fain, who has unconventionally been negotiating with all three automakers at once and has been reluctant to compromise much on the union’s demands.
“For the first time in our history, we will strike all three of the ‘Big Three’ at once,” Fain said just after 10 p.m. Thursday in live remarks streamed on Facebook and YouTube. “We are using a new strategy, the ‘stand-up’ strike. We will call on select facilities, locals or units to stand up and go on strike.”
Fain has referred to the union’s plans as a “stand-up strike,” a nod to historic “sit-down” strikes by the UAW in the 1930s.
Key proposals from the union have included 40% hourly pay increases, a reduced 32-hour work week, a shift back to traditional pensions, the elimination of compensation tiers and a restoration of cost-of-living adjustments (COLA), among other items on the table including enhanced retiree benefits and enhanced vacation and family leave benefits.
By late Thursday, it was clear there wouldn’t be a deal, even as President Joe Biden got involved. The White House said Biden, who boasts of his blue collar background and support for organized labor, talked with Fain and the leaders of the Detroit automakers.
Ford, in a statement Thursday night, said the UAW presented its “first substantive counterproposal” to four of the company’s offers, but it “showed little movement from the union’s initial demands.”
“If implemented, the proposal would more than double Ford’s current UAW-related labor costs, which are already significantly higher than the labor costs of Tesla, Toyota and other foreign-owned automakers in the United States that utilize non-union-represented labor,” Ford said. “The union made clear that unless we agreed to its unsustainable terms, it plans a work stoppage at 11:59 p.m. eastern.”
The automakers have made record proposals that address some of the UAW’s ambitious demands but not all of them. Specifically, the companies have offered wage increases of roughly 20%, COLA, altered profit-sharing bonuses; and enhanced vacation and family leave enhancements that the union has found inadequate.
Targeted strikes typically focus on key plants that can then cause other plants to cease production due to a lack of parts. They are not unprecedented, but the way Fain plans to conduct the work stoppages is not typical. They include initiating targeted strikes at select plants and then potentially increasing the number of strikes based on the status of the negotiations. Selecting assembly plants for such strikes is also unique.
Steve Forbes doesn’t expect the Federal Reserve to raise rates in upcoming meetings, but the Forbes Media chairman doesn’t see cuts in the near term either.
“I think the Federal Reserve is not going to increase interest rates in the next few months. I think they’re going to pause,” Forbes said, citing the slew of contradictory U.S. economic data.
“Some things are weakening, the labor market usually is a lagging indicator. But the services [sector] report was pretty good,” he told CNBC’s Chery Kang on the sidelines of the Forbes Global CEO Conference held in Singapore.
“So that mixed picture gives them [an] excuse finally to do nothing,” he said.
The Federal Open Market Committee’s next meeting is scheduled for Sept. 19 to 20. There’s a 92% chance the central bank will leave rates unchanged after its September meeting, according to the CME’s FedWatch tool. But those probabilities shift to a 38.4% chance of a hike after the November meeting.
When asked whether the U.S. faces a potential government shutdown, Forbes said he reckons one may be looming.
Funding for the federal government is set to run out at the end of the month unless Congress takes action. Failure to pass spending legislation would result in a shutdown on Sept. 30.
Forbes said that Washington will go “right to the deadline” before coming up with a deal.
“But the danger on these things, [when] we’re gonna keep getting close to the cliff is you might slip and go over the cliff. You might get a government shutdown,” he said.
Forbes also said he expects the 2024 elections to be about the “pocketbook,” with the state of the economy being “issue No. 1.”
Other issues will include crime and foreign policy, such as Washington’s standing on the global stage as well as its approach toward Ukraine.
Indian artist Jagjot Singh Rubal gives final touches to an oil painting of U.S. President Joe Biden, at his workshop in Amritsar on September 5, 2023, ahead of the two-day G20 summit in New Delhi.
Narinder Nanu | Afp | Getty Images
NEW DELHI — Indian Prime Minister Narendra Modi and U.S. President Joe Biden pledged Friday to deepen the partnership between their countries in their second bilateral meeting in less than six months, as Delhi prepares to host a meeting among leaders of the Group of 20 leading industrialized and developing countries.
The two leaders met shortly at Modi’s official residence after Biden’s arrival in Delhi and then issued a 29-point statement that highlighted the depth and breadth of their relationship at a time of evolving global alliances — from building resilient strategic technology value chains and linking defense industrial ecosystems, to collaborating on renewable and nuclear energy, climate financing and cancer research.
The two leaders “reaffirmed the importance of the Quad in supporting a free, open, inclusive, and resilient Indo-Pacific” and “expressed their appreciation for the substantial progress underway to implement the ground breaking achievements of Prime Minister Modi’s historic June 2023 visit to Washington.” The Quad is an informal security alignment of Australia, India, Japan and the U.S., which came about in response to China’s rising strength in the Indo-Pacific region.
This closed-door meeting with Biden was the third — after meetings with leaders from Mauritius and Bangladesh — that Modi convened on the eve of the G20 leaders’ summit and part of the dozen or so bilateral meetings planned for this weekend, underscoring India’s strategic ambitions as a key global player connecting the developed world and the Global South.
The summit is an important one for Modi, whose government has turned the normally sedate rotating G20 presidency into a branding vehicle to burnish India’s geopolitical importance ahead of national elections next year. Many governments, investors and businesses are also starting to look toward India — as China slows — which the International Monetary Fund expects to be the fastest growing economy this year.
This weekend’s agenda includes the expected admission of the African Union as an official G20 member as part of India’s broad focus on elevating the place of the Global South and fostering inclusive and sustainable growth in the multilateral forum founded in 1999 as a platform to address issues afflicting the global economy.
Russian President Vladimir Putin and China President Xi Jinping though won’t be in attendance this weekend.
While Putin is sending Foreign Minister Sergey Lavrov to take his place, China Premier Li Qiang will take Xi’s place — the first time Xi is skipping the G20 meeting in the decade since he became president.
Putin has not traveled outside of Russia since the International Criminal Court issued a warrant for his arrest for war crimes in Ukraine.
The pair’s absence has sparked fears that a communique binding member states may not be issued at the end of a G20 leaders’ summit — undercutting India’s clout and diminishing his domestic messaging.
India’s diplomats have been unable to foster binding agreements in the key discussion tracks since it assumed the rotating presidency in December 2022 — because Russia and China have objected to the wording referring to the war in Ukraine.
A war of words has ensued ahead of this weekend’s meeting.
“The G7 countries (primarily the US, the UK, Germany, and France) have been exerting pressure on India in a bid to have their unilateral approaches to the Ukraine situation reflected in the final documents of G20 forums,” the Russian foreign ministry said in a statement.
At a pre-summit press conference Friday, India’s G20 sherpa Amitabh Kant said the final declaration “is almost ready.”
“I can assure you our presidency has been inclusive, decisive and action-oriented,” Kant said.
With Putin and Xi conspicuously absent this weekend, India and the U.S. will hope this will be sufficient to persuade member states and other observers from the Global South they represent a more viable proposition from food security to debt resolution.
In their joint statement after their Friday bilateral meeting, Biden and Modi “reaffirmed their commitment to the G20.”
They also “expressed confidence that the outcomes of the G20 Leaders’ Summit in New Delhi will advance the shared goals of accelerating sustainable development, bolstering multilateral cooperation, and building global consensus around inclusive economic policies to address our greatest common challenges, including fundamentally reshaping and scaling up multilateral development banks.”
While Putin has an obvious reason accounting for his absence, Xi, though, has not indicated a reason — triggering speculation the Chinese leader may be snubbing Modi for a variety of reasons.
Despite recently traveling to South Africa for a BRICS meeting, Xi has rarely traveled abroad. Instead, he has tended to receive visiting dignitaries in Beijing — including Zambia and Venezuela in overlapping visits this weekend.
India’s warming ties with the U.S. also sharply contrasts against its standoff with its neighbor, China.
India — along with Malaysia, the Philippines, Vietnam and Taiwan — sharply rebuked China last week for a new national map that Beijing claims contested territories as its own.
India also stands to gain from American companies looking to diversify their supply chains — at China’s expense — as the U.S. ramps up efforts to limit the transfers of strategic technology to China on the grounds of national security.
This would likely be what Modi and Biden conceived as “their ambitious vision for an enduring India-U.S. partnership that advances the aspirations of our people for a bright and prosperous future, serves the global good, and contributes to a free, open, inclusive, and resilient Indo-Pacific.”
Smoke pours from the Twin Towers of the World Trade Center after they were hit by two hijacked airliners in a terrorist attack in New York City, Sept. 11, 2001.
Robert Giroux | Getty Images
Two victims who perished in the World Trade Center have been identified more than two decades after the Sept. 11, 2001, terrorist attacks, New York City’s chief medical examiner said Friday.
The names of the victims, a man and a woman, are being withheld at the request of their families, officials said. They are the 1,648th and 1,649th victims whose remains have been identified since 2001.
The remains of 1,104 victims, or 40% of those who died in the attacks, still have not been found nearly 22 years after al-Qaida terrorists hijacked commercial airlines and crashed them into the Twin Towers in lower Manhattan.
The towers were destroyed in the attacks, leaving more than 2,700 people dead.
Dr. Jason Graham, New York City’s chief medical examiner, described the painstaking effort to identify the victims’ remains as “the largest and most complex forensic investigation” in U.S. history.
Investigators have spent decades using DNA testing to identify tens of thousands of remains recovered from the Ground Zero disaster site. More than 30% of the remains recovered are still unidentified, according to the medical examiner’s office.
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Graham said in a statement Friday that the medical examiner’s office has made a “solemn pledge” to return the remains of those who perished to their loved ones.
The identification of the man was confirmed through DNA testing of remains recovered in 2001. The woman was identified through the testing of remains recovered in 2001, 2006 and 2013.
The announcement that two victims were identified comes three days before the anniversary of the attacks. The man and the woman are the first new identifications since September 2021.
Less than an hour after the attacks on the Twin Towers, al-Qaida terrorists crashed a third commercial airliner into the Pentagon, killing 184 people.
Passengers in a fourth hijacked airliner heading for the nation’s capital fought for control of the plane. United Airlines Flight 93 crashed in a field outside Shanksville, Pennsylvania, killing all 40 people on board.
In the wake of the attacks, the U.S. went to war in Afghanistan, where the leader of al-Qaida, Osama bin Laden, was sheltered by the Taliban. The Bush administration subsequently invaded Iraq to overthrow Saddam Hussein, who had no connection to the attacks.
More than 6,700 U.S. troops died in those wars.
Bin Laden was killed by U.S. forces during a raid in Pakistan in 2011. The Biden administration withdrew the U.S. military from Afghanistan in 2021 and the Taliban returned to power after the collapse of the U.S.-backed government in Kabul.
India’s relationship with the United States is the strongest it’s been in years.
U.S. President Joe Biden and Indian Prime Minister Narendra Modi are set to meet for another bilateral meeting later Friday at the Group of 20 summit in New Delhi, after several one-on-one meetings earlier this year.
Despite warming ties — with both leaders sharing a hug during Modi’s state visit to Washington in May — a “traditional alliance” between the two nations remains off the table, according to the Council on Foreign Relations.
“I do not think India and the United States are headed for a traditional alliance relationship … India is keen to make sure it protects its ability to make its own decisions on every kind of question,” said Alyssa Ayres, adjunct senior fellow for India, Pakistan, and South Asia at the Council on Foreign Relations.
US President Joe Biden and India’s Prime Minister Narendra Modi during an event with senior officials and chief executive officers in the East Room of the White House in Washington on June 22, 2023.
Bloomberg | Bloomberg | Getty Images
India is a “very independent” country, and the traditional alliance relationship the U.S. has with other countries “creates an almost unexpectable level of deference on the part of the other country,” Ayres told CNBC’s “Squawk Box Asia” on Friday.
“India very much doesn’t want … what it sees as its freedom of action in the future, constrained by requirements to act on behalf of another country due to an alliance agreement,” Ayres added.
Both countries still have disagreements, with a notable one being their views on the Russia-Ukraine war, which Washington has condemned but New Delhi has so far refrained from doing so.
India has purchased discounted Russian oil since the war broke out in February last year, and now imports about 40% of its crude supply from Moscow.
“Obviously, this is an area where American foreign policy leaders would like to see something different given American concerns about Russia’s war in Ukraine,” Ayres highlighted.
“So I think that this is yet another area where you do see some space between American interests and Indian interests … That’s probably going to remain an area of disagreement.”
Although an India-U.S. alliance seems to be off the table, the partnership between the two countries will continue to strengthen, with technology cooperation at the forefront of it.
In May, Biden and Modi announced a slew of technology and defense deals, ranging from collaborating on diversifying supply chains to working together across space and artificial intelligence.
“Technology generally has really been in the lead in improving this relationship,” said Evan Feigenbaum, vice president for studies at the Carnegie Endowment for International Peace.
“For a long time, people used to talk about India as a country that needed to be reformed. But increasingly, India has models and ideas and things that have been tested domestically that can be exported and scaled,” Feigenbaum told CNBC.
“They’re relevant in parts of the world, especially the global south like Africa and the Middle East, much more relevant than the models the United States and Europe has,” he added, citing the example of how India’s digital infrastructure has helped the “unbanked become banked.”
“It’s something the government wants to showcase and it’s something you’re going to hear a lot about at this G20,” Feigenbaum said.
Thanks to skyrocketing housing prices, homeowners are now sitting on nearly $30 trillion in home equity, according to the St. Louis Federal Reserve — just shy of the 2022 peak.
That’s roughly $200,000 cash per homeowner in equity that can be tapped, which is the amount most lenders will allow you to take out while still leaving 20% equity in the home as a cushion.
Up until last year, taking cash out by refinancing was a popular way to access the equity you’ve accumulated in your home. With mortgage rates currently over 7%, that’s suddenly a lot less appealing.
Even with high rates of home equity, borrowers are more likely to take out a second loan to pull cash out, rather than lose their low rate through a cash-out refi.
Otherwise, a home equity line of credit, also known as a HELOC, lets you borrow money against a portion of your home’s equity. Instead of taking out a home loan at a fixed amount, a HELOC is a revolving line of credit, but with better rates than a credit card, that you can use when you want to, or just have on hand.
Last year, originations of home equity loans and HELOCs increased 50% compared with two years earlier, according to the Mortgage Bankers Association, or MBA.
“Given the nearly $30 trillion of accumulated equity in real estate, there is untapped potential for home equity lending for lenders and borrowers,” said Marina Walsh, MBA’s vice president of industry analysis.
When it comes to borrowing against your home, the terms can vary greatly, according to a LendingTree report that analyzed more than 580,000 home equity loan offers across the country.
The average home equity loan amount offered to homeowners is $104,102, LendingTree found. Homes in Iowa had the most favorable terms with an average interest rate of 9.88% — two percentage points higher than the average rate of 7.88% offered in Maryland, the lowest in the nation.
Still, at less than 10%, rates are significantly lower than what it costs to borrow on credit cards, which charge roughly 20%, on average.
However, “it’s not that easy to withdraw money from your home,” said Zillow’s senior economist, Nicole Bachaud. “Not everybody is going to qualify for getting an extra loan.”
Fewer banks offered this option during the height of the Covid pandemic, when lenders tightened their standards to reduce their risk. Access to HELOCs has improved, although the most preferable terms still go to borrowers with higher credit scores and lower debt-to-income ratios.
“Though a home equity loan can be a good way to pay for big expenses, like major renovations, or to consolidate high-interest debt, getting one isn’t without drawback,” added Jacob Channel, LendingTree’s senior economist.
“Not only can qualifying for a home equity loan be more challenging than qualifying for other types of debt, defaulting on a home equity loan can have serious negative consequences,” Channel said. In some extreme instances, defaulting on a home equity loan can mean that you’ll lose your house, he noted.
Even now, “borrowers shouldn’t rush out to get a home equity loan until they fully understand all of the risks associated with them,” Channel cautioned.
Keep in mind that different lenders will also offer different terms and interest rates, Bachaud added. She recommended talking to several mortgage companies or loan officers, as well as weighing all the costs before deciding what makes the most sense.
An American Flag on the U.S. Capitol Building is seen in Washington, August 31, 2023.
Kevin Wurm | Reuters
A deeply divided Congress returned Tuesday from a monthlong summer vacation with the clock ticking to pass spending legislation to avoid a government shutdown and boost U.S. emergency response funding following multiple natural disasters.
The U.S. government will shut down at midnight on Sept. 30 if Congress fails to pass spending legislation. While the Senate is back in session Tuesday, the House will not return to work until Sept. 12, leaving nearly three weeks to pass funding before the Sept. 30 deadline.
The White House on Thursday asked Congress to pass a single short-term measure, called a continuing resolution, to fund the federal government at current levels and avoid a shutdown while negotiations continue over a dozen long-term funding bills.
The leaders of the House and Senate both agree that a short-term measure is the best way to avoid a government shutdown. Senate Majority Leader Chuck Schumer, D-NY, said in August that he and House Speaker Kevin McCarthy, R-Calif., agreed that Congress should pass a continuing resolution to extend funding at existing levels for a few months.
The continuing resolution is a stopgap measure that would kick the can down the road, setting the U.S. up for potential shutdown at a later date if Congress cannot pass the longer-term spending bills in the interim. The Republican-led House of Representatives has only passed one of a dozen bills needed to fund the federal government through 2024.
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McCarthy came out publicly in support of a continuing resolution to keep the government running during an interview with Fox News last month. He sought to cajole House Republicans into supporting the measure with a warning that investigations into the Biden administration would grind to a halt if the government shuts down.
“If we shut down, all of government shuts it down, investigations and everything else. It hurts the American public,” McCarthy told Fox News.
But far-right members of the House GOP are pushing back against McCarthy. The House Freedom Caucus is trying to tie government funding to legislation that would crack down on undocumented immigration and restart construction of the border wall.
And Rep. Marjorie Taylor Greene, R-Ga., told constituents during a town hall last Thursday that she would not vote to fund the government unless the House votes to open an impeachment inquiry into President Joe Biden.
Bank of America analysts in a note Tuesday put the chances of shutdown as a coinflip given the conditions conservative Republicans are putting on funding legislation. If a shutdown does occur, it will have a minimal impact on financial markets, UBS analysts said in a note Tuesday.
Bank of America believes a shutdown is unlikely to last long if it does occur given the potential political consequences for the GOP and the added pressure to fund the government given the devastating wildfires in Maui, Hawaii and Hurricane Idalia that swept through Florida and the Southeast last week.
The battle over funding the U.S. government comes as the Federal Emergency Management Agency is also running low on money to respond to natural disasters with hurricane season kicking into high gear this month.
FEMA Administrator Deanne Criswell said last week that a shutdown would not impact operations that are addressing the immediate needs of the victims of Maui wildfires, Hurricane Idalia and other disasters in the near future.
But FEMA expects to use up the $3.4 billion left in its disaster relief fund and run a deficit by the middle of the month in the absence of additional money. The Biden administration has called on Congress to pass separate funding that includes a total of $16 billion to bolster the disaster fund.
“We need this money done. We need this disaster relief request met and we need to do it in September — we can’t wait,” President Joe Biden told FEMA personnel during a visit to the agency’s headquarters in Washington, D.C., last week.
The Biden Administration’s request to bolster FEMA’s disaster relief fund could also run into Republican opposition to U.S. military aid for Ukraine. The White House linked the disaster money to a request for more than $20 billion to bolster Kyiv during its counteroffensive against the Russian occupation.
Florida Sens. Marco Rubio and Rick Scott, both Republicans, have called for Congress to consider the disaster funding and Ukraine aid separately. Scott vowed to introduce a bill to replenish FEMA’s disaster fund with $12.5 billion and push for an immediate vote when the Senate returns from summer vacation
Scott accused the Biden administration of “playing games” by tying the FEMA funding to aid for Ukraine. Rubio told Fox News, “No matter how anybody feels about Ukraine funding those two things should never be one for the other.”
U.S real estate investment trusts today manage $4.5 trillion in real estate worldwide. Many groups on Wall Street offer these tax-friendly funds to retail investors.
KKR’s real estate business is one of the big players in the REIT game. The private equity firm manages multiple REIT funds. The KKR Real Estate Select Trust, which currently manages $1.5 billion in assets, paid a dividend of 5.4% to its investors in July 2023.
But the benefits extend beyond returns.
“When you look at the after tax equivalent of that yield, it is very compelling.” said Billy Butcher, CEO of KKR’s global real estate business. “The depreciation from our properties has covered 100% of the income generated by our properties, and there’s no tax on that dividend,” he said in an interview with CNBC.
Larger funds sometimes contain a diversified pool of assets. Categories may include office, student housing, casino, timberlands, radio and cell towers, server farms, self-storage properties, billboards, and much more.
“Back in the 1960s, there were three or four different types [of REITs], said Sher Hafeez, a managing director at Jones Lang LaSalle, a real estate services firm. “Now, I can count at least 20 different types.”
Top performing REIT sub-sectors in recent years include data centers, self-storage properties, residential housing and tower REITs. Residential housing delivered a return of 16% from 2010 to 2020, according to a S&P Global Investments report.
The investor-friendly tax rules can also increase the pace of large-scale development.
“Having REITs there as a potential exit helps the market, and helps the availability of financing,” said Michael Pestronk, CEO and co-founder of Post Brothers, a Philadelphia-based housing developer.
Some funds like Invitation Homes and American Homes 4 Rent were founded in the yearslong slowdown in U.S. home construction. At the time, REITs bought and managed commercial-scale properties, which could include products like master-planned communities or traditional apartment complexes.
In recent years, publicly traded trusts have targeted single-family rental market, and today, these REITs have grown tremendously — enough to build new neighborhoods in their entirety.
Watch the video above to learn the fundamentals of real estate investment trusts.
South African police officers walk in front of an event banner outside the venue for the BRICS summit at the Sandton Convention Center in the Sandton district of Johannesburg, South Africa, on Monday, Aug. 21, 2023.
Michele Spatari | Bloomberg | Getty Images
Leaders from five developing nations accounting for nearly half the world’s population are gathering in Johannesburg Tuesday for the 15th BRICS Summit with expansion of the emerging market grouping, the war in Ukraine and relations with the West all high on the agenda.
Hosted by South African President Cyril Ramaphosa, the current BRICS chair, the meeting will convene Chinese President Xi Jinping, Brazilian President Luiz Inácio Lula da Silva, Indian Prime Minister Narendra Modi and Russian Foreign Minister Sergei Lavrov.
Russian President Vladimir Putin will join virtually as he is currently subject to an arrest warrant from the International Criminal Court for war crimes. As an ICC signatory, South Africa would have been required to honor the warrant had Putin arrived in the country.
Russian President Vladimir Putin attends a BRICS+ meeting during the BRICS summit via a video link in the Moscow region, Russia June 24, 2022.
Mikhail Metzel | Sputnik | Reuters
Ramaphosa invited 67 leaders from across Africa, Latin America, the Middle East, Asia and the Caribbean to attend the summit, but no Western leaders received an invitation. The U.N. secretary-general, chair of the African Union Commission and president of the New Development Bank were also invited along with over a dozen other dignitaries and a host of business leaders.
Expansion
A central focus of the summit will be the possible expansion of BRICS, with more than 40 countries expressing interest in joining, including major economic hubs and emerging geopolitical powers such as Nigeria, Saudi Arabia and Iran.
A total of 23 countries have formally applied to become new BRICS members, including Saudi Arabia, Iran, the UAE, Argentina, Indonesia, Egypt and Ethiopia, while major African players such as Nigeria and Ghana have informally expressed interest but so far stopped short of a formal application.
However, the informal nature of many expressions of interest so far highlights the straddling of a perceived global divide that many countries are attempting to navigate.
Gustavo de Carvalho, policy analyst and senior researcher at the South African Institute of International Affairs, said final decisions on new members are unlikely to emerge from this week’s two-day summit, but the aim will be to establish a clear process, criteria and timeframe for applications and admittance.
Speaking to CNBC via telephone from Johannesburg on Monday, de Carvalho noted that there are differing views on expansion among the existing members of the collaborative but amorphous bloc.
“India historically has been the country that mostly worries about the idea of expansion, and particularly with the fears that this would be used as increasing the Chinese influence within BRICS, and Russia is in a space where it’s very isolated in the international community so it became much more vocal in accepting the issue of the expansion,” de Carvalho explained.
He added that while Brazil for some time seemed neutral around the idea of expansion, the Lula administration has voiced some concern around potentially diluting the group to the point that it loses its effectiveness in providing a unified voice.
In a televised national address on Sunday, Ramaphosa explicitly supported expansion for the first time, particularly for fellow African nations that have long been part of “BRICS+” discussions among emerging economies.
In light of the punitive Western economic sanctions against Russia in response to its invasion of Ukraine, particularly the freezing of Russian assets, de Carvalho said other BRICS and affiliated countries were keen to reduce their risk exposure in the international financial system, and to find ways to collectively shore up their respective currencies and liquidity positions.
‘We have witnessed the world dividing into three camps’
Russian and Chinese officials have struck an increasingly anti-Western tone in their characterizations of what the BRICS bloc represents over the past year, as they look to build support for a broad coalition to challenge U.S. dominance over the global political and economic system.
Xi Jinping, China’s president, delivers a speech during a pre-BRICS summit state visit at the Union Buildings in Pretoria, South Africa, on Tuesday, Aug. 22, 2023. Xi, in an op-ed published in several South African media outlets, said his country and South Africa, as natural members of the Global South, should push for developing countries to have more sway in international affairs. Photographer: Michele Spatari/Bloomberg via Getty Images
Michele Spatari | Bloomberg | Getty Images
Though some analysts have suggested the BRICS may take a significant anti-Western turn, South Africa, India and Brazil have signaled intention to maintain closer ties with traditional Western partners, which de Carvalho said highlights the continued independence of constituent countries to prioritize their own interests with regards to diplomacy and international trade.
Some reports have cited Chinese officials as openly aiming to position BRICS as a direct geopolitical rival to the G7. Yet in his televised address on Sunday, Ramaphosa insisted South Africa would “not be drawn into a contest between global powers” and sought to retain its independence in a world “increasingly polarized into competing camps.”
The BRICS group operates on consensus and tends to collaborate on certain aspects of its various economies where interests align, rather than seeking to form a unilateral “alliance,” de Carvalho noted. In this vein, he said Ramaphosa’s speech was particularly important in differentiating Pretoria’s desire for a positive relationship with the West from the notion of a collective anti-Western shift.
Bilateral deals and cooperation is common among BRICS members, but de Carvalho challenged the idea that there is a unanimous desire to compete with the G7.
He argued that the aim instead is to represent the voice of five nations that cumulatively account for around 40% of the global population, based on the belief that “international politics should not be entirely controlled by a group of the seven most important industrialized economies,” of which India and China could well be members.
“It’s not really about changing the global order, I think it’s much more perception of the fact that the global order has already changed but our voice is still not nearly close enough to what we believe that we should be influencing global decisions,” de Carvalho said.
“So this is not just these countries in the global south whining about the role of the West that I think has much more to do with their own perception of capabilities and influence that they feel that they already have.”
He added that the BRICS members do not always agree and do not see the group as a “panacea,” but simply a “vehicle to become more influential in global discussions.”
“So for me, it’s not that BRICS would ever replace G7, but I wouldn’t be surprised if, for instance, and I think it would be potentially in a couple of years, a really good move is to start having meetings between BRICS and the G7.”
Yet Steven Gruzd, head of the African governance and diplomacy programme at the SAIIA, told CNBC on Monday that BRICS “already is a rival to the G7” insofar the bloc has established itself as one of the pre-eminent voices of the emerging economies.
“The G7 contains the rich Western economies, while BRICS contains the two most populous countries and the leading countries on three continents. Both blocs are seeking influence and support on the global stage. Whether the rivalry becomes geopolitical remains to be seen,” Gruzd said.
“We have witnessed the world dividing into three camps due to the Russian invasion of Ukraine – pro-West, pro-Russia-and-China and non-aligned. In my view, these splits are set to continue and widen, especially as the non-aligned face enormous pressure to join the other camps.”
‘What BRICS is and what it is not’
Though much of the narratives surrounding BRICS focus on the growing Chinese and Russian influence across emerging economies, de Carvalho suggested there is a mistaken assumption that China has “unlimited influence” within the other BRICS societies, which is “definitely not the case.”
“I think very clear that the competition and tension with India plays a major role within the BRICS dynamics and especially when it comes to some of the Indian fears of increased influence of China within the group and so on,” he said.
Evidence of the freedom of BRICS countries to chart their own courses on global issues has been highlighted in responses to Russia’s war in Ukraine, which de Carvalho said provided an opportunity in particular for other BRICS countries to “potentially serve as a bridge or a conduit for dialog.”
South Africa and China have separately held talks with Moscow and Kyiv in a bid to bring both sides of the conflict to the negotiating table, while India and Brazil have condemned the aggression but also pushed for a negotiated settlement rather than aligning with the West behind Ukraine. Separately, India has cooperated with Washington in opposing what they see as Chinese aggression in the Indo-Pacific.
“It is often useful to reflect on what BRICS is not: BRICS is not an alliance. None of the countries within BRICS see it as an alliance, like NATO, or any other kind of global alliance,” de Carvalho insisted.
“I think my hope for this summit is that we start getting more nuanced discussions around what BRICS is and what BRICS is not, and I think that can only be helpful for the international community more globally, because it does get a much better sense of what this institution is and how can we engage with that.”
As President Biden begins to more forcefully build a reelection case citing Bidenomics, Wall Street forecasts and actual GDP data are supportive, as are recent improving sentiment scores from consumers and CEOs. But on Main Street, small business owners remain a difficult group for Biden to win over.
Small business confidence is back at an all-time low, according to the just-released CNBC|SurveyMonkey Small Business Survey for the third quarter. That’s nothing new for Biden, as small business confidence has hung around a low throughout his presidency. In fact, the latest decline in the confidence index to a score of 42 out of 100 matches the all-time low from exactly one year ago.
With a business owner demographic that skews conservative, the twin economic issues of inflation and rising interest rates have compounded the general concerns about a Democratic administration. But at a time when signs are pointing to progress in the fight against inflation and a potential though by no means certain end to Federal Reserve interest rate hikes, the Q3 data presents more specific — and potentially more troubling — concerns for the president.
Even with a resilient economy, with interest rates at a multi-decade high, the number of small business owners who say they can easily access the capital needed to operate their firms continues to decline, now at under half (48%) versus 53% last quarter. This should not come as a surprise, as higher interest rates make banks stricter when it comes to lending requirements, a dynamic that tends to disproportionately punish small businesses, and linger or even intensify the longer a higher rate environment persists. Even for businesses that can secure loans, double-digit percentage rates are a cash flow challenge.
Data released on Monday from small business trade group NFIB reported similar difficulty among business owners attempting to access capital, with over half (58%) who borrowed or tried to borrow reporting high interest rates as their biggest complaint, and 40% of owners saying interest rates were a significant issue in the ability to access capital.
Wall Street banks and Main Street lending
The latest monthly report from alternative lending firm Biz2Credit from earlier this month shows small business loan approval percentages at banks with over $10 billion in assets at 13.3% in July, an approval rate that has been falling steadily and, pre-pandemic, had been as high as 28.3% in February 2020.
Rohit Arora, CEO of Biz2Credit, noted in a release on his firm’s data that as regulators raise capital requirements at some large banks in the years ahead, steps being taken today to prepare include more hesitancy to lend to smaller companies, since these loans can often range from five to seven years in term length.
Beyond recent concerns about the stability of regional banks, rating agencies say that even the largest Wall Street banks are on downgrade watch, not a situation in which banks are likely to be more accommodating to the capital needs of small firms, and in fact, the CNBC|SurveyMonkey data recorded a sharp drop in financial system confidence among business owners who work with large banks.
When it comes to accessing capital, small firms that hold accounts with large banks recorded the largest drop quarter-over-quarter, a 10% decline, from 59% saying it was easy for them to access business capital down to just 49% now. That was a much larger decline than among business owners who bank with a regional bank (down 2% quarter over quarter) and those who work with a community bank (down 4%). The largest group of small businesses (41%) conduct their business with large banks.
SurveyMonkey’s analysis of the data pointed to a gap between business owners who express confidence and a lack of confidence in banks that has widened from just 1 percentage point in Q2 (49% confident, 50% not confident) to 9 points now (45% confident, 54% not confident) this quarter.
“These data are a good reminder that the general economy for small business owners can often be very different from the economy that consumers on one side or large corporations on the other are experiencing,” said Laura Wronski, research science manager at SurveyMonkey.
The CNBC|SurveyMonkey Small Business Survey was conducted among over 2,000 small business owners across the U.S. between August 7-August 14.
While concerns across the economy about the banking crisis have lessened since the last quarter, that is not reflected in the conditions that small businesses are facing.
“Banking concerns have become even more top-of-mind for small business owners now, with their confidence in the U.S. banking system weakening and their ability to access needed capital hampered,” Wronski said.
Biden’s business supporters are increasingly negative
The CNBC|SurveyMonkey quarterly confidence index includes a series of core sentiment indicators related to policy that contributed to the decline back to the all-time low, with more small business owners saying they expect immigration policy and tax policy to be a negative.
That’s notable, according to SurveyMonkey analysis of the results, with these index components that had the largest drag on the overall scores not those tied to hiring or economic conditions, but “two factors that fall squarely within the remit of the president and Congress.”
Business owner expectations for revenue and hiring were largely unchanged, and the percentage that describe economic conditions as “good” changed only slightly, from 40% to 38%. More describe conditions as “middling,” up from 43% to 46% this quarter. But only 15% describe business conditions as “bad.”
“Small business owners seem to be more heavily factoring the political environment into their confidence estimations than the economic environment. The economy has shown promising growth over the last quarter, with fewer concerns about a recession economy-wide now and less immediate threat from a banking crisis,” Wronski said.
In the confidence index scoring, rather than broader survey questions, there was a notable drop for Biden. According to SurveyMonkey, overall approval of the president now matches the same level as Q3 2022 survey, with 31% saying they approve and 68% saying they disapprove of the way Joe Biden is handling his job as president. The small business survey data matches the overall trend in the recent FiveThirtyEight polling average.
But Wronski said, “What’s really surprising is that general confidence among small business owners is falling now for the first time among Biden’s supporters.”
With the overall confidence index back at the all-time low of 42, the gap in confidence index scoring specifically between Biden’s supporters and his detractors is now a record-low 18 points, according to SurveyMonkey (55 versus 37). Among survey respondents who identify as Democrats, the quarterly confidence score declined from 58 to 52, the lowest it has been since Biden became president. Among independents, the decline was from 49 to 42, the lowest it has been among these respondents since the first quarter of 2021. Republican confidence moved the least, declining from a score of 39 to 37.
A For Sale sign displayed in front of a home on February 22, 2023 in Miami, Florida.
Joe Raedle | Getty Images
Mortgage rates jumped Monday, following a rise in bond yields driven by investors’ concerns that high interest rates and inflation will linger longer than expected.
The average rate on the popular 30-year fixed mortgage hit 7.48%, the highest level since November 2000, according to Mortgage News Daily. It has risen 29 basis points in just the past week.
“Investors just aren’t seeing the kind of deterioration in economic data that they expected,” said Matthew Graham, chief operating officer of Mortgage News Daily.
He noted that the Federal Reserve wants to see the same deterioration before considering a policy shift, and that shift would likely favor short-term rates first.
“The net effect is that longer-term rates like 10-year Treasury yields and mortgages are bearing the brunt of the market’s negative rate sentiment. This won’t change until the data forces the Fed to start talking about the first rate cut.”
Higher rates are hitting potential homebuyers hard, adding insult to the injury of Covid pandemic-inflated home prices. Rates set more than a dozen record lows in 2020, setting off a homebuying spree that caused prices to rise over 40% from the start of the pandemic to the summer of 2022. Prices pulled back slightly at the end of last year but are now increasing again due to still-strong demand and very lean supply.
Higher mortgage rates exacerbate the supply situation. Current homeowners are reluctant to list their homes for sale because the vast majority of them have rates around or below 3%. To move to another home would mean more than doubling that rate. It has created what is now being called “golden handcuffs” among potential sellers.
For a buyer today, the difference in affordability from just a year ago is dramatic. The average on the 30-year fixed last year at this time was around 5.5%. For someone buying a $400,000 home, with 20% down on a 30-year fixed loan, the monthly payment today, with principal and interest, is roughly $420 more than it would have been a year ago.
More borrowers are now opting for adjustable-rate loans, which offer lower interest rates for shorter fixed terms. The average rate on a 5-year ARM last week was 6.2%, according to the Mortgage Bankers Association. The ARM share of applications rose to 7%. In 2020, when the 30-year fixed was setting multiple record lows, that share was less than 2%.
The nation’s homebuilders have been trying to offset higher mortgage rates by either buying down those rates for short or long terms, or by lowering home prices. They had slowed those incentives earlier this year, as demand surged and rates fell back, but they recently ramped them up again.
Homebuilder sentiment in August, however, dropped sharply, with builders citing higher interest rates as the main reason.
The Ukrainian counteroffensive that launched in June against Moscow’s invasion has run into a Russian wall.
In the run-up to the Ukrainian push, weapons from Western allies — such as tanks, artillery and other equipment — poured into Ukraine. Despite some small gains, Ukrainian forces have yet to see a large breakthrough, leaving some to wonder what else is needed.
“This is about as hard as it gets,” said Bradley Bowman, senior director of the Center on Military and Political Power at the Foundation for Defense of Democracies. “Think World War I with drones. … That’s a little bit what the Ukrainians are facing. And so in our microwave culture here in the United States, we want results yesterday, but that’s just not the way it works when you’re confronting a military like the Russians.”
Land mines have been a massive problem for Kyiv’s forces. Russia has deployed large tracts of the explosive devices, including mines aimed at troops as well as mines that are designed to take out armored vehicles like tanks, slowing down any Ukrainian advance. And with Russia’s ability to lay mines with specialized artillery, keeping cleared lanes open to send forces through has been a struggle.
“Let me be clear, this would present a significant challenge for any force that is trying to take it without the full scope of Western capabilities,” said Dmitri Alperovitch, executive chairman of Silverado Policy Accelerator and co-founder of CrowdStrike.
Many in Kyiv have called for the introduction of Western fighter jets, such as the F-16, to beef up the beleaguered Ukrainian Air Force, which has managed to keep flying and fighting despite what on paper is an overwhelming Russian advantage in air power. These fighters would also help take the pressure off of air defense forces, which consists of older Soviet surface-to-air missile systems that are difficult to resupply, and the newly provided Patriot missile system. Just sending F-16s to Ukraine wouldn’t turn the tide overnight. It would take months, if not years, of training to get the most out of these expensive jets.
“These weapons are not silver bullets,” said Mick Ryan, a retired major general of the Australian army and adjunct fellow at the Center for Strategic and International Studies. “There’s no such thing as a single weapon system that will provide that. It’s when you have lots of different weapons systems in the air on the ground. You have operators who are technically proficient and then you’re able to undertake the collective combined arms training, that’s when you have a really war-winning capability.”
Watch the video above to find out if more big-ticket, U.S.-made weapons such as F-16s, the Patriot missile system and HIMARS can turn the tide in Ukraine.
“In most recessions, unemployment rises more for lower-income groups,” said Tomas Philipson, a professor of public policy studies at the University of Chicago and former acting chair of the White House Council of Economic Advisers.
“Although we are not in an overall recession yet, the demand for and wages of lower-income groups are outpacing higher-income groups.”
Maskot | Digitalvision | Getty Images
The start of the year was plagued by waves of layoffs: Employers announced plans to cut 481,906 jobs in the first seven months, up 203% from the 159,021 cuts for the year-earlier period, according to Challenger, Gray & Christmas, a global outplacement and business and executive coaching firm.
Some sectors, such as banking and tech, have been particularly hard hit, and a series of Wall Street layoffs earlier this summer fueled fears that a recession still looms driven by those professional job losses.
But there still aren’t enough workers to fill open positions in the service industry and the unemployment rate remains near a 50-year low at just 3.5%.
“Recession is a loaded term,” said Jacob Channel, senior economist at LendingTree. “White-collar jobs might not be as plentiful as they were last year, but they’re still around.”
And “at the end of the day, even if white-collar hiring does appear to be on the decline, that doesn’t mean that the entire economy as a whole is struggling,” Channel said.
“On the contrary, most current data indicates that despite numerous headwinds, the broader economy is doing remarkably well, all things considered,” he added.
But regardless of the country’s economic standing, many Americans are feeling the pain of higher prices and most have exhausted their savings and are now leaning on credit cards to make ends meet.
Several reports show financial well-being is deteriorating. Rather than a “richcession,” this more closely resembles a so-called K-shaped recovery, said Greg McBride, Bankrate.com’s chief financial analyst.
Wealthy Americans aren’t exactly suffering, but credit card debt is at an all-time high and 61% of adults are living paycheck to paycheck. “Those are signs of financial strain,” he said.
However this economic period is ultimately defined, it will only be in hindsight, McBride said. “Typically, by the time a recession is declared, the recovery is underway.”
U.S. Speaker of the House Kevin McCarthy (R-CA) speaks to reporters before the passage of the National Defense Authorization Act (NDAA) at the U.S. Capitol on July 14, 2023 in Washington, DC.
Alex Wong | Getty Images
WASHINGTON — After more than two years of demanding that the Justice Department appoint a special counsel to investigate Hunter Biden, Republicans in Congress finally got their wish on Friday. And they were furious.
Reactions from the GOP began pouring in within minutes of Attorney General Merrick Garland’s announcement on Friday of a special counsel to oversee the criminal investigation of President Joe Biden’s son, Hunter Biden.
“If Weiss negotiated the sweetheart deal that couldn’t get approved, how can he be trusted as a Special Counsel?” House Speaker Kevin McCarthy tweeted shortly after the announcement.
McCarthy said the decision to appoint David Weiss, a federal prosecutor in Delaware who was assigned by former President Donald Trump to lead the criminal investigation into Hunter Biden, “cannot be used to obstruct congressional investigations or whitewash the Biden family corruption.”
Special counsels occupy a unique position within the legal system. They traditionally operate outside of the Justice Department’s chain of command and the congressional oversight that accompanies it. Special counsels are required to produce final reports on the results of their investigations for the attorney general, but they are not required to keep Congress or the Justice Department updated on the status of their work.
The appointment of the special counsel came as Republicans in Congress ramp up political attacks and investigations of the Biden family ahead of the 2024 election. Republicans argued that a special counsel probe would effectively draw a curtain around evidence they are seeking.
The plea agreement called for Biden to plead guilty to two counts of failing to pay his taxes in return for prosecutors recommending a sentence of probation and the dismissal of a separate gun charge in two years. The deal was scrapped earlier this month after a judge determined the agreements contained “some atypical provisions.”
“The fix is in,” said a PAC backing former President Donald Trump, Make America Great Again Inc.
“David Weiss cut Hunter Biden an unprecedented plea deal that attempted to give Joe Biden’s corrupt son blanket immunity,” MAGA Inc. Spokeswoman Karoline Leavitt said in a statement.
“Now, Merrick Garland expects us to trust Weiss to be the Special Counsel that finally brings Hunter Biden to justice,” said Leavitt.
A White House spokesperson referred CNBC to the Justice Department, which did not immediately respond to a request for comment.
Rep. James Comer, R-Ky., chairman of the House Oversight and Accountability Committee jointly looking into the federal probe of the younger Biden’s taxes, also accused the DOJ of a “Biden family coverup.”
“Let’s be clear what today’s move is really about,” Comer said in a statement. “The Biden Justice Department is trying to stonewall congressional oversight as we have presented evidence to the American people.”
Dye said the committee still expects the Justice Department to fully cooperate with Republicans’ investigation into Hunter Biden’s plea deal, “including not interfering with the 11 transcribed interviews” that have been requested.
Moreover, Weiss’ previous offer to appear before the committee this fall is still presumed to be valid, said Dye. As of Friday, the panel had not received anything from DOJ “indicating it is no longer willing to do so.”
