ReportWire

Tag: us government independent agencies

  • US Justice Department sues Norfolk Southern following train derailment in East Palestine | CNN

    US Justice Department sues Norfolk Southern following train derailment in East Palestine | CNN

    [ad_1]



    CNN
     — 

    The US Justice Department filed a civil lawsuit against Norfolk Southern Thursday, alleging violations of the Clean Water Act (CWA) and seeking damages over the train derailment and subsequent environmental disaster in East Palestine, Ohio, in February.

    The Norfolk Southern Railway Company and parent company Norfolk Southern Corporation are both named in the suit, court records show. The DOJ filed the lawsuit on behalf of the Environmental Protection Agency.

    The DOJ says the lawsuit seeks “injunctive relief, cost recovery, and civil penalties” for violations of the CWA, including discharges of pollutants and hazardous materials into waters, and under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA).

    Norfolk Southern says its focus is on making “progress every day cleaning up the site, assisting residents whose lives were impacted by the derailment, and investing in the future of East Palestine and the surrounding areas,” according to a statement sent to CNN from the company’s spokesperson, Connor Spielmaker, on Friday.

    “We are working with urgency, at the direction of the US EPA, and making daily progress,” the statement said. “That remains our focus and we’ll keep working until we make it right.”

    On February 3, a Norfolk Southern train derailed, igniting a dayslong inferno, spewing poisonous fumes into the air, killing thousands of fish and leaving residents to wonder if it was safe to live in East Palestine, Ohio.

    The fiery derailment prompted fears of a catastrophic explosion of vinyl chloride – a highly flammable chemical linked to an increased risk of cancer. After a mandatory evacuation order, crews released vinyl chloride into a trench and burned it off – averting an explosion but spawning new health concerns.

    Officials said tests showed that the air and municipal water were safe and allowed residents to return home, but some have reported a variety of new health problems including rashes, nausea, bloody noses and trouble breathing.

    While studying the possible health impacts from the train derailment, seven US government investigators also briefly fell ill in early March, the US Centers for Disease Control and Prevention confirmed to CNN on Thursday.

    “Symptoms resolved for most team members later the same afternoon, and everyone resumed work on survey data collection within 24 hours. Impacted team members have not reported ongoing health effects,” a CDC spokesperson said in a statement.

    The train operator Norfolk Southern must handle and pay for all necessary cleanup, according to the Environmental Protection Agency. The company has sent some hazardous waste out of state – fueling more questions about safety.

    The DOJ isn’t the only one filing a lawsuit against the railroad. The state of Ohio also filed a 58-count federal lawsuit against the rail company on March 14, saying Norfolk Southern violated numerous state, federal and Ohio common laws and violated the state’s CERCLA act.

    Norfolk Southern has set up a new web page that summarizes community impact efforts. Spielmaker said it “provides a 7-day look ahead and is updated daily and outlines Norfolk Southern’s continued environmental remediation efforts in concert with state and federal authorities.”

    “When a Norfolk Southern train derailed last month in East Palestine, Ohio, it released toxins into the air, soil, and water, endangering the health and safety of people in surrounding communities,” Attorney General Merrick B. Garland said in a statement. “With this complaint, the Justice Department and the EPA are acting to pursue justice for the residents of East Palestine and ensure that Norfolk Southern carries the financial burden for the harm it has caused and continues to inflict on the community.”

    The Justice Department, citing annual company reports, alleges in the suit Norfolk Southern both increased operating income and dropped operating costs over the past four years, including making “reductions in spending to repair, service, and maintain locomotives and freight cars, perform train inspections, and pay engine crews and train crews.” The suit also alleges that these measures are a “focus” of the compensation of the company’s executives.

    The lawsuit claims when the train derailed and cars carrying hazardous materials were breached, the dispersion and subsequent combustion of those materials released toxic chemicals into the “air, soil, groundwater, and waterways.”

    The DOJ says seven local waterways including the Ohio River were contaminated as a result.

    The Ohio Department of Natural Resources reported “thousands of aquatic animals were killed in the five-mile span of waterway from the Site” to the confluence of two creeks the DOJ described as contaminated, the lawsuit says.

    DOJ is asking for $64,618 per day, per violation of the CWA and $55,808 per day or $2,232 per barrel of oil or unit of hazardous substance, per violation of the CWA – but it was not immediately clear from the suit how many days the DOJ considered the violation to be applicable.

    They’re also seeking a declaration of liability against the company for response costs; a mandated increase in safety precautions by Norfolk Southern when transporting hazardous materials; and for the railroad to “remedy, mitigate, and offset” the environmental damage and public health issues that have arisen as a result of the derailment, court documents show.

    In early March, Norfolk Southern CEO Alan Shaw told a US Senate hearing that the company would “clean the site safely, thoroughly, and with urgency.”

    [ad_2]

    Source link

  • The US case against Binance calls out one of the worst-kept secrets in crypto | CNN Business

    The US case against Binance calls out one of the worst-kept secrets in crypto | CNN Business

    [ad_1]

    Editor’s Note: A version of this story appeared in CNN Business’ Nightcap newsletter. To get it in your inbox, sign up for free, here.


    New York
    CNN
     — 

    If you live in America, you’re not allowed to trade crypto derivatives. And if you’re a big international platform for trading crypto derivatives, you can’t let Americans trade those products if you haven’t registered with the boring-sounding but not-to-be-trifled-with federal regulator known as the Commodity Futures Trading Commission, or CFTC.

    Today, that regulator sued Binance, the world’s largest cryptocurrency exchange, for allegedly doing just that. (And if that name sounds familiar, it may because back in November, Binance briefly flirted with bailing out its smaller rival, FTX. Obviously, Binance took one look under the hood at FTX, now at the center of a massive federal fraud investigation, and promptly bailed.)

    Here’s the deal: The CFTC alleges that Binance and its CEO violated US trading laws by, among other things, secretly coaching “VIP” customers within the United States on how to evade compliance controls.

    The commission, which regulates US derivatives trading, said the company and its CEO, Changpeng Zhao, “instructed its employees and customers to circumvent compliance controls in order to maximize corporate profits.”

    Which, you know, isn’t something you want to be caught doing. The CFTC can’t bring criminal charges, but it can seek heavy fines and potentially ban Binance from registering in the US in the future.

    Binance said the lawsuit was “unexpected and disappointing,” adding that it has made “significant investments” in the past two years to ensure that US-based investors are not active on the platform.

    As news of the lawsuit broke Monday, Zhao, known as “CZ,” tweeted the number 4, pointing to a part of a previous statement: “Ignore FUD, fake news, attacks, etc.” (FUD is a commonly used acronym among crypto folks that stands for “fear, uncertainty, doubt.”)

    Binance has long argued that it isn’t subject to US laws because it doesn’t have a physical headquarters in America. Or anywhere, really — CZ claims that the company’s headquarters are wherever he is at any point in time, “reflecting a deliberate approach to attempt to avoid regulation,” according to the CFTC’s lawsuit.

    The CFTC’s lawsuit is certainly not great news for Binance, or for crypto more broadly. But it’s not quite the seismic event that was FTX’s collapse, or even the Terra/Luna meltdown. (You can read more about those here and here but, tl;dr: Those 2022 events were, to use a technical term, holy-crap-sell-everything-call-your-dad-and-cry moments for crypto investors.)

    Prices of bitcoin and ethereum, the two most popular cryptocurrencies, fell more than 3% Monday. Which is to say, it was just another day trading virtual currencies.

    Perhaps the most significant part of the lawsuit is the way the CFTC loudly calls out one of the worst-kept secrets in all of crypto: That not only are US customers gaining access to risky offshore crypto derivatives they shouldn’t be allowed to access, but it’s also pretty darn easy to do so. All anyone needs is a VPN and an iron stomach, because crypto derivatives are leveraged bets on wildly unstable assets. (And like everything in this newsletter, that shouldn’t be taken as any kind of advice.)

    The likely outcome, said Timothy Cradle, a crypto compliance and regulation expert at Blockchain Intelligence Group, will be that Binance ends up paying “hundreds of millions of dollars” in fines and will be prevented from registering a derivatives exchange in the future. That’s “a terminal blow for users of their service located in the US and a significant hit to Binance’s revenue” as the suit alleges US users make up 16% of the revenue for Binance’s derivatives product.

    Monday’s news adds yet another layer of regulatory scrutiny on crypto’s biggest players. The Internal Revenue Service and Securities and Exchange Commission are also reportedly also investigating Binance, per Bloomberg.

    Meanwhile, Coinbase, the largest US-listed crypto exchange, received a so-called Wells notice (typically a precursor to enforcement action) last week from the SEC for possible securities law violations.

    And just to pile on: The crypto industry earlier this month lost two of its biggest connections to the mainstream finance world — Silvergate and Signature Bank.

    All in all, not a great month for the industry that is perpetually straining credibility even when it’s hot. And right now, it is decidedly not.

    Enjoying Nightcap? Sign up and you’ll get all of this, plus some other funny stuff we liked on the internet, in your inbox every night. (OK, most nights — we believe in a four-day work week around here.)

    [ad_2]

    Source link

  • This is why SVB imploded, says top Fed official | CNN Business

    This is why SVB imploded, says top Fed official | CNN Business

    [ad_1]


    New York
    CNN
     — 

    Silicon Valley Bank imploded due to mismanagement and a sudden panic among depositors, a top Federal Reserve official plans to tell lawmakers at a hearing on Tuesday.

    In prepared testimony released on Monday, Michael Barr, the Fed’s vice chair for supervision, details how SVB leadership failed to effectively manage interest rate and liquidity risk.

    “SVB’s failure is a textbook case of mismanagement,” Barr says in testimony to be delivered before the Senate Banking Committee.

    The Fed official points out that SVB’s belated effort to fix its balance sheet only made matters worse.

    “The bank waited too long to address its problems and, ironically, the overdue actions it finally took to strengthen its balance sheet sparked the uninsured depositor run that led to the bank’s failure,” said Barr, adding that there was “inadequate” risk management and internal controls.

    Depositors yanked $42 billion from SVB on March 9 alone in a bank run, a panic that appeared to be fueled in part by venture capitalists urging tech startups to pull their funds.

    “Social media saw a surge in talk about a run, and uninsured depositors acted quickly to flee,” said Barr.

    The Fed official echoed comments from other top regulators in assuring the public about the safety of banks.

    “Our banking system is sound and resilient, with strong capital and liquidity,” Barr said. “We are committed to ensuring that all deposits are safe. We will continue to closely monitor conditions in the banking system and are prepared to use all of our tools for any size institution, as needed, to keep the system safe and sound.”

    Facing questions over how regulators — including at the Fed itself — missed red flags at SVB, the Fed has launched a review of oversight of the bank. Barr, who is leading that review, promised to take an “unflinching look” at the supervision and regulation of SVB. He said the review will be thorough and transparent and officials welcome and expert external reviews as well.

    In his testimony, Barr discloses that near the end of 2021, bank supervisors found “deficiencies” in the bank’s liquidity risk management. That resulted in six supervisory findings linked to SVB’s liquidity stress testing, contingency funding and liquidity risk management.

    Then, in May 2022, supervisors issued three findings related to “ineffective” board oversight, risk management weaknesses and internal audit function lapses, Barr said. Bank supervisors took further steps last year that show regulators were aware of problems at SVB.

    Barr’s testimony indicates the Fed’s review will examine how the 2018 rollback of Dodd-Frank may have contributed to SVB’s failure. That rollback, under then-President Donald Trump, allowed SVB to avoid tougher stress testing and rules on liquidity, funding, leverage and capital.

    Barr said the Fed will weigh whether the applying those tougher rules to SVB would have helped the bank manage the risks that led to its failure.

    Looking ahead, Barr said the recent events have underscored how regulators must enhance rules applying to banks and study banking has been changed by social media, customer behavior, rapid growth and other developments.

    [ad_2]

    Source link

  • TikTok collects a lot of data. But that’s not the main reason officials say it’s a security risk | CNN Business

    TikTok collects a lot of data. But that’s not the main reason officials say it’s a security risk | CNN Business

    [ad_1]



    CNN
     — 

    After TikTok CEO Shou Chew testified for more than five hours on Thursday before a Congressional committee, one thing was clear: US lawmakers remain convinced that TikTok is an urgent threat to national security.

    The hearing, Chew’s first appearance before Congress, kicked off with a lawmaker calling for TikTok to be banned and remained combative throughout. A number of lawmakers expressed deep skepticism about TikTok’s efforts to safeguard US user data and ease concerns about its ties to China. Nothing Chew said appeared to move the needle.

    The rhetoric inside and outside the hearing room highlighted the growing, bipartisan momentum for cracking down on the app in the United States. As the hearing was taking place, House Speaker Kevin McCarthy said he supports legislation that would effectively ban TikTok; Secretary of State Antony Blinken said TikTok should be “ended one way or another,” and the Treasury Department issued a statement vowing to “safeguard national security,” without mentioning TikTok by name.

    Concerns about TikTok’s connections to China have led governments worldwide to ban the app on official devices, and those fears have factored into the increasingly tense US-China relationship. But the remarks across the federal government on Thursday, combined with a prior threat from the Biden administration to impose a nationwide ban unless TikTok’s Chinese owners sell their stakes, shows that a complete ban of the hugely popular app very much remains a live possibility.

    However, more than two years after the Trump administration first issued a similar threat to TikTok, evidence remains unclear about whether the app is a national security threat. Security experts say the government’s fears, while serious, currently appear to reflect only the potential for TikTok to be used for foreign intelligence, not that it has been. There is still no public evidence the Chinese government has actually spied on people through TikTok.

    TikTok doesn’t operate in China. But since the Chinese government enjoys significant leverage over businesses under its jurisdiction, the theory goes that ByteDance, and thus indirectly, TikTok, could be forced to cooperate with a broad range of security activities, including possibly the transfer of TikTok data.

    “It’s not that we know TikTok has done something, it’s that distrust of China and awareness of Chinese espionage has increased,” said James Lewis, an information security expert at the Center for Strategic and International Studies. “The context for TikTok is much worse as trust in China vanishes.”

    When Rob Joyce, the National Security Agency’s director of cybersecurity, was asked by reporters in December to articulate his security concerns about TikTok, he offered a general warning rather than a specific allegation.

    “People are always looking for the smoking gun in these technologies,” Joyce said. “I characterize it much more as a loaded gun.”

    Technical experts also draw a distinction between the TikTok app — which appears to operate very similarly to American social media in the amount of user tracking and data collection it performs — and TikTok’s approach to governance and ownership. It’s the latter that’s been the biggest source of concern, not the former.

    The US government has said it’s worried China could use its national security laws to access the significant amount of personal information that TikTok, like most social media applications, collects from its US users.

    The laws in question are extraordinarily broad, according to western legal experts, requiring “any organization or citizen” in China to “support, assist and cooperate with state intelligence work,” without defining what “intelligence work” means.

    Should Beijing gain access to TikTok’s user data, one concern is that the information could be used to identify intelligence opportunities — for example, by helping China uncover the vices, predilections or pressure points of a potential spy recruit or blackmail target, or by building a holistic profile of foreign visitors to the country by cross-referencing that data against other databases it holds. Even if many of TikTok’s users are young teens with seemingly nothing to hide, it’s possible some of those Americans may grow up to be government or industry officials whose social media history could prove useful to a foreign adversary.

    Another concern is that if China has a view into TikTok’s algorithm or business operations, it could try to exert pressure on the company to shape what users see on the platform — either by removing content through censorship or by pushing preferred content and propaganda to users. This could have enormous repercussions for US elections, policymaking and other democratic discourse.

    Security experts say these scenarios are a possibility based on what’s publicly known about China’s laws and TikTok’s ownership structure, but stress that they are hypothetical at best. To date, there is no public evidence that Beijing has actually harvested TikTok’s commercial data for intelligence or other purposes.

    Chew, the TikTok CEO, has publicly said that the Chinese government has never asked TikTok for its data, and that the company would refuse any such request. In Thursday’s hearing, Chew said that what US officials fear is a hypothetical scenario that has not been proven.

    “I think a lot of risks that are pointed out are hypothetical and theoretical risks,” Chew said. “I have not seen any evidence. I am eagerly awaiting discussions where we can talk about evidence and then we can address the concerns that are being raised.”

    If there’s a risk, it’s primarily concentrated in the relationship between TikTok’s Chinese parent, ByteDance, and Beijing. The main issue is that the public has few ways of verifying whether or how that relationship, if it exists, might have been exploited.

    TikTok has been erecting technical and organizational barriers that it says will keep US user data safe from unauthorized access. Under the plan, known as Project Texas, the US government and third-party companies such as Oracle would also have some degree of oversight of TikTok’s data practices. TikTok is working on a similar plan for the European Union known as Project Clover.

    But that hasn’t assuaged the doubts of US officials. Multiple lawmakers at the hearing specifically said they were not persuaded by Project Texas. That’s likely because no matter what TikTok does internally, China would still theoretically have leverage over TikTok’s Chinese owners. Exactly what that implies is ambiguous, and because it is ambiguous, it is unsettling.

    In congressional testimony, TikTok has sought to assure US lawmakers it is free from Chinese government influence, but it has not spoken to the degree that ByteDance may be susceptible. TikTok has also acknowledged that some China-based employees have accessed US user data, though it’s unclear for what purpose, and it has disclosed to European users that China-based employees may access their data as part of doing their jobs.

    Multiple privacy and security researchers who’ve examined TikTok’s app say there aren’t any glaring flaws suggesting the app itself is currently spying on people or leaking their information.

    In 2020, The Washington Post worked with a privacy researcher to look under the hood at TikTok, concluding that the app does not appear to collect any more data than your typical mainstream social network. The following year, Pellaeon Lin, a Taiwan-based researcher at the University of Toronto’s Citizen Lab, performed another technical analysis that reached similar conclusions.

    But even if TikTok collects about the same amount of information as Facebook or Twitter, that’s still quite a lot of data, including information about the videos you watch, comments you write, private messages you send, and — if you agree to grant this level of access — your exact geolocation and contact lists. TikTok’s privacy policy also says the company collects your email address, phone number, age, search and browsing history, information about what’s in the photos and videos you upload, and if you consent, the contents of your device’s clipboard so that you can copy and paste information into the app.

    TikTok’s source code closely resembles that of its China-based analogue, Douyin, said Lin in an interview. That implies both apps are developed on the same code base and customized for their respective markets, he said. Theoretically, TikTok could have “privacy-violating hidden features” that can be turned on and off with a tweak to its server code and that the public might not know about, but the limitations of trying to reverse-engineer an app made it impossible for Lin to find out whether those configurations or features exist.

    If TikTok used unencrypted communications protocols, or if it tried to access contact lists or precise geolocation data without permission, or if it moved to circumvent system-level privacy safeguards built into iOS or Android, then that would be evidence of a problem, Lin said. But he found none of those things.

    “We did not find any overt vulnerabilities regarding their communication protocols, nor did we find any overt security problems within the app,” Lin said. “Regarding privacy, we also did not see the TikTok app exhibiting any behaviors similar to malware.”

    TikTok has cited Lin’s research as part of its defense. But Citizen Lab came out swinging this week at the company’s characterizations of the paper, saying in a statement that TikTok has presented the research as “somehow exculpatory” when a key finding was that Lin couldn’t see what happens to user data after it is collected.

    Chew, in a rare moment of apparent frustration, told lawmakers at the hearing that TikTok and Citizen Lab were really saying a version of the same thing. “Citizen Lab is saying they cannot prove a negative, which is what I’ve been trying to do for the last four hours,” he said.

    TikTok has faced claims that its in-app browser tracks its users’ keyboard entries, and that this type of conduct, known as keylogging, could be a security risk. The privacy researcher who performed the analysis last year, Felix Krause, said that keylogging is not an inherently malicious activity, but it theoretically means TikTok could collect passwords, credit card information or other sensitive data that users may submit to websites when they visit them through TikTok’s in-app browser.

    There is no public evidence TikTok has actually done that, however. TikTok has said the keylogging function is used for “debugging, troubleshooting, and performance monitoring,” as well as to detect bots and spam. Other research has shown that the use of keyloggers is extremely widespread in the technology industry. That does not necessarily excuse TikTok or its peers for using a keylogger in the first place, but neither is it proof positive that TikTok’s product, by itself, is any more of a national security threat than other websites.

    There have also been a number of studies that report TikTok is tracking users around the internet even when they are not using the app. By embedding tracking pixels on third-party websites, TikTok can collect information about a website’s visitors, the studies have found. TikTok has said it uses the data to bolster its advertising business. And in this respect, TikTok is not unique: the same tool is used by US tech giants including Facebook-parent Meta and Google on a far larger scale, according to Malwarebytes, a leading cybersecurity firm.

    At the hearing, Chew said the company does keystroke logging to “identify bots,” not to track what users say. He also repeatedly noted that TikTok does not collect more user data than most of its peers in the industry.

    As with the keylogging tech, the fact TikTok uses tracking pixels does not on its own transform the company into a national security threat; the risk is that the Chinese government could compel or influence TikTok, through ByteDance, to abuse its data collection capabilities.

    Separately, a report last year found TikTok was spying on journalists, snooping on their user data and IP addresses to find out when or if certain reporters were sharing the same location as company employees. TikTok later confirmed the incident and ByteDance fired several employees who had improperly accessed the TikTok data of two journalists.

    The circumstances surrounding the incident suggest it was not the type of wide-scale, government-directed intelligence effort that US national security officials primarily fear. Instead, it appeared to be part of a specific internal effort by some ByteDance employees to hunt down leaks to the press, which may be deplorable but hardly uncommon for an organization under public scrutiny. (Nevertheless, the US government is reportedly investigating the incident.)

    Joyce, the NSA’s top cyber official, told reporters in December that what he really worries about is “large-scale influence” campaigns leveraging TikTok’s data, not “individualized targeting through [TikTok] to do malicious things.”

    To date, however, there’s no public evidence of that taking place.

    TikTok may collect an extensive amount of data, much of it quietly, but as far as researchers can tell, it isn’t any more invasive or illegal than what other US tech companies do.

    According to security experts, that’s more a reflection of the broad leeway we’ve given to tech companies in general to handle our data, not an issue that’s unique or specific to TikTok.

    “We have to trust that those companies are doing the right thing with the information and access we’ve provided them,” said Peiter “Mudge” Zatko, a longtime ethical hacker and Twitter’s former head of security who turned whistleblower. “We probably shouldn’t. And this comes down to a concern about the ultimate governance of these companies.”

    Lin told CNN that TikTok and other social media companies’ appetite for data highlights policy failures to pass strong privacy laws that regulate the tech industry writ large.

    “TikTok is only a product of the entire surveillance capitalism economy,” Lin said. “And governments around the world are ignoring their duty to protect citizens’ private information, allowing big tech companies to exploit user information for gain. Governments should try to better protect user information, instead of focusing on one particular app without good evidence.”

    Asked how he would advise policymakers to look at TikTok instead, Lin said: “What I would call for is more evidence-based policy.”

    [ad_2]

    Source link

  • What the banking crisis means for mortgage rates | CNN Business

    What the banking crisis means for mortgage rates | CNN Business

    [ad_1]


    Washington
    CNN
     — 

    Mortgage rates have taken would-be buyers on a ride this year — and it’s only March.

    Generally, home buyers can anticipate mortgage rates to move down through the rest of this year as the banking crisis drags on, which could cool down inflation.

    But there are bound to be some bumps along the way. Here’s why rates have been bouncing around and where they could end up.

    After steadily rising last year as a result of the Federal Reserve’s historic campaign to rein in inflation, the average rate for a 30-year fixed-rate mortgage topped out at 7.08% in November, according to Freddie Mac. Then, with economic data suggesting inflation was retreating, the average rate drifted down through January.

    But a raft of robust economic reports in February brought concerns that inflation was not cooling as quickly or as much as many had hoped. As a result, after falling to 6.09%, average mortgage rates climbed back up, rising half a percentage point over the month.

    Then in March banks began collapsing. That sent rates falling again.

    Neither the actions of the Federal Reserve nor the bank failures directly impact mortgage rates. But rates are indirectly impacted by actions that the Fed takes or is expected to take, as well as the health of the broader financial system and any uncertainty that may be percolating.

    On Wednesday, the Federal Reserve announced it would raise interest rates by a quarter point as it attempts to fight stubbornly high inflation while taking into account recent risks to financial stability.

    While the bank failures made the Fed’s work more complicated, analysts have said that, if contained, the banking meltdown may have actually done some work for the Fed, by bringing down prices without raising interest rates. To that point, the Fed suggested on Wednesday that it may be at the end of its rate hike cycle.

    Mortgage rates tend to track the yield on 10-year US Treasury bonds, which move based on a combination of anticipation about the Fed’s actions, what the Fed actually does and investors’ reactions. When Treasury yields go up, so do mortgage rates; when they go down, mortgage rates tend to follow.

    Following the Fed’s announcement on Wednesday, bond yields — and the mortgage rates that usually follow them — fell.

    But the relationship between mortgage rates and Treasurys has weakened slightly in recent weeks, said Orphe Divounguy, senior economist at Zillow.

    “The secondary mortgage market may react to speculation that more financial entities may need to sell their long-term investments, like mortgage backed securities, to get more liquidity today,” he said.

    Even as Treasurys decline, he said, tighter credit conditions as a result of bank failures will likely limit any dramatic plunging of mortgage rates.

    “This could restrict mortgage lenders’ access to funding sources, resulting in higher rates than Treasuries would otherwise indicate,” Divounguy said. “For borrowers, lending standards were already quite strict, and tighter conditions may make it more difficult for some home shoppers to secure funding. In turn, for home sellers, the time it takes to sell could increase as buyers hesitate.”

    Inflation is still quite high, but it is slowing and analysts are anticipating a much slower economy over the next few quarters — which should further bring down inflation. This is good for mortgage borrowers, who can expect to see rates retreating through this year, said Mike Fratantoni, Mortgage Bankers Association senior vice president and chief economist.

    “Homebuyers in 2023 have shown themselves to be quite sensitive to any changes in mortgage rates,” Fratantoni said.

    The MBA forecasts that mortgage rates are likely to trend down over the course of this year, with the 30-year fixed rate falling to around 5.3% by the end of the year.

    “The housing market was the first sector to slow as the result of tighter monetary policy and should be the first to benefit as policymakers slow — and ultimately stop — hiking rates,” said Fratantoni.

    In second half of the year, the inflation picture is expected to improve, leading to mortgage rates that are more stable.

    “Expectations for slower economic growth or even a recession should bring inflation down and help mortgage rates decline,” said Divounguy.

    That’s good news for home buyers since it improves affordability, bringing down the cost to finance a home. It also benefits sellers, since it reduces the intensity of an interest-rate lock-in.

    Lower rates could also convince more homeowners to list their home for sale. With the inventory of homes for sale near historic lows, this would add badly needed inventory to an extremely limited pool.

    “Mortgage rates are steering both supply and demand in today’s costly environment,” said Divounguy. “Home sales picked up in January when rates were relatively low, then slacked off as they ramped back up.”

    But with cooling inflation comes a higher risk of job losses, which is typically bad for the housing market.

    “Of course, much uncertainty surrounding the state of inflation and this still-evolving banking turmoil remains,” said Divounguy.

    In his remarks on Wednesday, Fed Chair Jerome Powell said estimates of how much the recent banking developments could slow the economy amounted to “guesswork, almost, at this point.”

    But regardless of the tack the economy and banking concerns take, their impact will quickly be seen in mortgage rates.

    “Evidence — in either direction — of spillovers into the broader economy or accelerating inflation would likely cause another policy shift, which would materialize in mortgage rates,” said Divounguy.

    [ad_2]

    Source link

  • FTC wants to make it easier for consumers to cancel free trials and subscriptions | CNN Business

    FTC wants to make it easier for consumers to cancel free trials and subscriptions | CNN Business

    [ad_1]



    CNN
     — 

    New rules from the US government could soon let Americans more easily cancel free trials and subscriptions they no longer want, according to the Federal Trade Commission.

    The proposed rule change announced Thursday would apply to vast swaths of the US economy, covering both digital and physical subscriptions. Products subject to the new rule would include gym memberships, digital streaming and e-commerce, cable TV service, traditional print media and more.

    The FTC regulation could hit some of America’s biggest retailers and online platforms and a huge range of smaller businesses. It would affect millions of consumers in virtually every aspect of their lives, as subscription-based goods and services have become commonplace in industries as varied as music distribution, video gaming and pet care.

    Americans should not have to jump through hoops or be hounded by unwanted retention offers just to cancel their subscriptions, FTC Chair Lina Khan told reporters on a conference call Wednesday.

    “The idea here is pretty simple,” Khan said. “Companies should not be able to manipulate consumers into paying for subscriptions that they don’t want.”

    Broadly speaking, the rule change would prohibit companies from trying to retain customers through deceptive or burdensome tactics intended to stymie or delay them from quitting a subscription, such as by making customers mail in paperwork to cancel a subscription they initially signed up for online. For each violation of the rule, companies would be on the hook for potentially tens of thousands of dollars a day in fines — not to mention the consumer refunds the FTC could seek under the rule. While the FTC can currently pursue those types of remedies in specific sectors where cancellation rules exist, such as telemarketing, there is no such rule covering the economy as a whole, Khan said.

    The FTC voted 3-1 to introduce the proposal to amend the agency’s so-called Negative Option Rule, with the commission’s lone Republican, Christine Wilson, opposing the measure. The rules have not yet been finalized, the FTC said, and the public will have an opportunity to comment on the proposal. The agency also said it was not claiming any new legal authority, but that the rule would allow regulators to enforce against deceptive practices related to subscription cancellations without having to litigate each violation in a court.

    “We get countless complaints about this in our complaint database,” Khan said, “and we’re now putting an end to it.”

    Under the proposed change, companies would have to offer consumers the option to cancel a subscription using at least the same method they used to sign up; if a customer signed up for a service online or by phone, he or she would have to be able to cancel online or by phone.

    The proposed regulations include an array of other specific dos and don’ts. For example, companies would be required to first ask consumers who are requesting to cancel whether they would be open to retention offers, before the company could try to entice them back with discounts or deals. At the outset, all companies would be required to provide detailed information to consumers about a subscription’s terms before they could ask for billing details. Currently, the FTC said, there is no uniformity in how businesses present details such as how long a free trial period may last, the final date a customer can cancel a trial without charge, or the frequency of charges.

    The proposed FTC rule, which the agency calls “click to cancel,” comes as regulators have increasingly criticized the use of subtle techniques to steer consumers toward decisions that benefit a company’s bottom line.

    In the digital space, regulators have increasingly focused on so-called “dark patterns,” or the use of digital design interfaces that, for example, may use brightly colored buttons to encourage consumers to give up their personal information while simultaneously making opt-out buttons harder to see. More recently, Justice Department officials have argued that, depending on the context, the use of dark patterns could be considered an antitrust violation. On Wednesday, Khan adopted a similar view, telling reporters that the FTC’s consumer protection efforts — in this case, on deceptive cancellation practices — have antitrust implications because unchallenged deception tilts markets in favor of dishonest businesses that compete unfairly.

    The FTC in 2021 warned companies against deploying illegal dark patterns that trick or trap consumers into subscription services.

    The agency said at the time it was ramping up its enforcement in response to a rising number of complaints about deceptive sign-up tactics, including unauthorized charges or ongoing billing that is impossible to cancel. The FTC receives thousands of such complaints a year, it said.

    Since 2021, the FTC has been investigating Amazon

    (AMZN)
    over allegations the company uses deceptive sign-up and cancelation practices in its Amazon

    (AMZN)
    Prime product. The probe, whose sprawling scope now covers nearly a half-dozen Amazon

    (AMZN)
    services, was publicly disclosed in an Amazon

    (AMZN)
    filing accusing the FTC of harassing founder Jeff Bezos and CEO Andy Jassy; the FTC has said both men must personally testify in connection with the investigation.

    Thursday’s announcement underscores how the FTC’s scrutiny of user experience design extends to the enormous range of real-world commercial activity it oversees.

    The FTC has said it would pursue action against companies that did not provide easy and simple cancellations.

    Gyms, newspapers, phone companies and other businesses have faced lawsuits for imposing obstacles on consumers who try to cancel their services.

    In 2022, the FTC announced it reached a settlement with internet phone service provider Vonage over its cancellation policies. Vonage was required to pay $100 million in refunds to consumers harmed by the company’s actions, make its cancellation process simple and transparent, and stop charging consumers without their consent.

    Online children’s education company ABCmouse agreed in 2020 to pay $10 million to settle FTC allegations that it failed to disclose membership terms that led to consumers being charged without their consent.

    [ad_2]

    Source link

  • Most Asian shares reverse early losses after US Fed raises rates by a quarter point | CNN Business

    Most Asian shares reverse early losses after US Fed raises rates by a quarter point | CNN Business

    [ad_1]


    Hong Kong
    CNN
     — 

    Most Asia Pacific shares pared early losses on Thursday, after the US Federal Reserve reaffirmed its dedication to bring down inflation.

    In Hong Kong, the benchmark Hang Seng

    (HSI)
    index traded 1.5% higher, leading gainers in the region. One of the top gainers was internet giant Tencent, which was more than 7% higher after posting a strong rise in its online advertising business in the December quarter on Wednesday.

    In Japan, the Nikkei 225

    (N225)
    was flat after opening lower. The broader Topix index was 0.3% lower, reversing some of its early morning losses.

    South Korea’s Kospi was 0.2% higher, while Australia’s S&P ASX 200 advanced by half a percentage point.

    Asian shares had opened broadly lower, tracking losses on Wall Street. In the US, the Dow closed 1.6% lower, while the S&P 500

    (DVS)
    slipped about 1.7%. The Nasdaq Composite declined 1.6%.

    “Looking ahead, while we see fundamental value in Asia-ex Japan stocks … we remain concerned about a possible pullback in US stocks assuming US data deteriorates in the months ahead,” Nomura analysts wrote in a Thursday research note.

    US markets had been fickle on Wednesday before settling in the red as investors digested the Federal Reserve’s quarter-point rate hike and looked for clues about the state of the banking sector meltdown.

    The Fed raised rates by a quarter point at the conclusion of its two-day meeting, even though its historic rate hiking campaign was a contributing factor in the banking crisis.

    Investors were heartened by the central bank’s strong hints that its aggressive pace of interest rate hikes would come to an end soon. Still, the central bank also warned that rate cuts aren’t coming this year.

    – CNN’s Krystal Hur and Laura He contributed reporting

    [ad_2]

    Source link

  • Ramen noodles and drained savings: FEC weighs allowing candidates to use political cash to pay themselves bigger salaries | CNN Politics

    Ramen noodles and drained savings: FEC weighs allowing candidates to use political cash to pay themselves bigger salaries | CNN Politics

    [ad_1]



    CNN
     — 

    When Nabilah Islam began running for Congress in the 2020 cycle, she said she quickly discovered the high price of her decision.

    “It was impossible for me to have a full-time job and wage a competitive campaign,” the Georgia Democrat recalled. So, she gave up her work as a campaign consultant, paused paying her student loans and went without health insurance – in the middle of a pandemic – because she could no longer afford to pay the premiums. She drained her savings to pay living expenses.

    “I was eating ramen and turkey sandwiches every day,” said Islam, who lost her bid for a House seat and now serves in the Georgia state Senate. “It was one of the hardest things I had ever done in my life.”

    Now, the Federal Election Commission is taking up a request that Islam lodged in 2021 to change some of the federal rules governing the use of political cash. At a hearing Wednesday, the regulators weighed boosting the amount of campaign money candidates can use to pay themselves while running for office. They also are considering whether to allow federal candidates to use donors’ money to underwrite health insurance premiums and other benefits.

    Although the FEC now allows candidates to use campaign funds to pay themselves a salary, the agency set strict limits. That salary is capped at the annual salary for the office they are seeking or their earnings in the year before they became a candidate, whichever is the lower amount.

    The limits are aimed at preventing candidates from enriching themselves at donors’ expense, but they also bar candidates who were unemployed or at home caring for children in the prior year from using contributors’ money to draw a candidate salary.

    Supporters of the change say it would make it easier for a broader spectrum of Americans to run for federal office, including full-time caregivers, students and people from working-class backgrounds. But critics question whether it would encourage grift.

    “The reality is that giving up your salary for a year or two to run for Congress is unsustainable for most working people,” said Liuba Grechen Shirley, a former House candidate and founder and CEO of the Vote Mama Foundation, which aims to overcome the obstacles mothers face in running for office. She supports the rule change.

    “We have to make it the norm that candidates pay themselves a livable wage, so that they can run for office because that’s how we start to change the system,” she told CNN in an interview this week.

    Running for Congress is a time-consuming and expensive enterprise. The average successful House winner in the 2022 midterms spent nearly $2.8 million in campaign funds, according to OpenSecrets, a nonpartisan organization that tracks political money.

    And members of Congress, as a group, are far wealthier than the general US population. An OpenSecrets analysis of congressional financial disclosures reports in 2020 found that more than half the people in Congress that year were millionaires.

    Although a record number of women serve in Congress, they still make up just over a quarter of total representation, according to the Center for American Woman and Politics (CAWP) at Rutgers University.

    Only about 28% of all candidates for the House in 2022 were women, said Kelly Dittmar, CAWP’s director of research, underscoring that the gender disparities start long before Election Day.

    “If you could tell a potential candidate that they would have greater financial security if they decided to wage a campaign for office, then it might increase the pool of candidates, including women,” Dittmar said.

    The limits don’t just affect women.

    Maxwell Frost rides an elevator on his way to be interviewed on a podcast in Orlando, Florida, on August 30, 2022.

    Florida Rep. Maxwell Frost, who last year became the first Gen Z candidate to win a congressional seat, told the commissioners he “put himself in a bad financial place” by seeking a House seat.

    The 26-year-old Democrat said he left his job at a gun-violence prevention organization to run for office but quickly realized that he couldn’t sustain campaigning and driving part-time for Uber as he had planned.

    Frost drew headlines late last year after a landlord denied his application to rent an apartment in Washington, DC, because of his low credit score.

    “I did overcome the odds,” he testified Wednesday. “But there are often consequences when you participate in a system that’s not set up for you.”

    The FEC, which is not likely to make a decision in the coming weeks, is considering a range of options.

    Among them: Allowing candidates to earn, on a pro-rated basis, up to 50% – or as much as 100% – of the federal office they are seeking, regardless of what they earned in the year before they launched their campaigns. Rank-and-file members of Congress earn $174,000 a year, with those in top leadership positions collecting more.

    Other options include allowing candidates to receive a salary that’s tied to a $15-an-hour rate or to the minimum wage set by federal or state law.

    So far, a range of individuals and organizations – including the campaign arms for House Democrats and Republicans – have expressed general support for a change, although they diverge on the specific remedies.

    Some Republicans on the panel, including Commissioner James “Trey” Trainor, questioned whether the agency is overstepping its bounds by weighing a rule change and should instead ask Congress to change the federal law that bars candidates from converting campaign contributions to personal use.

    Bradley Smith, a former Republican FEC commissioner, testified that the agency should be wary of going too far with “feel-good rule-making.”

    “Why not allow candidates to pay for haircuts, better clothes, better food to keep a candidate’s energy up and fundraising or recharging time at the country club, all of which could be helpful to a campaign?” he asked.

    The commission also is considering whether to allow candidates to begin drawing a donor-funded salary as soon as they file a statement of candidacy rather than waiting, as is currently required, for primary ballot deadlines, which vary widely by state.

    Frost, the freshman congressman from Florida, also urged the commission to allow candidates to continue drawing a campaign salary after the election as they wait for their salaries as officeholders to kick in.

    Although the FEC often deadlocks along partisan lines, the commission has signaled an openness to easing some rules for candidates in the past.

    In 2018, the agency opened the door to candidates using campaign contributions to pay for child care benefits, following a request from Grechen Shirley. She said she did so after trying for months to juggle care for her small children while running for a House seat in Long Island. “I would literally be nursing my son, while my daughter put hairclips in my hair, and I’d have my headphones on and would be dialing for dollars,” she said.

    To date, 59 federal candidates have used campaign dollars for child care, according to Vote Mama. The group now is pressing states around the country to extend the policy to state and local candidates.

    This year, 19 bills to do so have been introduced in 13 states, Grechen Shirley said.

    Last year, Islam, 33, made history by becoming the youngest woman and the first Muslim woman elected to the Georgia state Senate. Although she is not currently planning another run for Congress, she said she is determined to see federal policy change.

    “I’m very persistent,” she said. “No one should have to go through all that in order to run for office.”

    [ad_2]

    Source link

  • Biden White House closely watching Federal Reserve following bank failures | CNN Politics

    Biden White House closely watching Federal Reserve following bank failures | CNN Politics

    [ad_1]



    CNN
     — 

    All eyes are trained on the Federal Reserve as it prepares to announce another potential interest rate hike Wednesday afternoon – exactly 10 days after the Biden administration stepped in with dramatic emergency actions to contain the fallout from two bank failures.

    Biden White House officials will be closely watching the highly anticipated rate decision – and monitoring every word of Fed Chairman Jerome Powell’s public comments – for any telling clues on how the central bank is processing what has emerged one of the most urgent economic crises of Joe Biden’s presidency.

    The moment creates a complex, if carefully observed, dynamic for the administration’s top economic officials who have spent much of the last two weeks engaged in regular discussions and consultations with Powell and Fed officials as they’ve navigated rapid and acute risks to the banking system.

    The Fed’s central role in not only supervising US banks and the stability of the financial system, but also in serving as a liquidity backstop in moments of systemic risk, has once again thrust the central bank back to center stage in the government’s effort to stabilize rattled markets.

    But Biden has made the central bank’s independence on monetary policy an unequivocal commitment – and has repeatedly underscored that he has confidence in the Fed’s central role in navigating inflation that has weighed on the US economy for more than a year and remained stubbornly persistent.

    Even as some congressional Democrats have directed fire at Powell for the rapid increase in interest rates and the risks the effort poses to a robust post-pandemic economic recovery, White House officials have taken pains not to shed light on their views publicly.

    Officials stress nothing in the last week has changed that mandate from Biden – and note that the widespread uncertainty about what action the Fed will take on rates only serves to underscore that reality.

    It’s a reality that comes at a uniquely inopportune time for a banking system that has shown clear signs of stabilizing in the last several days, but is still facing a level of anxiety among market participants and depositors about the durability of that shift.

    “I do believe we have a very strong and resilient banking system and all of us need to shore up the confidence of depositors that that’s the case,” Treasury Secretary Janet Yellen said during remarks Tuesday in Washington.

    Yellen said a new emergency lending facility launched by the Fed, along with its existing discount window, are “working as intended to provide liquidity to the banking system.”

    But prior to the closures of Silicon Valley Bank and Signature Bank, analysts had widely predicted that the Fed would unveil a half-point rate hike. But after the sudden collapse of the two banks that sent shockwaves across the global economy, there has been a growing belief among Wall Street analysts that the central bank will pull back, and only raise rates by a quarter-point – in part to try to alleviate concerns that the Fed’s historically aggressive rate hikes over the past year were precisely to blame for this month’s financial turmoil.

    But there are also concerns that a dramatic pullback, like choosing to forgo any rate increases altogether until a later meeting, would bring its own risks of signaling to the market that there are deeper systemic problems.

    It’s a conundrum top Fed officials started grappling with in the first of their two-day Federal Open Market Committee meeting on Tuesday. How they choose to navigate the path ahead will remain behind closed doors until their policy statement is released Wednesday afternoon.

    Powell is scheduled to speak to reporters shortly after.

    For officials inside the Biden White House, Wednesday is poised to offer critical insight into how the central bank is grappling with its urgent priority of bringing down inflation, while at the same time, minimizing the risk of additional dominoes falling in the US banking sector.

    Those two imperatives – bringing prices down and maintaining stability across the US financial sector – are urgent priorities for the Biden White House, particularly as the president moves closer to a widely expected reelection announcement and the health of the economy remains the top issue for voters.

    Yet the Fed’s decision will come at a moment of accelerating political pressure on the Fed itself – and Powell specifically.

    Massachusetts Democratic Sen. Elizabeth Warren, a member of the Senate Banking Committee, slammed Powell, saying he has failed at two of his main jobs, citing raising interest rates and his support of bank deregulation.

    “I opposed Chair Powell for his initial nomination, but his re-nomination. I opposed him because of his views on regulation and what he was doing to weaken regulation, but I think he’s failing in both jobs, both as oversight manager of these big banks which is his job and also what he’s doing with inflation,” Warren said on NBC’s “Meet the Press.”

    White House officials have made clear – with no hesitation – that Biden’s long-stated confidence in Powell is unchanged. Powell, who was confirmed for his second four-year term as Fed chair last year, announced last week that the Fed would launch a review into the failure of Silicon Valley Bank.

    Treasury and Fed officials, along with counterparts at other federal regulators and their international counterparts, have continued regular discussions this week as they’ve monitored the system in the wake of the weekend collapse, and eventual sale, of European banking giant Credit Suisse.

    US officials viewed the Credit Suisse collapse as unrelated to the crisis that took down the US banks a weekend prior, although they acknowledged it posed broader risks tied to confidence, or the potential lack thereof, in the system.

    In recent days, White House officials have begun to cautiously suggest that they see signs of the US economy stabilizing, following the turbulent aftermath of the closures of Silicon Valley Bank and Signature Bank. Biden, for his part, has credited the sweeping steps his administration announced – namely, the backstopping of all depositors’ funds held at the two institutions and the creation of an emergency lending program by the Federal Reserve – as having prevented a broader financial meltdown.

    He has also called on US regulators and lawmakers to strengthen financial regulations, though it is not yet clear what specific actions the president may ultimately throw his weight behind.

    Press secretary Karine Jean-Pierre declined to comment Tuesday afternoon at the White House press briefing on how she and other officials were watching the Fed’s upcoming decision.

    “The Fed is indeed independent. We want to give them the space to make those monetary decisions and I don’t want to get ahead of that,” Jean-Pierre said. “I don’t even want to give any thoughts to what Jerome Powell might say tomorrow.”

    [ad_2]

    Source link

  • Lawmakers say TikTok is a national security threat, but evidence remains unclear | CNN Business

    Lawmakers say TikTok is a national security threat, but evidence remains unclear | CNN Business

    [ad_1]



    CNN
     — 

    As TikTok CEO Shou Zi Chew prepares for his first congressional grilling on Thursday, much of the focus will undoubtedly be on the short-form video app’s potential national security risks.

    Concerns about TikTok’s connections to China have led governments worldwide to ban the app on official devices, and those fears have factored into the increasingly tense US-China relationship. The Biden administration has threatened TikTok with a nationwide ban unless its Chinese owners sell their stakes in the company.

    But more than two years after the Trump administration first issued a similar threat to TikTok, security experts say the government’s fears, while serious, currently appear to reflect only the potential for TikTok to be used for foreign intelligence, not that it has been. There is still no public evidence the Chinese government has actually spied on people through TikTok.

    TikTok doesn’t operate in China. But since the Chinese government enjoys significant leverage over businesses under its jurisdiction, the theory goes that ByteDance, and thus indirectly, TikTok, could be forced to cooperate with a broad range of security activities, including possibly the transfer of TikTok data.

    “It’s not that we know TikTok has done something, it’s that distrust of China and awareness of Chinese espionage has increased,” said James Lewis, an information security expert at the Center for Strategic and International Studies. “The context for TikTok is much worse as trust in China vanishes.”

    When Rob Joyce, the National Security Agency’s director of cybersecurity, was asked by reporters in December to articulate his security concerns about TikTok, he offered a general warning rather than a specific allegation.

    “People are always looking for the smoking gun in these technologies,” Joyce said. “I characterize it much more as a loaded gun.”

    Technical experts also draw a distinction between the TikTok app — which appears to operate very similarly to American social media in the amount of user tracking and data collection it performs — and TikTok’s approach to governance and ownership. It’s the latter that’s been the biggest source of concern, not the former.

    The US government has said it’s worried China could use its national security laws to access the significant amount of personal information that TikTok, like most social media applications, collects from its US users.

    The laws in question are extraordinarily broad, according to western legal experts, requiring “any organization or citizen” in China to “support, assist and cooperate with state intelligence work,” without defining what “intelligence work” means.

    Should Beijing gain access to TikTok’s user data, one concern is that the information could be used to identify intelligence opportunities — for example, by helping China uncover the vices, predilections or pressure points of a potential spy recruit or blackmail target, or by building a holistic profile of foreign visitors to the country by cross-referencing that data against other databases it holds. Even if many of TikTok’s users are young teens with seemingly nothing to hide, it’s possible some of those Americans may grow up to be government or industry officials whose social media history could prove useful to a foreign adversary.

    Another concern is that if China has a view into TikTok’s algorithm or business operations, it could try to exert pressure on the company to shape what users see on the platform — either by removing content through censorship or by pushing preferred content and propaganda to users. This could have enormous repercussions for US elections, policymaking and other democratic discourse.

    Security experts say these scenarios are a possibility based on what’s publicly known about China’s laws and TikTok’s ownership structure, but stress that they are hypothetical at best. To date, there is no public evidence that Beijing has actually harvested TikTok’s commercial data for intelligence or other purposes.

    Chew, the TikTok CEO, has publicly said that the Chinese government has never asked TikTok for its data, and that the company would refuse any such request.

    If there’s a risk, it’s primarily concentrated in the relationship between TikTok’s Chinese parent, ByteDance, and Beijing. The main issue is that the public has few ways of verifying whether or how that relationship, if it exists, might have been exploited.

    TikTok has been erecting technical and organizational barriers that it says will keep US user data safe from unauthorized access. Under the plan, known as Project Texas, the US government and third-party companies such as Oracle would also have some degree of oversight of TikTok’s data practices. TikTok is working on a similar plan for the European Union known as Project Clover.

    But that hasn’t assuaged the doubts of US officials, likely because no matter what TikTok does internally, China would still theoretically have leverage over TikTok’s Chinese owners. Exactly what that implies is ambiguous, and because it is ambiguous, it is unsettling.

    In congressional testimony, TikTok has sought to assure US lawmakers it is free from Chinese government influence, but it has not spoken to the degree that ByteDance may be susceptible. TikTok has also acknowledged that some China-based employees have accessed US user data, though it’s unclear for what purpose, and it has disclosed to European users that China-based employees may access their data as part of doing their jobs.

    Multiple privacy and security researchers who’ve examined TikTok’s app say there aren’t any glaring flaws suggesting the app itself is currently spying on people or leaking their information.

    In 2020, The Washington Post worked with a privacy researcher to look under the hood at TikTok, concluding that the app does not appear to collect any more data than your typical mainstream social network. The following year, Pellaeon Lin, a Taiwan-based researcher at the University of Toronto’s Citizen Lab, performed another technical analysis that reached similar conclusions.

    But even if TikTok collects about the same amount of information as Facebook or Twitter, that’s still quite a lot of data, including information about the videos you watch, comments you write, private messages you send, and — if you agree to grant this level of access — your exact geolocation and contact lists. TikTok’s privacy policy also says the company collects your email address, phone number, age, search and browsing history, information about what’s in the photos and videos you upload, and if you consent, the contents of your device’s clipboard so that you can copy and paste information into the app.

    TikTok’s source code closely resembles that of its China-based analogue, Douyin, said Lin in an interview. That implies both apps are developed on the same code base and customized for their respective markets, he said. Theoretically, TikTok could have “privacy-violating hidden features” that can be turned on and off with a tweak to its server code and that the public might not know about, but the limitations of trying to reverse-engineer an app made it impossible for Lin to find out whether those configurations or features exist.

    If TikTok used unencrypted communications protocols, or if it tried to access contact lists or precise geolocation data without permission, or if it moved to circumvent system-level privacy safeguards built into iOS or Android, then that would be evidence of a problem, Lin said. But he found none of those things.

    “We did not find any overt vulnerabilities regarding their communication protocols, nor did we find any overt security problems within the app,” Lin said. “Regarding privacy, we also did not see the TikTok app exhibiting any behaviors similar to malware.”

    TikTok has faced claims that its in-app browser tracks its users’ keyboard entries, and that this type of conduct, known as keylogging, could be a security risk. The privacy researcher who performed the analysis last year, Felix Krause, said that keylogging is not an inherently malicious activity, but it theoretically means TikTok could collect passwords, credit card information or other sensitive data that users may submit to websites when they visit them through TikTok’s in-app browser.

    There is no public evidence TikTok has actually done that, however. TikTok has said the keylogging function is used for “debugging, troubleshooting, and performance monitoring,” as well as to detect bots and spam. Other research has shown that the use of keyloggers is extremely widespread in the technology industry. That does not necessarily excuse TikTok or its peers for using a keylogger in the first place, but neither is it proof positive that TikTok’s product, by itself, is any more of a national security threat than other websites.

    There have also been a number of studies that report TikTok is tracking users around the internet even when they are not using the app. By embedding tracking pixels on third-party websites, TikTok can collect information about a website’s visitors, the studies have found. TikTok has said it uses the data to bolster its advertising business. And in this respect, TikTok is not unique: the same tool is used by US tech giants including Facebook-parent Meta and Google on a far larger scale, according to Malwarebytes, a leading cybersecurity firm.

    As with the keylogging tech, the fact TikTok uses tracking pixels does not on its own transform the company into a national security threat; the risk is that the Chinese government could compel or influence TikTok, through ByteDance, to abuse its data collection capabilities.

    Separately, a report last year found TikTok was spying on journalists, snooping on their user data and IP addresses to find out when or if certain reporters were sharing the same location as company employees. TikTok later confirmed the incident and ByteDance fired several employees who had improperly accessed the TikTok data of two journalists.

    The circumstances surrounding the incident suggest it was not the type of wide-scale, government-directed intelligence effort that US national security officials primarily fear. Instead, it appeared to be part of a specific internal effort by some ByteDance employees to hunt down leaks to the press, which may be deplorable but hardly uncommon for an organization under public scrutiny. (Nevertheless, the US government is reportedly investigating the incident.)

    Joyce, the NSA’s top cyber official, told reporters in December that what he really worries about is “large-scale influence” campaigns leveraging TikTok’s data, not “individualized targeting through [TikTok] to do malicious things.”

    To date, however, there’s no public evidence of that taking place.

    TikTok may collect an extensive amount of data, much of it quietly, but as far as researchers can tell, it isn’t any more invasive or illegal than what other US tech companies do.

    According to security experts, that’s more a reflection of the broad leeway we’ve given to tech companies in general to handle our data, not an issue that’s unique or specific to TikTok.

    “We have to trust that those companies are doing the right thing with the information and access we’ve provided them,” said Peiter “Mudge” Zatko, a longtime ethical hacker and Twitter’s former head of security who turned whistleblower. “We probably shouldn’t. And this comes down to a concern about the ultimate governance of these companies.”

    Lin told CNN that TikTok and other social media companies’ appetite for data highlights policy failures to pass strong privacy laws that regulate the tech industry writ large.

    “TikTok is only a product of the entire surveillance capitalism economy,” Lin said. “And governments around the world are ignoring their duty to protect citizens’ private information, allowing big tech companies to exploit user information for gain. Governments should try to better protect user information, instead of focusing on one particular app without good evidence.”

    Asked how he would advise policymakers to look at TikTok instead, Lin said: “What I would call for is more evidence-based policy.”

    [ad_2]

    Source link

  • FCC cracks down on spammy text messages | CNN Business

    FCC cracks down on spammy text messages | CNN Business

    [ad_1]


    Washington
    CNN
     — 

    The Federal Communications Commission is cracking down on spammy text messages with new rules for telecom companies, citing a surge of consumer complaints in recent years tied to unwanted robotexts.

    The new rules require phone providers to block text messages from suspicious sources including phone numbers that appear to be “invalid, unallocated, or unused.” Carriers will also have to block text messages coming from phone numbers that claim not to ever send text messages, or that the government has identified as numbers not used for texting, the FCC said.

    The move mirrors a similar US government effort to shut down illegal robocalls, which has led to at least one phone provider being cut off entirely from the US telephone network. Robocall monitoring services say the effort has largely been successful at reducing the volume of robocalls. But in recent years, an explosion of spam and scam text messages appears to have taken their place, leading to more than 18,000 consumer complaints at the FCC last year.

    The FCC is mulling additional regulations that could, among other things, apply Do Not Call registry protections to text messages for the first time. The FCC said it is also considering making it harder for marketers to use a single consumer consent to flood that user with calls and text messages from multiple sources and numbers.

    Unwanted or scam robotexts can be an even greater risk to consumers than unwanted robocalls, the FCC said, because unlike phone calls, text messages may contain malicious links that can infect a smart device with dangerous software.

    “Scam artists have found that sending us messages about a package you never ordered or a payment that never went through along with a link to a shady website is a quick and easy way to get us to engage on our devices and fall prey to fraud,” said FCC Chairwoman Jessica Rosenworcel in a statement.

    The FCC voted to adopt the new rules in a unanimous 4-0 decision.

    [ad_2]

    Source link

  • Opinion: The SVB collapse doesn’t have to be the first in a chain of many | CNN

    Opinion: The SVB collapse doesn’t have to be the first in a chain of many | CNN

    [ad_1]

    Editor’s Note: Lanhee J. Chen is a regular contributor to CNN Opinion and the David and Diane Steffy fellow in American Public Policy Studies at the Hoover Institution. He was a candidate for California state controller in 2022. He has played senior roles in both Republican and Democratic presidential administrations and has been an adviser to four presidential campaigns, including as policy director of 2012 Mitt Romney-Paul Ryan campaign. The views expressed in this commentary are his own. View more opinion on CNN.



    CNN
     — 

    When Silicon Valley Bank collapsed this month, analysts and policymakers quickly began considering how to prevent similar failures from happening in the future. While there are changes that lawmakers should consider, when it comes to financial regulation, history shows us that politicians are usually reacting to the last crisis and one step behind the next one.

    The savings and loan crisis of the 1980s led to passage of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, which closed insolvent financial institutions, created new regulatory agencies and implemented restrictions on how savings and loan (or thrift) institutions could invest deposited funds.

    The 2007-2008 financial crisis led to passage of the sweeping Dodd-Frank Act in 2010, which revamped federal regulation of the financial services sector and placed restrictions on how banks do business. Amid criticism that Dodd-Frank had gone too far in regulating banks, a bipartisan coalition in Congress passed, and then-President Donald Trump signed into law in 2018, some rollbacks of Dodd-Frank’s requirements pertaining to small and midsize financial institutions.

    Democrats have largely blamed this rollback of regulations for SVB’s demise. Many Republicans, for their part, have focused their aim on whether the bank’s leadership spent too much time pursuing “woke” policies on diversity and sustainability rather than ensuring depositors were protected.

    The fact that there is so little overlap between Republican and Democrat critiques in the wake of SVB’s collapse illuminates the challenging road ahead for bipartisan policy solutions to avert a future similar failure. If the two sides can’t even agree on the principal cause of the bank’s failure, it’s unlikely there will be consensus on the policies needed to shore up the financial system for the future.

    But they should. While Democrats generally favor more aggressive oversight of the financial system and Republicans largely argue that the current regulatory scheme is sufficient, the right answer looking ahead is somewhere in between.

    In the wake of SVB’s failure, some regulatory interventions have come into focus and could form the basis of policy discussions in the coming weeks and months as Congress considers how to respond to the current banking crisis.

    First, SVB’s demise came when a lack of liquidity (or a shortfall of cash on hand) left it unable to pay out depositors when they came looking for their money. The bank had invested a disproportionate amount of assets in long-term debt that was purchased at a time when interest rates were much lower than they are today. When the bank attempted to liquidate this debt over the last few weeks, it was forced to do so at a significant loss. SVB failed to hedge against risk by diversifying its investments.

    When depositors tried to withdraw $42 billion in cash from the bank on a single day, SVB’s cash shortfall generated a panic among those who had deposits at the bank and raised concerns about the health of the US banking system more broadly.

    Just as individual investors are often advised to diversify their investment strategies to minimize risk, so too might politicians look to requirements that banks ensure that they have proper diversification in how they are investing their assets.

    Further, some Republicans and many Democrats are also calling for expanded deposit insurance so that bank deposits over the current federal cap of $250,000 are also insured. Democratic Sen. Elizabeth Warren of Massachusetts, a vocal supporter of increased financial sector regulation, has called for increased deposit insurance that would be paid for by banks. Democratic Rep. Ro Khanna of California is expected soon to introduce legislation that raises or removes the insurance cap entirely, such that deposits of all amounts will be protected.

    Some Republicans have joined them in addressing the insurance cap. Republican Sen. J.D. Vance of Ohio, for example, has argued that lifting the cap (for example, by ensuring the cap keeps up with inflation) would equalize the playing field between large banks and smaller local and regional ones. Republican Sen. Mitt Romney of Utah has suggested that larger depositors might be insured up to the entire amount of their deposits in exchange for a small fee.

    If Congress moves toward increasing or eliminating the deposit insurance cap entirely, it should do so carefully. Depending on how the policy is constructed, such changes could disproportionately benefit wealthier institutional depositors or encourage bad behavior by banks if they know an open-ended bailout is waiting on the other end of risky investment decisions.

    Finally, some changes will undoubtedly come through the Federal Reserve, rather than Congress. This is probably a good thing, as these policymakers have some insulation from the political forces that directly affect lawmakers.

    The Federal Reserve, for example, will likely examine the extent of both capital and liquidity requirements at banks based on their total assets. A bank’s capital is the difference between its assets and liabilities or, put another way, the resources a bank has to ultimately absorb losses. Liquidity, by comparison, is a measure of the cash and assets a bank has immediately on hand to pay obligations (such as money that depositors might ask for).

    America’s central bank may also look at the content of “stress tests” created by the Dodd-Frank Act and designed to regularly assess the health of large financial institutions across the country. For nearly a decade, tests have been benchmarked to a low-interest rate environment, which is not reflective of recent conditions.

    But ultimately, the Federal Reserve is not blameless in the collapse of SVB as it created a fertile environment for the bank’s failure by keeping interest rates as low as they were for as long as they were. Lawmakers should do their part to make sure people understand that monetary policy has far-reaching impacts.

    While the best way to prevent the next SVB is likely to be viewed by policymakers through partisan-tinted glasses, there are avenues for Democrats and Republicans to work together. But the window to do so is narrow and closing. This time next year, we’ll be in the throes of presidential primary elections, and neither party will be particularly interested in compromise — even if that’s what our financial system needs.

    [ad_2]

    Source link

  • Transportation Secretary Pete Buttigieg cites ‘uptick’ in aviation incidents at FAA safety summit reviewing ‘serious close calls’ | CNN

    Transportation Secretary Pete Buttigieg cites ‘uptick’ in aviation incidents at FAA safety summit reviewing ‘serious close calls’ | CNN

    [ad_1]



    CNN
     — 

    Secretary of Transportation Pete Buttigieg said Wednesday there has been an “uptick” in recent aviation incidents and called on participants at a Federal Aviation Administration safety summit to help find the “root causes” of the issues.

    “We are particularly concerned because we have seen an uptick in serious close calls,” Buttigieg said in his opening remarks, referring to a series of near collisions on runways across the US.

    The summit comes after the FAA said it was investigating another close call between commercial airliners. The most recent close call was at Reagan National Airport near Washington, DC – the seventh since the start of this year.

    On March 7, Republic Airways Flight 4736 crossed a runway, without clearance, that United Airlines Flight 2003 was using for takeoff, according to a preliminary review, the FAA said. The United pilot had just been cleared for takeoff, the agency said.

    “An air traffic controller noticed the situation and immediately canceled the takeoff clearance for the United flight,” the FAA said.

    The FAA safety summit in McLean, Virginia, is the first of its kind since 2009 and kicks off a sweeping safety review the agency is conducting in the wake of the incursions.

    “Today is about the entire system, which means it’s about all of us,” Buttigieg said at the summit’s opening on Wednesday. The summit includes safety investigators, industry representatives, union leaders, and others.

    Buttigieg said Wednesday’s summit is the first in a series of coordinated events the FAA will conduct to find out what’s working well and what “new steps” need to be taken to ensure safety.

    Air travel has had a strong safety record and is the safest form of travel, Buttigieg said, but “we dare not” take that record for granted.

    The chairwoman of the National Transportation Safety Board told participants in the summit that the safety agency has made seven recommendations on runway collisions that have not been enacted.

    “One is 23 years old and still appropriate today on technology warning pilots of an impending collision,” chairwoman Jennifer Homendy said.

    “How many times are we going to have to issue the same recommendations over and over and over again?” she asked.

    Homendy said she’s already found one common issue with the six runway incursions they are investigating. In each case, the cockpit voice recorder, known as one of the black boxes, was overwritten, preventing investigators from hearing what took place on the flight deck.

    “All federal agencies here today need to ask: Are we doing everything possible to make our skies safer? We’ve been asking ourselves that very question at the NTSB,” she said.

    Nick Calio, president and CEO of Airlines for America, the trade association representing the major airlines, told the summit, “There’s constant self-evaluation always going on.”

    Calio said the airlines are looking at their data to try to find ways to make aviation safer so that close calls on runways, like those under investigation by the NTSB, don’t happen.

    “I don’t want to speculate a lot on what’s happened there, because they’re all under investigation. And we’re all trying to determine what is going on. Is this a trend? Is this a pattern?” he said.

    Rich Santa, president of the National Air Traffic Controllers Association union, cited a lack of staffing in air traffic control towers as a potential culprit.

    “Unfortunately, we have a staffing issue right now, as air traffic controllers. We are 1,200 certified professional controllers less now than we were 10 years ago,” he said at the summit. “It’s time for us to accurately and adequately staff the facilities.”

    Acting FAA Administrator Billy Nolen told the summit the agency is “continuing to hire” and is on pace to hire 1,500 controllers this year and another 1,800 next year.

    The NTSB is investigating the string of runway incursions involving commercial airliners. The near-collisions on US runways also have prompted federal safety investigators to open a sweeping review.

    Last month, a Southwest passenger jet and a FedEx cargo plane came as close as 100 feet from colliding at an Austin, Texas, airport, and it was a pilot – not air traffic controllers – who averted disaster, according to Homendy.

    In January, there was an alarming close call similar to this latest one. A Delta Air Lines flight was taking off from New York’s John F. Kennedy International Airport when air traffic controllers “noticed another aircraft crossing the runway in front of the departing jetliner,” the FAA said in a statement.

    [ad_2]

    Source link

  • Why Silicon Valley Bank collapsed and what it could mean | CNN Business

    Why Silicon Valley Bank collapsed and what it could mean | CNN Business

    [ad_1]


    London
    CNN
     — 

    Silicon Valley Bank collapsed with astounding speed on Friday. Investors are now on edge about whether its demise could spark a broader banking meltdown.

    The US federal government has stepped in to guarantee customer deposits, but SVB’s downfall continues to reverberate across global financial markets. The government has also shut down Signature Bank, a regional bank that was teetering on the brink of collapse, and guaranteed its deposits.

    In a sign of how seriously officials are taking the SVB failure, US President Joe Biden told Americans Monday that they “can rest assured that our banking system is safe,” adding: “We will do whatever is needed on top of all this.”

    Here’s what you need to know about the biggest US bank failure since the global financial crisis.

    Established in 1983, Silicon Valley Bank was, just before collapsing, America’s 16th largest commercial bank. It provided banking services to nearly half of all US venture-backed technology and life science companies.

    It also has operations in Canada, China, Denmark, Germany, Ireland, Israel, Sweden and the United Kingdom.

    SVB benefited hugely from the tech sector’s explosive growth in recent years, fueled by ultra-low borrowing costs and a pandemic-induced boom in demand for digital services.

    The bank’s assets, which include loans, more than tripled from $71 billion at the end of 2019 to a peak of $220 billion at the end of March 2022, according to financial statements. Deposits ballooned from $62 billion to $198 billion over that period, as thousands of tech startups parked their cash at the lender. Its global headcount more than doubled.

    SVB’s collapse came suddenly, following a frenetic 48 hours during which customers yanked deposits from the lender in a classic run on the bank.

    But the root of its demise goes back several years. Like many other banks, SVB ploughed billions into US government bonds during the era of near-zero interest rates.

    What seemed like a safe bet quickly came unstuck, as the Federal Reserve hiked interest rates aggressively to tame inflation.

    When interest rates rise, bond prices fall, so the jump in rates eroded the value of SVB’s bond portfolio. The portfolio was yielding an average 1.79% return last week, far below the 10-year Treasury yield of around 3.9%, Reuters reported.

    At the same time, the Fed’s hiking spree sent borrowing costs higher, meaning tech startups had to channel more cash towards repaying debt. At the same time, they were struggling to raise new venture capital funding.

    That forced companies to draw down on deposits held by SVB to fund their operations and growth.

    While SVB’s problems can be traced back to its earlier investment decisions, the run on the bank was triggered Wednesday when the lender announced that it had sold a bunch of securities at a loss and would sell $2.25 billion in new shares to plug the hole in its finances.

    That set off panic among customers, who withdrew their money in large numbers.

    The bank’s stock plummeted 60% Thursday and dragged other bank shares down with it as investors began to fear a repeat of the global financial crisis a decade and a half ago.

    By Friday morning, trading in SVB shares was halted and it had abandoned efforts to raise capital or find a buyer. California regulators intervened, shutting the bank down and placing it in receivership under the Federal Deposit Insurance Corporation, which typically means liquidating the bank’s assets to pay back depositors and creditors.

    US regulators said Sunday that they would guarantee all SVB customers’ deposits. The move is aimed at preventing more bank runs and helping tech companies to continue paying staff and funding their operations.

    The intervention does not amount to a 2008-style bailout, however, which means investors in the company’s stock and bonds will not be protected.

    “Let me be clear that during the financial crisis, there were investors and owners of systemic large banks that were bailed out … and the reforms that have been put in place mean that we’re not going to do that again,” Treasury Secretary Janet Yellen told CBS in an interview Sunday.

    “But we are concerned about depositors and are focused on trying to meet their needs.”

    There are already some signs of stress at other banks. Trading in First Republic Bank

    (FRC)
    and PacWest Bancorp

    (PACW)
    was temporarily halted Monday after the shares plunged 65% and 52% respectively. Charles Schwab

    (SCHW)
    stock was down 7% at 11.30 a.m. ET Monday.

    In Europe, the benchmark Stoxx Europe 600 Banks index, which tracks 42 big EU and UK banks, fell 5.6% in morning trade — notching its biggest fall since last March. Shares in embattled Swiss banking giant Credit Suisse were down 9%.

    SVB isn’t the only financial institution whose investments into government bonds and other assets have fallen dramatically in value.

    At the end of 2022, US banks were sitting on $620 billion in unrealized losses — assets that have decreased in price but haven’t been sold yet, according to the FDIC.

    In a sign that regulators have concerns about wider financial chaos, the Fed said Sunday that it would make additional funding available for eligible financial institutions to prevent the next SVB from collapsing.

    Most analysts point out that US and European banks have much stronger financial buffers now than during the global financial crisis. They also highlight that SVB had very heavy exposure to the tech sector, which has been particularly hard hit by rising interest rates.

    “While SVB is a major failure, [it] and other niche players like Signature are quite unique in the broader banking world,” research analysts David Covey, Adrian Cighi and Jaimin Shah at M&G Investments commented in a blog post on Monday. “So unique, in our view, that it is unlikely to create material problems for any of the large diversified banks in the US or Europe from a credit point of view.”

    HSBC stepped in Monday to buy SVB UK for £1 ($1.2), securing the deposits of thousands of British tech companies that hold money at the lender.

    Had a buyer not been found, SVB UK would have been placed into insolvency by the Bank of England, leaving customers with only deposits worth up to £85,000 ($100,000) — or £170,000 ($200,000) for joint accounts — guaranteed.

    The HSBC rescue is “fantastic news” for the UK startup ecosystem, said Piotr Pisarz, the CEO of Uncapped, a financial tech startup that lends to other startups. “I think we can all relax a bit today,” he told CNN.

    In a statement, HSBC CEO Noel Quinn said the acquisition “strengthens our commercial banking franchise and enhances our ability to serve innovative and fast-growing firms, including in the technology and life science sectors, in the UK and internationally.”

    [ad_2]

    Source link

  • From Wile E. Coyote to edibles: Recession forecasts are getting weird | CNN Business

    From Wile E. Coyote to edibles: Recession forecasts are getting weird | CNN Business

    [ad_1]

    A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here. You can listen to an audio version of the newsletter by clicking the same link.


    New York
    CNN
     — 

    Understanding the economy is a complicated task, and even the experts are struggling to answer seemingly simple questions like “Are we on the brink of a recession?” or “Why isn’t inflation falling faster?”

    Many have resorted to the use of metaphor to convey the current complexity of the economy.

    It’s a communications tactic that some Federal Reserve officials have long favored. In the early 1980s, Nancy Teeters, the first woman appointed to the Federal Reserve Board, came up with an apt metaphor to explain why she disagreed with steep rate hikes implemented by then-Fed Chairman Paul Volcker.

    Her colleagues were “pulling the financial fabric of this country so tight that it’s going to rip,” she said. “Once you tear a piece of fabric, it’s very difficult, almost impossible, to put it back together again,” she added, before remarking that “none of these guys has ever sewn anything in his life.”

    These days, economists and analysts are turning to increasingly outlandish metaphors to help translate their thoughts.

    Here are some of the most interesting descriptors used recently and what they mean:

    Wile E. Coyote

    If you think back to Saturday morning cartoons, you may remember the never-ending, and mostly futile, chase between Wile E. Coyote and his nemesis, Road Runner. That pursuit often ended with Wile E. running off a cliff and into mid-air.

    The toons were fun sources of entertainment in our salad years, but former Treasury Secretary Larry Summers says they now double as a case study for the Fed and the economy.

    “The [Federal Reserve’s] process of bringing down inflation will bring on a recession at some stage, as it almost always has in the past,” Summers told CNN last week.

    And for the US economy, it could likely mean a “Wile E. Coyote moment,” Summers said — if we run off the cliff, gravity will eventually win out.

    “The economy could hit an air pocket in a few months,” he said.

    Antibiotics

    When describing the state of the economy, Summers doesn’t just rely on Looney Tunes. He also borrows from the medical community.

    While describing why the Fed can’t end its rate hike regimen when inflation shows signs of showing, Summers has compared higher interest rates to medicine for a country sick with high inflation. The entire dose must be taken for the treatment to fully work, he says.

    “We’ve all had the experience of taking a course of drugs and giving up, stopping the drugs, before the course was exhausted, simply because we felt better. And then, whatever infection we had came back and it was harder to fight the second time,” Summers told Boston’s NPR news station WBUR in February.

    For what it’s worth, Before the Bell is also guilty of using this one.

    Fog report

    We may be driving in the fog, landing a plane in the fog or even just walking in it.

    What’s important in this oft-used scenario is that it’s hard to see and we’re doing something that typically requires clear visibility.

    Clients “facing the fog of uncertainty in financial markets, economic growth and geopolitics,” should “avoid unnecessary lane changes,” and “allow extra time to reach your destination,” advised Goldman Sachs analysts earlier this year.

    It’s essentially a fancy way of saying that no one really knows what’s going on in this economy. Instead of attempting to find a way out of the chaos, investors should slow down, stay the course and wait for recovery.

    Edibles

    Late last year, investment analyst Peter Boockvar used a semi-illicit metaphor to explain why he thought the Fed might be over-tightening the economy into recession. He compared the Fed to an inexperienced consumer of weed gummies, which can take a long time to kick in.

    During that waiting period, an eager consumer may think the drugs aren’t working and eat more before the effects of the first dose even set in. They then inevitably find themselves way too stoned and feeling not-so-great.

    Boockvar was careful to note that he himself does not indulge in this practice, by the way.

    Storm chasing

    JPMorgan Chase CEO Jamie Dimon should receive an honorary degree in meteorology for his recessionary weather predictions.

    The Big Bank exec has repeatedly referred to economic recession as a storm gathering on the horizon — occasionally he’ll update the public on how far away and how bad that storm is.

    Last summer Dimon spooked markets when he compared a possible upcoming recession to a “hurricane.” In November, he downgraded it to a “storm.”

    By January, his forecast was simply “storm clouds,” adding that he probably should never have used the term “hurricane.”

    Polyurethane

    Rick Rieder, BlackRock’s Chief Investment Officer of Global Fixed Income, has likened the economy to a bendable piece of plastic. Much like the economy, he wrote, polyurethane, “displays flexibility and adaptability, but also durability and strength.”

    He added that “the material’s ability to be stretched, bent, stressed and flexed without breaking, while in fact returning to its original condition, is what makes it so chemically unique. In recent years the US economy has displayed a remarkable resilience to stresses and an extraordinary ability to adapt to changing conditions.”

    Last week Senator Elizabeth Warren grilled Federal Reserve Chair Jerome Powell about American job losses being potential casualties of the central bank’s battle against high inflation.

    Warren, a frequent critic of the Fed’s leader, noted that an additional 2 million people would have to lose their jobs if the unemployment rate rises from its current 3.6% rate to reach the Fed’s projections of 4.6% by the end of the year.

    “If you could speak directly to the two million hardworking people who have decent jobs today, who you’re planning to get fired over the next year, what would you say to them?” Warren asked.

    Powell argued that all Americans, not just two million, are suffering under high inflation.

    “Will working people be better off if we just walk away from our jobs and inflation remains 5% or 6%?” Powell replied.

    Warren cautioned Powell that he was “gambling with people’s lives.”

    The discussion was part of a larger cost-benefit conversation that keeps popping up around the jobs market: Which is worse — widespread job loss or elevated inflation?

    CNN spoke with two top economic analysts with different perspectives to gain a deeper understanding of the debate.

    Below is our interview with Johns Hopkins economist Laurence Ball.

    Yesterday we published our interview with Roosevelt Institute director Michael Konczal, you can read that here.

    This interview has been edited for length and clarity.

    Before the Bell: Is it necessary to increase the unemployment rate to successfully fight inflation?

    Laurence Ball: There’s a trade off between inflation and unemployment. When the economy is very strong and unemployment is pushed down, inflation tends to be higher. Right now there are almost two job openings per unemployed worker, the supply of workers looking for jobs and the demand for firms to hire is out of whack. That’s leading to faster wage increases, which sounds good except that gets passed through to faster price increases and more inflation. So somehow the labor market has to be brought back towards a normal balance of workers and jobs and that means slowing down the economy, and that probably means raising unemployment.

    Can you explain the cost-benefit analysis of two million jobs lost to get down to 2% inflation?

    If we assume we have to get inflation down to 2%, then it’s just an unhappy fact of life that that’s going to require higher unemployment. But a lot of people, including me, think that if the Fed gets it down to 4% or 3%, that’s the time to declare victory or say, ‘close enough for government work.’

    It gets more and more expensive in terms of how much unemployment it costs to go from 3% to 2% inflation. Those last few points will have disproportionately large costs, and it’s very dubious if that’s really worth it.

    Now, the Fed has the political problem that they’ve been insisting on a 2% target rate for years. If they say right at this moment that 3% or 4% is okay that would be seen as surrendering or moving the goalposts. I think a likely outcome is that inflation gets down to 3% or 4% and the Fed continues to say their target is a 2% inflation rate but never does what has to be done to get it there.

    If you examine Fed history you see that 5% appears to be a magic number. When inflation is above 5% it becomes this big political issue. When it goes below 5% it disappears from the headlines.

    What do you think is important for our readers to know about this back-and-forth between Powell and Warren?

    Behind all of this, in a market economy there’s sort of a basic glitch. We have this thing called unemployment, we sort of chronically have not enough jobs for everybody and that’s a big problem. The problem can be reduced somewhat in the short run if you get the economy going very fast. But then that leads to inflation. Accepting that unemployment has to go back up is just recognizing that there’s this glitch in the market economy or capitalism. It’s not clear how we can get around that.

    CNN Business’ David Goldman reports

    In an extraordinary action to restore confidence in America’s banking system, the Biden administration on Sunday guaranteed that customers of the failed Silicon Valley Bank will have access to all their money starting Monday.

    In a related action, the government shut down Signature Bank, a regional bank that was teetering on the brink of collapse in recent days. Signature’s customers will receive a similar deal, ensuring that even uninsured deposits will be returned to them Monday.

    SVB collapse: live updates

    In a joint statement Sunday, Treasury Secretary Janet Yellen, Federal Reserve Chair Jerome Powell and Federal Deposit Insurance Corporation Chairman Martin J. Gruenberg said the FDIC will make SVB and Signature’s customers whole. By guaranteeing all deposits — even the uninsured money that customers kept with the failed banks — the government aimed to prevent more bank runs and to help companies that deposited large sums with the banks to continue to make payroll and fund their operations.

    The Fed will also make additional funding available for eligible financial institutions to prevent runs on similar banks in the future.

    Wall Street investors were relieved that the government intervened as stock futures rebounded on Sunday evening, although the rally is fading Monday morning. Markets had tumbled more than 3% Thursday and Friday as investors feared more bank failures and systemic risk for the tech sector.

    [ad_2]

    Source link

  • What’s going on with all the runway close calls | CNN Politics

    What’s going on with all the runway close calls | CNN Politics

    [ad_1]

    A version of this story appeared in CNN’s What Matters newsletter. To get it in your inbox, sign up for free here.



    CNN
     — 

    There have been six close calls on US runways this year, which has led to a fair amount of news coverage, some alarm among the flying public and a lot of calls for answers – including from the acting head of the Federal Aviation Administration Billy Nolen, who testified on Capitol Hill this week.

    Unable to explain the spike, Nolen told lawmakers the agency wants to get to the bottom of things at a safety summit planned for next week. There are also specific investigations into each incident in Boston; Burbank, California; Austin, Texas; Honolulu; New York; and Sarasota, Florida.

    I talked to CNN’s Pete Muntean, who not only covers aviation but is also a pilot and flight instructor, for his perspective on what the heck is going on.

    Our conversation, conducted by phone, is below. Stick with it for an interesting bonus story on how low-flying planes are used to find poachers in Africa.

    WOLF: Six close calls in recent weeks. Are these all distinct events? Or should we view them as one larger issue?

    MUNTEAN: There’s definitely a constant theme because they’re the same type of event, which is officially known as a runway incursion. It is where two airplanes essentially get in the way of one another on or near the runway.

    These types of events can range from really minor to more egregious. What we saw at JFK in New York in January, that had to be one of the more egregious ones. The air traffic controller had to swoop in and stop a flight that was barreling down the runway toward a crossing, taxiing (Boeing) triple seven from taking off.

    That is a more extreme, severe example. There have been some examples where the airplanes get within a few hundred feet of one another, maybe as close as 100 feet. One of the cases like in Austin.

    But they’re not really caused, necessarily, by the same thing. That’s, of course, something that investigators will look at.

    (On Wednesday) the acting head of the FAA on Capitol Hill said that if there are dots to connect, they’ll connect them in this safety summit next week, although it doesn’t seem like there was any real common trigger. No common cause.

    RELATED: FAA to conduct sweeping safety review after multiple incidents

    WOLF: Who is supposed to keep these from happening? Is it the air traffic controllers? Is it the pilots? How is it supposed to work?

    MUNTEAN: There are multiple different layers of safeguards in place in the air traffic system, especially at these busy airports where there are a lot of airliners coming in and out in a lot of varying conditions, a lot of different times of day.

    Some of the responsibility falls on air traffic control. Of course, it’s their job to keep airplanes from running into one another. Some of the responsibility falls on the flight crew to keep it so that they follow the instructions of air traffic control, that they remain vigilant all the time, if they’re taxiing across runways or taking off from a runway that’s crisscrossing with another one as they’re about to land.

    The good news is that in commercial aviation in the US – which has a stellar track record, by the way – there are two trained pilots at all times. And there are a lot of eyeballs essentially making it so that these things don’t happen.

    The pilots can intercede at any point, and in some cases they have. They’ve just essentially called their own go-arounds to make it so that they don’t come in contact with an airplane. In some cases, the air traffic controllers will call it. The onus is on a few different layers here.

    I’m a pilot, but I just did a demonstration with a former NTSB (National Transportation Safety Board) investigator at a busy airport, Dulles (in Virginia), and it begs pointing out that some of the safeguards are as simple as paint on the runway and taxiways to remind pilots not to taxi too close to the runway. Some of it is in the phraseology that’s used on the radio. Some of it is in the procedures and training the pilots get.

    I think every pilot that’s out there now – and if you talk to professional pilots this is something that weighs on them – this has been a chronic problem for aviation for a while. But now, because of these headlines, it’s especially top of mind for pilots and air traffic controllers and regulators and safety advocates.

    WOLF: You said it’s a chronic problem. Is there any indication or any data to suggest this is happening more often? Or are we in the media just paying attention to it?

    MUNTEAN: I think these events are getting more attention. No doubt that these six that we have seen so far this year are extreme. Usually they don’t happen with such severity, with such frequency.

    But the FAA, at every layer of aviation from commercial aviation on down to small airplanes and private airports, they’re always trying to remind pilots to remain vigilant. Something that pilots really train for in their first flying lesson is how to behave in and respect the environment around an airport.

    In some ways, it’s like flying with a loaded gun. You have to be really, really careful.

    The reason why these are happening, one pilot told me – who’s the representative for a large union of airline pilots and a major airline – he said the system is just under so much pressure right now. There’s a lot of corporate pressure for airlines to get back on their feet after the pandemic.

    There’s a lot of new pilots flying right now, who may have matriculated from regional airlines to larger airlines. A lot of the old guard have retired. Pilots have left just because they were given voluntary leave packages as a result of the downturn of the pandemic.

    There are a ton of different factors at play.

    The fact that we’re sort of paying attention to these more just sort of highlights that nobody can ever let their guard down.

    WOLF: Is the current air traffic system that we’re using technologically up to snuff?

    MUNTEAN: I think it is. And I think the FAA would say that it is, because they have added in so many layers of technology to make it so that these incidents are avoided.

    They have technology that can sense, at some larger airports, whether or not a pilot is lined up with the wrong thing, if they were aiming for a runway but instead aimed for a taxiway to land on – which has happened before.

    They have more lighting on the pavement that warns pilots, essentially like a stoplight, to make it so they don’t go rolling across a runway as they are taxiing across one.

    There are even systems that make it so that they can sense, using radar and other technologies, where airplanes are on the ground and not just in the air. Some of these runway incursions are caused simply by airplanes being in the wrong place as they are taxiing and not necessarily in the air.

    I think the system is up to snuff. I think the FAA would say the system is up to snuff. But they’re also using this as a moment to sort of reinspect and have some introspection on the matter and whether or not they could be doing more to make it so that these problems can be avoided.

    WOLF: You already pointed out that commercial aviation in the US is incredibly safe.

    MUNTEAN: The last time there was a fatality was 2018, which was kind of a freak accident, where a person got hit on a Southwest flight by a fan blade that broke up in a jet engine.

    We’re reporting on crashes that don’t happen. These are close calls, sure, but nobody’s been hurt. Nobody’s been killed. So it kind of shows, in a way, how safe the system is.

    WOLF: Is there a spot in the system that is particularly weak? Is it takeoff or landing? What is the thing that makes pilots most nervous?

    MUNTEAN: The common theme is having so many airplanes close together. That’s sort of the inherent flaw of an airport, right? You bring in airplanes and take off and land. You may be using multiple different runways at the same time. There’s a lot of demand in the air traffic right now.

    Every airport is different, right?

    Some airports may have a lot of runways that are parallel and a lot of taxiways that are parallel to one another, like at Dulles the other day, where we went. There are three runways lined up: one left, one center and one right. They’re all headed the same direction to the north. You have to be really careful that you’re lined up with the right one.

    There are a few different things that you can do in the airplane to mitigate that and make sure that you have a safeguard of your own. But I think it really varies by the airport. In some places, there are intersecting runways. There are taxiways that have confusing turns.

    The FAA does granular looks at things like this, where they say something like this taxiway design isn’t all that great, there may be a blind spot here, as you’re taxiing you may approach this at a 45-degree angle or it could be a 90-degree angle where somebody in the cockpit can see more.

    Also when conditions are changing – we saw in the Austin incident the weather was abysmal at that time. It was very low cloud ceilings and very low visibility where the pilots were able to get an indication that there was somebody on the runway, an approaching FedEx flight and a Southwest flight that was still on the runway that hadn’t taken off yet.

    They weren’t necessarily able to see that (Southwest flight), so far as we know, by their eyeball.

    There are a lot of things at play. You can’t just say it’s any one different thing. And remember, these pilots are often going in and out of different places multiple times a day. The responsibility is on everybody.

    WOLF: Do pilots face the same sort of difficult lifestyle we’ve been hearing about for train operators?

    MUNTEAN: There’s a ton of regulation that protects pilots. We see that occasionally getting better. Even flight attendants have gotten longer rest rules recently, where they’re able to rest between trips for a longer period of time.

    There’s always friction between organized labor, work groups and the companies that they work for. A lot of times it comes down to regulators and what they are able to do for workers. Pretty much every major airline right now – their pilot groups, as well as a lot of major flight attendant groups – are going through contract negotiations with their companies.

    Some of the safety and protection, unions would say, comes from a good deal that protects not only their ability to work but also keeps pilots and passengers safe. Organized labor and unions have a lot to say about this, and they want to make sure that they are treated fairly to make it so that these incidents don’t happen.

    I just talked to Dennis Tajer, who’s the representative of the Allied Pilots Association, which represents all the American Airlines pilots, and he said this is something that we’ve kind of been pounding our fists on the podium about, we’ve said for about a year that the air traffic system and the aviation system and the airline system are just under too much pressure, and now you’re seeing the result of that.

    It’s on not only regulators like the FAA, the Department of Transportation but also companies to make sure that these major airlines – which are huge corporations – to make sure that their pilots are safe and doing the job properly with the proper amount of rest, with the proper amount of resources.

    WOLF: Right. It’s in nobody’s interest for there to be an incident.

    MUNTEAN: Everyone says safety is a top priority, of course.

    But depending on your viewpoint, safety can have a lot of different meanings.

    WOLF: It’s always been my sense that air traffic is one of the most, if not the most, government-regulated systems in the country. Unlike other areas where there might be a move toward deregulation, this is something the government controls and is going to continue to control.

    MUNTEAN: It’s super regulated because a lot of the rules are, frankly, written in blood.

    When you talk about this runway incursion issue, the landmark case is the Tenerife accident (in 1977), where KLM and Pan Am 747s that both diverted to Tenerife, an island near Spain, ran into one another and killed a bunch of people. There were some survivors, but it was a classic runway incursion incident.

    One of the airplanes was back taxiing down the runway, as the KLM crew essentially blasted off without regard for where the other airplane was. They couldn’t see it because the weather was poor.

    These regulations are often born out of horrible disasters. And I think the thing to point out here is that we have avoided disaster in these six cases, but in some cases came pretty close. It underscores why things were so regulated and also why the regulators are taking this so seriously.

    WOLF: What are you looking out for?

    MUNTEAN: I would point out these things are still under investigation. And the National Transportation Safety Board has tried to shed a lot of light on this issue. I asked Jennifer Homendy, the chair of the NTSB, why do you think these things are happening more?

    She said, well, it’s possible that these things are happening more. It’s also possible that these things are getting more attention. It doesn’t matter; it’s good that these things are being brought to the spotlight.

    That could ultimately have a huge impact on safety. Aviation is not waiting for another Tenerife. They’re taking these one-off scares and really trying to learn from them.

    WOLF: You sound very passionate about all of this.

    MUNTEAN: I love flying more than anything. The cool part of my job is I get to talk about aviation for a living, and it’s something I’m so passionate about.

    I also instruct and teach people. I just came back from this incredible trip in Kenya where I got to instruct for the Kenya Wildlife Service Airwing, flying with essentially rangers, who are also pilots, with an anti-poaching air force.

    And that was just incredibly cool, but the focus is safety. Maybe I’m a little biased, but aviation is just like something I always geek out on. It’s fun to talk about. …

    I was invited with a group of instructors to go there, and we were in a national park south of Nairobi, called Tsavo West. We flew with 19 different pilots. Three instructors from the States essentially go down and audit their flying ability and safety.

    They’re very, very good pilots. Because they fly at a few hundred feet, guarding against poachers and spotting wildlife, they don’t have a ton of margin for error. We did a lot of brush-up things with them, and they were all very appreciative, and it was a very cool and rewarding experience flying smaller airplanes.

    Those are the type of airplanes that are best suited for that mission, because they can fly low and slow and have a lot of visibility. You can’t do that in a jet.

    It’s sort of like flying into Jurassic Park, because you see elephants all the time, and we saw rhinos and more zebras than I can ever count, and giraffes. But these pilots do a really important job, and (it) was really cool to be a part of it.

    [ad_2]

    Source link

  • NSA chief warns TikTok could censor videos as part of Chinese influence operations | CNN Business

    NSA chief warns TikTok could censor videos as part of Chinese influence operations | CNN Business

    [ad_1]


    Washington
    CNN
     — 

    US national security officials are concerned that TikTok could use its vast global reach to shape public opinion by either suppressing certain videos or promoting others, the head of the National Security Agency and US Cyber Command told lawmakers on Tuesday.

    “It’s not only the fact that you can influence something, but you can also turn off the message as well when you have such a large population of listeners,” Gen. Paul Nakasone said in testimony before the Senate Armed Services Committee.

    TikTok’s collection of data and its control over the algorithm that serves user content are also concerning, Nakasone said.

    Nakasone’s comments follow a directive from the White House that gives US federal agencies 30 days to remove TikTok from government-issued devices. And they come amid a major policy debate in Washington about what to do about one of the most popular apps among American youth.

    US officials have for years accused TikTok – and its Chinese parent firm ByteDance – of collecting data that could enable surveillance by the Chinese government. TikTok denies the allegations and has called on the Biden administration to finalize a national security deal that would allow TikTok to continue operating in the US in exchange for greater US government visibility into how it collects and stores data on Americans.

    A TikTok spokesperson said that the company has been working with the US government to address national security concerns.

    “Our status has been debated in public in a way that is divorced from the facts of that agreement and what we’ve achieved already. We will continue to do our part to deliver a comprehensive national security plan for the American people,” Brooke Oberwetter from TikTok said in statement.

    Some House lawmakers have pushed legislation that could effectively force the Biden administration to impose an outright ban on TikTok, but the prospects of that bill becoming law are slim.

    A bipartisan Senate bill that Virginia Democrat Mark Warner and South Dakota Republican John Thune are expected to unveil on Tuesday would give the Commerce Department authority to develop “mitigation measures,” up to and including a ban, to meet the risk posed by foreign-linked technologies.

    Like the US government push to ban hardware and other gear made by Huawei, another Chinese technology giant, US officials are often short on specifics when asked to show public proof of collusion between the Chinese government and ByteDance.

    “People are always looking for the smoking gun in these technologies,” NSA Cybersecurity Director Rob Joyce told reporters in December. “I characterize it much more as a loaded gun.”

    “I would not expect individualized targeting through [TikTok] to do malicious things,” Joyce said. “Where I’m concerned is the overall ability to do large-scale influence.”

    [ad_2]

    Source link

  • Astronaut crew heads home after five-month stay on the International Space Station | CNN

    Astronaut crew heads home after five-month stay on the International Space Station | CNN

    [ad_1]

    Sign up for CNN’s Wonder Theory science newsletter. Explore the universe with news on fascinating discoveries, scientific advancements and more.



    CNN
     — 

    The four astronauts who make up the Crew-5 team aboard the International Space Station began their return trip home Saturday morning, marking the end of a five-month stay in space.

    The SpaceX Crew Dragon capsule disembarked from the space station at 2:20 am ET, beginning the final leg of the astronauts’ journey. The spacecraft is set to splash down off Florida at around 9:02 p.m. ET Saturday.

    Rescue ships will be awaiting the team’s arrival, ready to haul the capsule out of the ocean and allow the crew to disembark, giving the astronauts their first breath of fresh air in nearly 160 days. Shortly afterward, the crew will depart for NASA Johnson Space Center in Houston.

    The four crew members — NASA astronauts Nicole Mann and Josh Cassada, astronaut Koichi Wakata of JAXA, or Japan Aerospace Exploration Agency, and cosmonaut Anna Kikina of the Russian space agency Roscosmos — launched to the space station aboard a SpaceX Crew Dragon capsule this past October. They’ve spent the past few months carrying out research experiments and keeping up with maintenance of the two-decade-old orbiting laboratory.

    And for the past few days, the four have been handing off operations to the Crew-6 team of astronauts who arrived at the space station on March 3.

    Mann, a registered member of the Wailacki tribe of the Round Valley reservation, became the first Native American woman to travel into orbit. Like the other astronauts, she devoted time on her journey to public outreach, some of which focused on inspiring Indigenous children. During one outreach event in November 2022, Mann showed off a dream catcher — a traditional totem for Native Americans meant to ward off bad dreams — that she took with her to the space station.

    “I am very proud to represent Native Americans and my heritage,” Mann told reporters before launch. “I think it’s important to celebrate our diversity and also realize how important it is when we collaborate and unite, the incredible accomplishments that we can have.”

    Kikina’s participation in this flight came as part of a ride-sharing agreement by NASA and Roscosmos in July 2022. Despite geopolitical tensions between the United States and Russia as the war in Ukraine has escalated, NASA has repeatedly said its partnership with Roscosmos is vital to continuing the space station’s operations and the valuable scientific research carried out on board.

    The journey marked the first trip to space for Mann, Cassada and Kikina.

    Wakata previously flew on NASA’s space shuttle flights and Russia’s Soyuz spacecraft. This trip was the Japanese astronaut’s fifth spaceflight mission.

    [ad_2]

    Source link

  • Takeaways from the February jobs report | CNN Business

    Takeaways from the February jobs report | CNN Business

    [ad_1]


    Minneapolis
    CNN
     — 

    February’s jobs report had a little something for everyone.

    For workers, there were jobs; for employers, there were workers filling shortfalls caused by the pandemic; for the Federal Reserve, there were indications that the labor market was loosening and wage pressures were easing.

    Then again, the total of 311,000 net jobs added was significantly higher than expectations of 205,000, and the unemployment rate surprisingly grew to 3.6%.

    The report was a “mixed bag” at a time when the Fed — which this week signaled a more hawkish approach after a strong batch of recent economic data — is weighing to go lighter or heavier on rate hikes.

    Here are some takeaways from Friday’s report:

    Economists were anticipating that January’s blockbuster 504,000 net job gain was an anomaly due to a combination of factors such as annual data adjustments, warm weather and employers hoarding workers.

    But the US labor market in February showed that, overall, it remained fairly resistant to the Fed’s yearlong barrage of interest rate hikes. The latest employment snapshot from the Bureau of Labor Statistics also showed only a slight downward revision to the January jobs total.

    “This report, it’s not about the Federal Reserve, it’s not about inflation, it’s about you; it’s about how workers are doing,” said Claudia Sahm, founder of Sahm Consulting and a former Fed economist. “And once again, we had a month in which we were adding jobs on net, and this is really good for workers.”

    There are also encouraging signs for employers, she said, noting some of the biggest gains were in industries that have been suffering from the deepest shortages since the pandemic.

    The leisure and hospitality industry added 105,000 jobs in February, accounting for 34% of the entire month’s total gains and putting the sector that much closer to matching its pre-pandemic levels. As of February, the leisure and hospitality industry was 410,000 jobs, or 2.42%, shy of February 2020 employment levels, a CNN analysis of BLS data shows.

    “Right now, we’re still in a phase of getting back to normal in terms of not having labor shortages, not having the costs of serving customers rise and rise,” Sahm said. “I would much rather see us get back to normal by workers coming back as opposed to customers going away.”

    Despite the Fed hammering out a succession of rate hikes during the past year, construction employment hasn’t yet faltered. In February, the construction industry added 24,000 jobs, marking 12 consecutive months of employment growth.

    “Contractors are continuing to work through existing backlogs that have grown over the past two years as new opportunities arose and supply chain issues extended construction timelines,” wrote Nick Grandy, construction and real estate senior analyst at RSM US.

    Notable sectors that recorded job losses during the month were in information, which was down another 25,000 jobs (-0.8%); transportation and warehousing, which was down 21,500 jobs (0.3%); and manufacturing, which was down 4,000 positions.

    While the headline job figure and relatively minimal losses show overall strength, there is an indication of a pullback across industries. The BLS’ employment diffusion index, which shows the percentage of 250 industries that added jobs, fell to 56, which is the lowest reading since April 2020.

    “That indicates that the impact of high interest rates is spilling over to more industries,” said Julia Pollak, chief economist at ZipRecruiter.

    The labor market has remained extremely tight and fairly out of whack for the past three years. Friday’s report showed that “a modicum of slack crept back into the jobs market,” wrote Wells Fargo economists Sarah House and Michael Pugliese.

    The unemployment rate moved to 3.6% from its 53-year-low of 3.4%. That increase was in part due to more people reentering the workforce and joining the ranks of the unemployed, which the BLS classifies as people without jobs actively searching for work.

    February’s employment report showed a 0.1 percentage point increase in the labor force participation rate to 62.5% — the highest it’s been since April 2020.

    The average workweek ticked down to 34.5 hours from a revised 34.6 hours, signaling a “significant overall drop” in labor demand, said Brad McMillan, chief investment officer for Commonwealth Financial Network.

    Still, with the prime-age employment to population ratio increasing to 80.5% — on par with early 2020 levels — there may be little space left for sustained labor supply gains, according to Matt Colyar, a Moody’s Analytics economist.

    “February’s figure, apart from early 2020 readings, is higher than any rate during the previous decade-long expansion,” Colyar noted. “Even in corners of the economy where demand has slumped, businesses have shown little appetite to lay off workers en masse. As other sectors continue to hire rapidly, an acceleration in wage growth will remain a looming threat.”

    A softening in average hourly earnings is helping fuel hopes for a soft landing.

    At 0.2% on the month, wage growth was below expectations and measured 4.6% year over year.

    “There were signs in today’s report that progress on inflation can be made without torpedoing employment,” the Wells Fargo economists noted.

    As of February, the annualized rate of wage growth during the past three months is slightly under 3.6%, a pace seen when inflation was below the Fed’s target, said economist Dean Baker, co-founder of the Center for Economic and Policy Research.

    “Perhaps most important from the Fed’s perspective is the slowdown in wage growth,” Baker wrote in a statement. “The 3.6% annual rate over the last three months can hardly be seen as posing a serious threat of inflation. This slowing in the average hourly wage, coupled with the 4% rate reported in the fourth quarter Employment Cost Index, should provide solid evidence that wage growth has slowed sharply.”

    A hot batch of January economic data helped to send the Fed into a more hawkish turn. Fed Chair Jerome Powell told members of Congress this week that the Fed is prepared to increase the pace of its rate hikes if warranted.

    “The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated,” Powell told lawmakers.

    There’s still more data to come before the Fed meets for its two-day policymaking meeting on March 21-22, notably the Consumer Price Index, Producer Price Index and the Commerce Department’s retail sales report. However, Friday’s jobs report likely won’t spur a more dovish turn from the Fed, said Sean Snaith, an economist and director of the University of Central Florida’s Institute for Economic Forecasting.

    “We didn’t go from a four-alarm fire to a five-alarm fire with this data report, but the inflation flames aren’t out either,” he wrote in a note Friday. “And nothing today indicates that the Fed needs to change its more aggressive approach to raising interest rates.”

    Still, economist Gregory Daco cautioned that the Fed shouldn’t fall into the trap of confirmation bias by letting the stronger-than-expected economic data influence the analysis of Friday’s jobs report and next week’s CPI report.

    The Fed may see the low unemployment rate and the robust job gains as fueling wage growth, said Daco, chief economist at EY Parthenon.

    “Our view, however, is slower job growth in the goods sector, easing hours worked and moderating sequential wage growth momentum and a rise in the labor force participation rate indicate a welcome easing of labor market tightness,” Daco noted. “While we acknowledge this report was by no means a weak one, we also observe that some of the job gains were in sectors where there has been a structural employment shortfall — health care and education in particular. Employment strength in those sectors may not be indicative of cyclical wage pressures, but rather easing structural constraints.”

    [ad_2]

    Source link

  • When China shot down five U-2 spy planes at the height of the Cold War | CNN

    When China shot down five U-2 spy planes at the height of the Cold War | CNN

    [ad_1]


    Seoul, South Korea
    CNN
     — 

    When a Chinese high-altitude balloon suspected of spying was spotted over the United States recently, the US Air Force responded by sending up a high-flying espionage asset of its own: the U-2 reconnaissance jet.

    It was the Cold-War era spy plane that took the high-resolution photographs – not to mention its pilot’s selfie – that reportedly convinced Washington the Chinese balloon was gathering intelligence and not, as Beijing continues to insist, studying the weather.

    In doing so, the plane played a key role in an event that sent tensions between the world’s two largest economies soaring, and shone an international spotlight on the methods the two governments use to keep tabs on each other.

    Until now, most of the media’s focus has been on the balloon – specifically, how a vessel popularly seen as a relic of a bygone era of espionage could possibly remain relevant in the modern spy’s playbook. Yet to many military historians, it is the involvement of that other symbol of a bygone time, the U-2, that is far more telling.

    The U-2 has a long and storied history when it comes to espionage battles between the US and China. In the 1960s and 1970s, at least five of them were shot down while on surveillance missions over China.

    Those losses haven’t been as widely reported as might be expected – and for good reason. The Central Intelligence Agency (CIA), which was responsible for all of America’s U-2s at the time the planes were shot down, has never officially explained what they were doing there.

    Adding to the mystery was that the planes were being flown not by US pilots nor under a US flag, but by pilots from Taiwan who, in a striking parallel to today’s balloon saga, claimed to be involved in a weather research initiative.

    That the CIA would be tight-lipped over what these American-built spy planes were doing is hardly surprising.

    But the agency’s continued silence more than 50 years later – it did not respond to a CNN request for comment on this article – speaks volumes about just how sensitive the issue was both at the time and remains today.

    The US government has a general rule of 25 years for automatic declassification of sensitive material. However, one of its often-cited reasons for ignoring this rule is in those cases where revealing the information would “cause serious harm to relations between the US and a foreign government, or to ongoing diplomatic activities of the US.”

    Contemporary accounts of what the planes were doing – by the Taiwan pilots who were shot down, retired US Air Force officers and military historians among them – leave little doubt as to why it would have caused a stir.

    The planes – according to accounts by the pilots in a Taiwan-made documentary film and histories published on US government websites – had been transferred to Taiwan as part of a top-secret mission to snoop on Communist China’s growing military capabilities, including its nascent nuclear program, which was receiving help from the Soviet Union.

    The newly developed U-2, nicknamed the Dragon Lady, appeared to offer the perfect vessel. The US had already used it to spy on the Soviet’s domestic nuclear program as its high-altitude capabilities – it was designed in the 1950s to reach “a staggering and unprecedented altitude of 70,000 feet,” in the words of its developer Lockheed – put it out of the range of antiaircraft missiles.

    Or so the US had thought. In 1960, the Soviets shot down a CIA-operated U-2 and put its pilot Gary Powers on trial. Washington was forced to abandon its cover story (that Powers had been on a weather reconnaissance mission and had drifted into Soviet airspace after blacking out from oxygen depletion), admit the spy plane program, and barter for Powers to be returned in a prisoner swap.

    “Since America didn’t want to have its own pilots shot down in a U-2 the way Gary Powers had been over the Soviet Union in 1960, which caused a major diplomatic incident, they turned to Taiwan, and Taiwan was all too willing to allow its pilots to be trained and to do a long series of overflights over mainland China,” Chris Pocock, author of “50 Years of the U-2,” explained in the 2018 documentary film “Lost Black Cats 35th Squadron.”

    A mobile chase car pursues a U-2 Dragon Lady as it prepares to land at Beale Air Force Base in California in June 2015.

    Like the U-2, Taiwan – also known as the Republic of China (ROC) – seemed a perfect choice for the mission. The self-governing island to the east of the Chinese mainland was at odds with the Communist leadership in Beijing – as it remains today – and at that time in history had a mutual defense treaty with Washington.

    That treaty has long since lapsed, but Taiwan remains a point of major tensions between China and the United States, with Chinese leader Xi Jinping vowing to bring it under the Communist Party’s control and Washington still obligated to provide it with the means to defend itself.

    Today, the US sells F-16 fighter jets to Taiwan as part of that obligation. In the 1960s, Taiwan got the US-made U-2s.

    The island’s military set up a squadron that would officially be known as the “Weather Reconnaissance and Research Section.”

    But its members – pilots from Taiwan who had been trained in the US to fly U-2s – knew it by a different name: the “Black Cats.”

    The author Pocock and Gary Powers Jr., the son of the pilot shot down by the Soviets and the co-founder of the Cold War Museum in Washington, DC, explained the thinking behind the squadron and its mission in the 2018 documentary film.

    The other CIA unit in Taiwan

  • Coinciding with the Black Cat Squadron, the Black Bat Squadron was formed under the cooperation of the Central Intelligence Agency and Taiwan’s air force, according to a Taiwan Defense Ministry website.
  • While the Black Cats were in charge of high-altitude reconnaissance missions, the Black Bats conducted low-altitude reconnaissance and electronic intelligence gathering missions over mainland China from May 1956. It also operated in Vietnam in tandem with the US during the Vietnam War.
  • Between 1952 to 1972, the Black Bats lost 15 aircraft and 148 lives, according to the website.

“The Black Cats program was implemented because the American government needed to find out information over mainland China – what were their strengths and weaknesses, where were their military installations located, where were their submarine bases, what type of aircraft were they developing,” said Powers Jr.

Lloyd Leavitt, a retired US Air Force lieutenant general, described the mission as “a joint intelligence operation by the United States and the Republic of China.”

“American U-2s were painted with ROC insignia, ROC pilots were under the command of a ROC (Air Force) colonel, overflight missions were planned by Washington, and both countries were recipients of the intelligence gathered over the mainland,” Leavitt wrote in a 2010 personal history of the Cold War published by the Air Force Research Institute in Alabama.

One of the first men to fly the U-2 for Taiwan was Mike Hua, who was there when the first of the planes arrived at Taoyuan Air Base in Taiwan in early 1961.

“The cover story was that the ROC (air force) had purchased the aircraft, that bore the (Taiwanese) national insignia. … To avoid being confused with other air force organizations stationed in Taoyuan, the section became the 35th Squadron with the Black Cat as its insignia,” Hua wrote in a 2002 history of the unit for the magazine Air Force Historical Foundation.

At the Taiwan airbase, Americans worked with the Taiwan pilots, helping to maintain the aircraft and process the information. They were know as Detachment H, according to Hua.

“All US personnel were ostensibly employees of the Lockheed Aircraft Company,” Hua wrote.

The ROC air force and US representatives inked an agreement on the operation, giving it the code name “Razor,” Hua wrote.

He described the intelligence gained by the flights as “tremendous” and said it was shared between Taipei and Washington.

“The missions covered the vast interior of the Chinese mainland, where almost no aerial photographs had ever been taken,” he wrote. “Each mission brought back an aerial photographic map of roughly 100 miles wide by 2,000 miles long, which revealed not only the precise location of a target, but also the activities on the ground.”

Other sensors on the spy planes gathered information on Chinese radar capabilities and more, he said.

Between January 1962 and May 1974, according to a history on Taiwan’s Defense Ministry’s website, the Black Cats flew 220 reconnaissance missions covering “more than 10 million square kilometers over 30 provinces in the Chinese mainland.”

When asked for further comment on the Black Cats, the ministry referred CNN to the published materials.

“The idea was that black cats go out at night, and the U-2 would usually launch in the darkness. Their cameras were the eyes, and it was very stealthy, quiet, and hard to get. And so combining the two stories, they became known as the Black Cats,” the author Pocock said in the documentary.

The squadron even had its own patch, reputedly drawn by one of its members, Lt. Col. Chen Huai-sheng, and inspired by a local establishment frequented by the pilots.

But the Black Cats, like Powers Sr. two years before, were about to find out their U-2s were not impervious to antiaircraft fire.

On September 9, 1962, Chen became the first U-2 pilot to be shot down by a People’s Liberation Army antiaircraft missile. His plane went down while on a mission over Nanchang, China.

Sailors assigned to Explosive Ordnance Disposal Group 2 recover a high-altitude surveillance balloon off the coast of Myrtle Beach, South Carolina, Feb. 5, 2023. (U.S. Navy Photo by Mass Communication Specialist 1st Class Tyler Thompson)

See photos showing US Navy recovering spy balloon from water

In the following years, three more Black Cat U-2 pilots were killed on missions over China as the PLA figured out how to counter the U-2 missions.

“The mainland Chinese learned from their radars where these flights were going, what their targets were, and they began to build sites for the missiles but move them around,” Pocock said.

“So they would build a site here, occupy that site for a while but if they thought the next flight would be going over here, they would move the missiles. It was a cat-and-mouse game, literally a black cat and mouse game between the routines from the flights from Taiwan and those air defense troops of the (Chinese) mainland, working out where the next flight would go.”

In July 1964, Lt. Col. Lee Nan-ping’s U-2 was shot down by a PLA SA-2 missile over Chenghai, China. According to the Taiwan Defense Ministry he was flying out of a US naval air station in the Philippines and trying to gain information on China’s supply routes to North Vietnam.

In September 1967, a PLA missile hit the U-2 being flown by Capt. Hwang Rung-pei over Jiaxin, China, and in May 1969, Maj. Chang Hsieh suffered a “flight control failure” over the Yellow Sea while reconnoitering the coast of Hebei province, China. No trace of his U-2 was ever found, according to Taiwan’s Defense Ministry.

A U-2 Dragon Lady, from Beale Air Force Base, lands at Joint Base Pearl Harbor-Hickam, Hawaii, in 2017.

Two other Taiwanese U-2 pilots were shot down but survived, only to spend years in Communist captivity.

Maj. Robin Yeh was shot down in November 1963 over Jiujiang, Jiangxi province.

“The plane lost control when the explosion of the missile took out part of the left wing. The plane spiraled down. Lots of shrapnel flew into the plane and hit both of my legs,” Yeh, who died in 2016, recalled in “The Brave in the Upper Air: An Oral History of The Black Cat Squadron” published by Taiwan’s Defense Ministry.

He said that following his capture Chinese doctors removed 59 pieces of shrapnel from his legs, but couldn’t take it all out.

“It didn’t really affect my daily life, but during winter my legs would hurt, which affected my mobility. I guess this would be my lifelong memory,” Yeh said.

Maj. Jack Chang’s U-2 was hit by a missile over Inner Mongolia in 1965. He, too, suffered dozens of shrapnel injuries and bailed out, landing on a snowy landscape.

“It was dark at the time, preventing me from seeking help anyway, so I had to wrap myself up tightly with the parachute to keep myself warm … After ten hours when dawn broke, I saw a village of yurts afar, so I dragged myself and sought help there. I collapsed as soon as I reached a bed,” he recalled in the oral history.

Neither Yeh nor Chang, who were assumed killed in action, would see Taiwan again for decades. The pilots were eventually released in 1982 into Hong Kong, which at the time was still a British colony.

However, the world into which they emerged had changed greatly in the intervening years. The US no longer had a mutual defense treaty with Taiwan and had formally switched diplomatic recognition from Taipei to Beijing.

Though the Cold War US-Taiwan alliance was no longer, the CIA brought the two pilots to the US to live until they were finally allowed to return to Taiwan in 1990.

Members of the 5th Reconnaissance Squadron

Indeed, by the time of their release CIA control of the U-2 program had long since ceased. It had turned the planes over to the US Air Force in 1974, according to a US Air Force history.

Two years later, the Air Force’s 99th Strategic Reconnaissance Squadron and its U-2s moved into Osan Air Base in South Korea. Commander Lt. Col. David Young gave the location the “Black Cat” moniker.

Today, the unit is known as the 5th Reconnaissance Squadron.

But US U-2s continue to be involved in what might be characterized as “cat-and-mouse” activities and their activities continue to make waves occasionally in China. In 2020, Beijing accused the US of sending a U-2 into a no-fly zone to “trespass” on live-fire exercises being conducted by China below.

The US Pacific Air Forces confirmed to CNN at the time that the flight had taken place, but said it did not violate any rules.

Meanwhile, for those involved in the original Black Cats, there are few regrets – even for those who were captured.

Yeh told the documentary makers he had fond memories of life at 70,000 feet.

“We were literally up in the air. The view we had was also different; we had the bird’s eye view. Everything we saw was vast,” he said.

Chang too felt no bitterness.

“I love flying,” he said. “I didn’t die, so I have no regrets.”

[ad_2]

Source link