US politics

Breakthrough in Washington between Democrats and Republicans could end the damaging cycle of “crisis-driven decision making” and avoid another shutdown next year. How the deal was announced- full story and analysts’ reaction…

 


Powered by Guardian.co.ukThis article titled “US budget deal brings relief; Lloyds hit with record fine over bonuses – business live” was written by Graeme Wearden, for theguardian.com on Wednesday 11th December 2013 13.25 UTC

Simon Chouffot, spokesperson for the Robin Hood Tax campaign, says the record fine imposed on Lloyds over its staff bonus schemes shows that the government is still being too soft on banking greed:

“The people who run Britain’s banks seem to hold the public in total contempt – pressurising staff into ripping the rest of us off. Businesses are supposed to serve customers – but with banks, it’s the other way around.”

“Issuing fines after the latest scandal happens to be unearthed will not fundamentally change the relationship between banks and society. The Government must get a grip on the culture of greed in the sector and ensure it starts contributing positively to society.

Worth noting that Lloyds says it has now mended its ways.after continuing to use incentive schemes such as the ‘champagne bonus’ more than two years after the taxpayer bailed it out.

Market update

Back in the markets, and the big three European indices are all positive — as traders take some comfort from the détente between Democrats and Republicans over the US budget (see opening post onwards for details and reaction).

BAE Systems is the biggest riser on the FTSE 100, up 2.5%, with analysts predicting defence stocks will benefit from the increased US spending.

Liberum Capital analysts:

This is progress and will allow budget prioritisation.

Economists say the US economy will benefit too:

FTSE 100: up 25 points at 6551, +0.4%

German DAX: up 29 points at 9143, +0.3%

French CAC: up 33 points at 4124, + 0.8%

The boss of Tesco Bank also agrees that whopping bonuses for bank sales staff are counter-productive.

Updated

Our Money editor, Patrick Collinson, argues that Lloyds didn’t heed banking scandals of the past when it offered its staff hefty bonuses for selling products, and demotion if they failed.

Here’s a flavour:

The FCA uncovered incentives such as “champagne bonuses” and “grand in your hand” that owe more to the culture of Wall Street trading that a high street bank giving advice on the hard-earned savings of the Mr and Mrs Migginses of Britain. If Lloyds staff failed to meet their targets, they could lose nearly half their salary. No wonder desperate employees ended up flogging policies to themselves and their family members to keep food on the table.

As usual, the directors of the bank will be contrite, will say that lessons have been learned, and that it’s different this time. But one important fact should always be remembered about Britain’s bankers. How many have been jailed since the start of the financial crisis? None. Until the penalties become personal, the likelihood of any lessons being learned will remain at zero.

More here: Lloyds has failed to learn the lessons of previous mis-selling fines

Updated

Back on Lloyds…….. and unions are saying that they warned against the kind of sales targets at the heart of today’s record fine (details from 9.21am)

Dominic Hook, Unite national officer, said:

Despite the countless reports and investigations into the conduct of the banks the industry clearly has not learned the lessons of the financial crisis nor heard the concerns of customers and staff in order to adequately change.

(reminder, our news story on the fine is here)

Nikos Magginas, economist at National Bank, agrees that there are some glimmers of hope amid the news that Greece’s unemployment rate has hit a new high of 27.4%.

Magginas said (via Reuters):

The decline in the number of those employed was the lowest since early 2010.

The data shows a stabilisation trend in the jobless rate and a slowdown in new job losses, helped by a strong performance in tourism.

Updated

Looking for more details of how Lloyds staff were lured into mis-selling products by a flawed bonus structure, leading to today’s record fine of £28m? Look no further….

Lloyds mis-selling scandal: Q&A

It includes what to do if you think you were caught up in the scandal.

Italian PM promises reforms

In Italy, prime minister Enrico Letta has warned MPs that the country will slide into chaos unless they back him in a confidence vote due later today.

Letta urged politicians to throw their weight behind his reform programme, ahead of the first test of his parliamentary muscle since Silvio Berlusconi quit his coalition — trimming Letta’s majority.

Letta was also scathing over Italy’s failure to reform, saying MPs had avoided meaningful changes for 20 years.

Reuters has the details:

“I’m determined to work with everything I have to prevent the country falling back into chaos,” he said, pledging to throw his weight behind efforts to fight a growing tide of political disillusion and hostility to the European Union.

He said the next 18 months would be devoted to a broad package of institutional reforms aimed at creating a stable basis for economic growth, which he said should reach 1 percent in 2014 and 2 percent in 2015.

As well as a new electoral law and measures to untangle the conflicting web of powers between different levels of the administration, he promised to overhaul parliament to remove the Senate’s power to vote no confidence in the government.

He said the upper house would become a review chamber for legislation passed in the lower house, removing one of the key factors causing stalemate in the Italian political system.

On the economic front, he promised to rein in the deficit, cut Italy’s towering public debt, the second highest in the euro zone as a proportion of the overall economy, lower taxes on families and companies, reduce unemployment and boost public investment.

Privatisations would continue and the government would consider allowing employees to buy shares in the post office and other public companies, he said.

The lower house of parliament is expected to hold a confidence vote in the early afternoon, followed by the Senate tonight. Letta is expected to win both votes.

Updated

Greek unemployment rate rises

Greece’s unemployment rate has risen to a new record high, but there may still be some reasons for optimism.

ELSTAT, the country’s statistics body, reported that the number of people classed as unemployed rose by 14,023 between August and September. That pushed the jobless rate up to 27.4% in September, up 0.1 percentage point on August’s 27.3%.

The number of unemployed people rose by 14,023 persons in September to 1,376,463, a 1% increase during the month.

But the number of people in work also rose, by 5,397, to 3,639,429.

Those classed as inactive (not working or looking for work) dropped by 5,296 persons, which may suggest more people are now trying (and failing) to find a job.

Still, on an annual basis, the unemployment total is up by 5.9% and the employment total is down by 1.5%.

And the youth jobless rate remains a scar, at 51.9%.

The data is seasonally adjusted. ELSTAT’s believes there has been “a relative stability in the estimated seasonally adjusted unemployment rate” since the summer, but we’ll need to wait several more months until the picture becomes clear.

Here’s the official release.

And here’s some reaction:

Updated

Fog update: it’s not cleared yet:

Here’s our news story on the fine imposed on Lloyds for operating flawed bonus schemes for its staff:

Lloyds Banking Group fined record £28m in new mis-selling scandal

Updated

Now here’s an idea to keep Britain’s bank bosses in line:

The Independent’s Ben Chu points to the scale of the bonuses which Lloyds offered its staff to encourage them to sell products:

Back in Europe, the Finnish prime minister says he’s not given up hope of a proper deal on banking union before the end of the year (despite the limited progress made last night). That’s via his official spokesman.

Updated

Champagne bonus, anyone?

The FCA’s ruling against Lloyds includes detail of the bonus schemes that drove staff to sell inappropriate products to its customers:

· Variable base salaries

Advisers could be automatically promoted and get a pay increase or be automatically demoted and have a pay reduction depending on their sales performance. For a Lloyds TSB adviser on a mid-level salary, not hitting 90% of their target over a period of 9 months could see their base annual salary drop from £33,706 to £25,927; and if they were demoted by two levels their base pay would drop to £18,189 – almost a 50 per cent salary cut. In the worst example that the FCA saw, an adviser sold protection products to himself, his wife and a colleague in order to hit his target and prevent himself from being demoted.

· Bonus thresholds

Both firms had in place thresholds that meant should a certain sales target be reached large bonuses could be earned. At Lloyds TSB this incentive was called the ‘champagne bonus’ and could see an adviser receiving 35% of their monthly salary as a bonus as soon as they reached their sales target.

Updated

Lloyds responds

And here’s the full statement from Lloyds:

Lloyds Banking Group accepts the findings of an FCA investigation into its historic systems and controls governing bancassurance legacy incentive schemes for branch advisers, and has agreed to pay a fine of £28m.

The Group launched its new strategy in 2011 to fully refocus the business on its customers. As part of that approach, the Group has been addressing historic issues and ensuring that customers get fair and appropriate outcomes.

As soon as these issues were identified in 2011, the Group acted immediately to make significant changes to ensure that all its schemes focused on doing the right things for customers and providing good service. The FCA has acknowledged that we have made substantial improvements to systems and controls governing incentives.

Lloyds Banking Group has co-operated fully throughout the enforcement investigation and has agreed with the FCA the next steps with regard to customers.

The Group has already commenced a review to address potential customer impacts that may have occurred as a result of these failings. We are already contacting customers, and will continue to contact potentially affected customers over the coming months. Customers do not need to take any action at this stage to be included in the review and they will be contacted in due course.

The Group recognises that its oversight of these particular schemes during the period in question was inadequate and apologises to its customers for the impact that they may have had. We are determined to ensure that any customer impacts are dealt with quickly and fully.

Lloyds has accepted the FCA findings, and says the record £28m fine won’t have a ‘material impact’ on the group.

11-Dec-2013 09:27 – LLOYDS BANKING GROUP SAYS ACCEPTS FINDINGS OF FCA INVESTIGATION INTO SALES PRACTICES 

11-Dec-2013 09:26 – LLOYDS BANKING GROUP SAYS COST OF FCA ENFORCEMENT AND REVIEW IS NOT EXPECTED TO HAVE MATERIAL IMPACT ON GROUP 

Updated

The FCA’s description of Lloyds’ sales practices is depressing, but it’s not a shock. Back in March, my colleague Hilary Osborne exposed how there was still a dangerous “‘sell, sell, sell” culture at the heart of Halifax, a key part of Lloyds Banking Group.

She wrote:

An employee of Britain’s biggest banking group has described a “disheartening and demotivating” sales culture that pressurises staff into selling financial products to customers in order to meet strict points-based daily targets.

The man, who did not wish to be named, but we will call David Elliott, works as a financial consultant for Halifax.

He says his job chiefly entails trying to sell insurance to customers. “I’ve been a counter clerk, banking adviser, financial adviser and now I’m a financial consultant – so I’ve been at every level there is in a retail bank. It gradually gets worse the higher you climb the ladder and now I’m at the highest seller point in banking and the pressure is abnormal,” he says.

More here: Exposed: bank’s high-pressure sales culture continues

Updated

FCA: Lloyds investigation does not make pleasant reading

Tracey McDermott, the FCA’s director of enforcement and financial crime, said that the watchdog’s investigation found serious problems at Lloyds:

The findings do not make pleasant reading. Financial incentive schemes are an important indicator of what management values and a key influence on the culture of the organisation, so they must be designed with the customer at the heart. The review of incentive schemes that we published last year makes it quite clear that this is something to which we expect all firms to adhere.

Customers have a right to expect better from our leading financial institutions and we expect firms to put customers first – but firms will never be able to do this if they incentivise their staff to do the opposite.

McDermott added that Lloyds TSB and Bank of Scotland have made “substantial changes” in recent months, reviewing its sales practices and paying compensation to those affected.

Record fine for Lloyds over mis-selling failings

Just in: the UK’s Financial Conduct Authority has hit Lloyds Banking Group with the biggest ever fine levied for retail banking misbehaviour in the UK, after using unacceptable sales targets to motivate its staff.

The FCA has penalised Lloyds £28m, after an investigation found widespread evidence that the bank ran flawed sales incentive schemes that encouraged staff to sell products to customers regardless of whether they were in their best interest.

In a damning indictment of how Lloyds ran its business, the FCA explained that staff at Lloyds TSB Bank and Bank of Scotland were put under undue pressure to hit sales targets or risk losing bonuses.

These bonuses could be almost half of an employee’s wage packet.

The products in question were mainly investment products (such as share ISAs) and protection products such as PPI.

At one stage, staff were offered “a grand in your hand” for hitting a particular target.

In one instance an adviser sold protection products to himself, his wife and a colleague to prevent himself from being demoted, the FCA said.

Lloyds’s fine was increased by 10% because regulators had warned that its incentive schemes were poorly managed, and because it was fined for the unsuitable sale of bonds in 2003 “caused in part by the general pressure to meet sales targets”.

The FCA also found that Lloyds staff received bonuses even if the bank knew they’d sold unsuitable products:

229 advisers at Lloyds TSB received a bonus even when all of their assessed sales were deemed unsuitable or potentially unsuitable; and 30 advisers received a bonus in the same circumstances on more the one occasion.

Updated

European finance ministers, incidentally, didn’t make as much progress as we’d hoped over banking reform last night. After a long, drawn-out meeting, ministers agreed some broad details, but couldn’t decide one key question — how to share the cost of dealing with a failed bank.

The FT’s Peter Spiegel and Alex Barker stayed up late for the action (or lack or) and reported:

A marathon negotiating session in Brussels produced a draft compromise, broadly based on Germany’s revised position, which sets out how eurozone countries cede power to a central bank resolution authority and establish a common funding network.

While the basic parameters are likely to survive in a final deal, several countries raised strong objections to Berlin-backed conditions that slowly phase in a single resolution fund – and gives big countries a greater say on when it can be used.

These voting arrangements and financing details – including the unaddressed issue of what happens should the bank resolution funds be exhausted – will be left to a final emergency meeting next Wednesday, on the eve a summit of EU leaders.

Here’s their full story: EU sets out framework for banking union

Updated

City traders also faced a challenge to find their offices in the fog gripping London today — as this lovely picture shows:

There’s a pretty muted reaction in the City, with the FTSE 100 up just 6 points.

It’s being dragged down a little by Royal Bank of Scotland – whose shares have fallen 1.6% as investors react to the news that finance director Nathan Bostock is resigning, apparently to join Santander.

Traders are also calculating that the outbreak of peace on Capitol Hill will encourage the Federal Reserve to begin slowing its stimulus programme, currently pumping $85bn into the system each month.

Budget deal: what the media say

The Financial Times reckons the deal is a decent start on the long road to dealing with America’s debts:

Due to its limited nature, the deal does not tackle broader fiscal problems affecting the US, such as the long-term cost of health and pension plans which could become more expensive as a consequence of the ageing population.

It also does not contain big changes to the tax code, which many on Capitol Hill want to see transformed.

“This bipartisan deal looks like a good step, but it doesn’t address the real drivers of our long-term debt,” said Michael Peterson, president of the Peter G Peterson Foundation, which advocates for a bigger deficit reduction deal. “We should all welcome our lawmakers coming together on a budget agreement that would end the recent cycle of governing by crisis. But make no mistake – we still have a lot more to do to put our nation on a sustainable fiscal path.

FT: US Congress strikes budget deal

Marketwatch points out that some in the Republican party could oppose it – -suggesting a battle to get it through the House of Representatives

House Speaker John Boehner praised the deal but didn’t address whether it can pass the House.

“While modest in scale, this agreement represents a positive step forward by replacing one-time spending cuts with permanent reforms to mandatory spending programs that will produce real, lasting savings,” he said in a statement.

Sen. Marco Rubio, a Florida Republican who may run for president, quickly came out against the deal, calling it “irresponsible” and charging that it doesn’t reduce the U.S. debt.

Marketwatch: Murray, Ryan reach two-year U.S. budget deal

Business Insider breaks down the numbers;

The legislation provides $63 billion in sequester relief over two years, which is split evenly between defense and non-defense programs. This is offset by targeted spending cuts and non-tax revenues that total $85 billion. Ryan and Murray said that the deal reduces the deficit between $20 and $23 billion.

Murray said that the deal includes an additional $6 billion in revenue from additional federal worker pension contributions. Military employees take the same hit in the deal.

BI: BUDGET DEAL REACHED — Here’s What You Need To Know

And here’s the Guardian’s take:

Aspects of the deal may alarm both parties, particularly Democrats, who are being asked to accept additional spending cuts, no new taxes and increased pension contributions from public sector workers.

Nevertheless the prospect of ending years of political deadlock appeared to satisfy political leaders of both parties, whose expectations have been lowered by the recent government shutdown and a virtual standstill on a host of other issues.

US congressional leaders unveil two-year budget deal

The deal doesn’t address one problem, though — America’s debt ceiling. Congress still needs to agree to raise US borrowing limits in February 2014, or risk a default.

The thawing of relations between Republicans and Democrats on Capitol Hill may mean the debt ceiling is less of a poisoned pill?

Here’s Michael Hewson of CMC Markets’s take:

The new deal, if approved by Congress, which seems likely, would last until 2015, and ease the severity of some recent budget cuts, with slightly higher spending levels of $63bn.

This agreement, while a positive for markets, would then remove one potential land mine for markets ahead of February’s debt ceiling deadline, which still remains unresolved. It is likely that neither side will be pleased with the deal on the margins, but the hope is that enough Democrats and Republicans will be able to swallow it to be able to push it through Congress.

Updated

The agreement reached by Ryan and Murray comes to $85bn — made up of $63bn in cancelled sequestor cuts, and and around $22bn in deficit reduction.

Small beer, compared to America’s $17 trillion national debt — but enough to avert another shutdown in January.

Chris Weston of IG says it’s a cause to celebrate:

Finally US politics is starting to look like it can actually function without political partisanship or using the economy or markets as a bargaining tool like we’ve seen over the recent year.

Shane Oliver, head of investment strategy and chief economist at AMP Capital, reckons the deal means investors should fret less about America’s fiscal problems in 2014.

He told CNBC the deal was good for stocks:

The short-term fiscal easing next year, the fact that Congress after years of dysfunctional behaviour has reached a compromise on their own without a crisis – all of those things are positive.

US budget deal could avert another crisis

Good morning, and welcome to our rolling coverage of the world economy, the financial market, the eurozone and the business world.

There’s a sense of relief in the financial world this morning after an unexpected burst of bipartisan co-operation in Washington.

Democrats and Republicans negotiators have agreed a deal to set spending levels until 2015 – averting the risk of a repeat of the government shutdown which gripped the markets in October.

In a welcome development, Senate Budget Committee chairman Senator Patty Murray, and her House counterpart Paul Ryan, stood shoulder-to-shoulder to announce the proposal, which could be voted through within days.

Ryan declared:

I think this agreement is a clear improvement on the status quo. It makes sure we don’t lurch from crisis to crisis.

The plan hammered out by Murray and Ryan is significant for two reasons — it eases some of the pain of looming spending cuts (the sequester), and it could end the damaging pattern of deadlock between the two parties.

President Obama hailed both sides for breaking “the cycle of short-sighted, crisis-driven decision-making to get this done.”

Under the agreement, federal spending would be fixed at around $1.012tn — a compromise between the two sides.

It means an extra $63bn in government spending over the next two years — which should please the International Monetary Fund, which feared the US was tightening fiscal policy too fast.

That’s got implications for the European economies too — the sequester threatened to knock the eurozone’s already weak recovery off course. 

As our Washington Bureau chief Dan Roberts explains, the deal is not without its critics:

Rather than raising new taxes to pay for the sequester relief – something Republicans were implacably opposed to – negotiators agreed to raise additional government revenue through fees, such as airport charges and by demanding that federal workers pay more toward their pensions.

Union umbrella group, the AFL-CIO, has already hit out at the proposal, arguing that federal workers were acting as a “punching bag” for Republicans.

The deal still needs to be voted through Congress. And it doesn’t fix America’s fiscal challenges – but it’s a start.

As Murray put it:

For years we have lurched from crisis to crisis. That uncertainty was devastating to our fragile economic recovery.

Reaction to follow, along with other details of the day ahead….

Updated

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USA 

Pressure mounting on Republicans to make deal. Investor confidence appears to hold. Senate action expected. Live blog coverage of Congress’ attempt to reopen the US government and steer the world’s biggest economy clear of the default cliff…

 


Powered by Guardian.co.ukThis article titled “US pushed to brink of default as hopes hang on bipartisan Senate deal – live” was written by Tom McCarthyin New York, for theguardian.com on Wednesday 16th October 2013 13.26 UTC

The Senate convenes at noon today. The House is scheduled to meet at 10am. President Obama is scheduled to have lunch with vice president Biden and has meetings today with his secretaries of treasury and state.

Good morning and welcome to our live blog coverage of Congress’ attempt to reopen government and steer clear of the default cliff.

Tuesday was a bad day on Capitol Hill. It began with hopes for a bipartisan Senate deal. Then House Republicans announced they were going to make a deal of their own. ”Whatever proposal we move forward will reflect our emphasis on fairness,” majority leader Eric Cantor said. But there was no proposal to follow. The leadership could not bring the hard-right faction on board.

Today begins with hopes for a bipartisan Senate deal. The Wall Street Journal has published an editorial telling Republicans that enough is enough: “Republicans can best help their cause now by getting this over with and moving on to fight more intelligently another day,” the paper concludes. The conservative National Review reports that GOP members indeed are ready to just “get it over with”.

The markets showed a bit of queasiness in yesterday’s tumble-jumble, but declined to panic.

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Senate leaders join struggle to find passable bill. Stock markets only mildly perturbed. “Reneging on its debt obligations would make the U.S. the first major Western government to default since Nazi Germany 80 years ago,” Bloomberg reports…

 


Powered by Guardian.co.ukThis article titled “US shutdown: Congress reconvenes after weekend of choppy talks – live” was written by Tom McCarthyin New York, for theguardian.com on Monday 14th October 2013 15.31 UTC

Texas Senator Ted Cruz, whose quixotic campaign to “defund” Obamacare was the stick in the spokes that got us here, could – could – cause a default all by himself, Joshua Green reports in Bloomberg BusinessWeek:

How could this happen? Because the Senate can move quickly when necessary–but only by unanimous consent. Let’s say Harry Reid and Mitch McConnell strike a deal today (that’s looking unlikely). Cruz surely won’t like it and has said repeatedly, “I will do everything necessary and anything possible to defund Obamacare.” If he’s true to his word, he could drag out the proceedings past Thursday and possibly well beyond. “If a determined band of nut jobs wants to take down the global economy, they could do it,” says Jim Manley, a former top staffer for Reid. “Under Senate rules, we are past the point of no return–there’s not anything Reid or McConnell could do about it.”

Read the full piece here. There’s no indication that Cruz is that crazy?

“Reneging on its debt obligations would make the U.S. the first major Western government to default since Nazi Germany 80 years ago,” Bloomberg reports.

Updated

Congress won’t act until markets panic, they say. Comforted by the implication that Congress can and will act, markets don’t panic. But Congress won’t act until markets panic. Comforted by…

Anatomy of a deal

How might an eventual deal look? What are the sticking points?

Congress must decide how long to extend the debt limit and how long to fund the government for. Legislators must also decide the level at which to fund government – whether or not to retain the deep “sequester” cuts that took effect on March 1, and for how long.

Republicans would like a shorter debt limit extension in order to maintain leverage in budget negotiations. Democrats would like a shorter-term funding bill in order to accelerate the end of the sequester, which chunked $85bn off the budget between March and October.

At the end of September, Senate Democrats passed conciliatory legislation that would have funded the government at sequestration levels through November – but the bill was rejected by House Republicans. Token Conservative New York Times columnist Ross Douthat retold the history in a recommended Twitter lecture on Sunday:

But now the “original” potential deal to keep government open over the short term at sequester levels is gone, and everything seems back in play. The distance between the two sides on the debt limit extension and the term of the spending bill is a matter of months, NBC’s John Harwood reports:

The Washington Post’s Greg Sargent sees a possible deal by which Democrats would demand the destruction of the debt ceiling as a counterweight to Republican demands on spending:

So here’s what Dems should do. If Republicans refuse to budge off their insistence on lower spending levels, Dems should call their bluff by demanding a permanent disabling of the debt limit as an extortion tool as part of any short-term compromise. (Yes, Republicans will say No. But bear with me.)

If, somehow, a deal is reached this week in the Senate that involves Republicans giving ground on spending levels, Dems should make the push for a permanent disabling of the debt limit a key goal in the next round of formal, long term negotiations.

In the short term, if Dems accept sequester level spending into early next year in exchange for permanent disabling of the debt limit, it would not be an awful outcome.

Read the full piece here.

Senator Joe Manchin of West Virginia, a centrist Democrat, offered a relatively optimistic view of the negotiations this morning on CNN. Talking Points Memo caught the spot:

“I think we’re 70-80% there, putting the extra 20-25% to it,” Sen. Joe Manchin (D-WV) said Monday on CNN.” “When should the (continuing resolution) come due, when should the debt ceiling come due, and does that give that time for the budget conference, the budget committees to sit down and work through this? Those are the details that have to be worked out.”

Updated

Leaders of the World Bank and IMF warned at a meeting in Washington DC Sunday of the disastrous consequences of a US default, the New York Times reports. Some damage has already been done, as borrowing costs for the United States – over the short term, at least – are creeping up.

Christine Lagarde, managing director of the International Monetary Fund, warned of “massive disruption the world over” if the United States plunges into default. At the start of the month she said it is “‘mission-critical’ that [the US default risk] be resolved as soon as possible.”

From the Times report on the Washington meeting:

Participants at the meetings remained on edge, given the gravity of the threat. Ms. Lagarde said “that lack of certainty, that lack of trust in the U.S. signature” would disrupt the world economy.

Wolfgang Schäuble, the German finance minister, issued his own urgent appeal. “The fiscal standoff has to be resolved without delay,” he said in a statement released by the I.M.F.

Read the full piece here.

The Dow Jones Industrial Average opens the day down just a bit, about a half-percent. The bets are still on, for now.

President Obama spoke yesterday with House minority leader Nancy Pelosi, and the two party leaders in the Senate – Democrat Harry Reid and Republican Mitch McConnell – have been holding talks through the weekend that were expected to resume this morning.

Talks between the president and the House Republican leadership – so hopeful as of Friday evening – foundered on Saturday. “No deal” Wisconsin Rep. Paul Ryan told reporters at the Capitol.

The needle they’re collectively trying to thread is legislation raising the debt ceiling that would be acceptable to both Senate Democrats and House Republicans. The current legislation thought to be under discussion would also provide for reopening government and settle a budget through the New Year.

If a catchall deal proves unworkable, Congress may have to pass the debt limit bill separately. However it may actually be easier to pass a catchall deal, because there are more variables and thus more room for negotiation – and compromise.

Guardian Washington correspondent Dan Roberts (@RobertsDan) is tracking the action:

Democrat majority leader, Harry Reid, appeared briefly in the Senate to say he had a “productive and substantive” discussion with Republican Mitch McConnell and was optimistic about a deal, but suspended public proceedings until 2pm on Monday while his backroom talks continued.

The only outward sign of movement from the White House came in a Sunday afternoon phone call with House minority leader Nancy Pelosi, in which President Obama reiterated his insistence on Republicans agreeing to end a government shutdown and extend the debt ceiling before he would negotiate any budget concessions.

Read the full piece here.

Early Halloween.

Good morning and welcome to our live blog coverage of yet another moment of truth in Washington. If the nation’s legislators can’t cut a deal soon – they have a day or two; just exactly how long is a matter for debate – then we get to find out if Warren Buffett was just being a hysterical ninny when he compared default to “a nuclear bomb”.

Negotiations through the weekend failed to produce a deal, or clear a pathway to a deal. Since Friday, talks between House Republican leaders and the White House have fallen apart, and talks between the party leaders in the Senate have sprung up. The House is scheduled to convene today at noon, the Senate shortly thereafter.

The top priority for Congress is to pass legislation that would raise the debt limit sufficiently to fund the Treasury’s accounts payable. They also need to pass a bill to reopen the federal government, which has been partially shuttered for 14 days now (it closed on 1 October). In the current environment, having the government closed is only Code Orange. The debt limit is the Code Red bit.

Investors are holding their breaths to see what the stock market will think of the weekend’s dithering. Knowledgable analysts have suggested that a stock market crash may be the most likely spur to get Congress to actually act. The bond market is closed Monday for the Columbus Day holiday, but stocks are open. The Dow still was relatively unbothered by the crisis on Friday.

The Treasury has said the “extraordinary measures” it has taken since May to cover expenses will be exhausted Thursday, at which point the government will be operating on about $30bn cash on hand and a prayer, with neither expected to last long

Updated

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Meetings intensify as shutdown enters 11th day. Public blames unpopular Republicans, poll shows. Negotiations thought to include larger budget issues. Senate majority leader Harry Reid proposed to vote on a bill to extend the debt ceiling until the end of 2014…

 


Powered by Guardian.co.ukThis article titled “Senate Republicans meet with President Obama for shutdown talks – live” was written by Tom McCarthy, for theguardian.com on Friday 11th October 2013 16.00 UTC

No votes are scheduled in the House today. But it’s open. They could ramp up any time.

In the Senate, majority leader Harry Reid moved Thursday evening to vote on a bill to extend the debt ceiling until the end of 2014. That legislation, or a version of it, could work its way into a broad agreement between the sides, although Republicans have rejected the idea of adding so much headroom.

The headroom, lest anyone needs reminding, is currently running out fast:

What’s a “spending cut”? 

Updated

The Republicans have arrived to the White House, CBS News reports.

Anatomy of a deal

The White House has said repeatedly that the president will not enter budget negotiations until Congress reopens the government. Those negotiations now appear to be happening.

The question is, if a deal emerges, will it require Republicans to pass the stopgap spending bill the Senate passed on 27 September with no add-ons pertaining to Obamacare or anything else – “clean,” as they say?

And what will the Republicans require in return for doing so? “We need to get something for the [continuing resolution] and something for the debt ceiling,” Rep. Raul Labrador of Idaho has explained.

One of the leaders of the negotiations on the Republican side is Paul Ryan, the former vice presidential candidate and reputed budget wonk. “Suddenly a man who seemed in danger of being eclipsed as the face of his party has re-emerged as essential to its rescue,” New York Times congressional reporter Jonathan Weisman writes. So what does Ryan want?

Ryan laid out areas for negotiation in a Wall Street Journal editorial Tuesday. They are Medicare (means-testing for relatively affluent recipients); federal pensions (cutting them) and taxes. He also alluded to the Keystone pipeline which would connect Canada “tar sands” oil deposits to the Gulf coast with dire environmental implications.

Ryan did not mention Obamacare, significantly, meaning a plan he brokers could encounter resistance from the hard-right House faction for whom destroying the law is a top priority. The health care law is partially paid for by a tax on medical devices. The deletion of the tax as part of a deal would allow the Tea Party to claim it had dealt the law a blow.

Democrats have been insisting all week that even a “clean” stopgap spending bill is not great for Democrats because it extrapolates from base spending levels that take into account the “meat-cleaver” sequester cuts. When sequestration becomes part of the new normal, there’s an argument to be made that the Republicans have won, no matter how bad their numbers are.

The chairman of the House appropriations committee said Republicans will test the president on his vow only to cut a budget deal on the condition that government reopens, Bloomberg Business week reports (via @robertcostaNRO):

Obama “would like the shutdown stopped,” Representative Hal Rogers, a Kentucky Republican, said after the White House session. “We are trying to find out what it is he would insist upon” in a spending measure to open the government.

What will they get?

Guardian Washington bureau chief Dan Roberts says Senator Ted Cruz, the grandstanding outspoken Tea Party standard-bearer, will be among Senate Republicans attending today’s meeting with the president.

Invited to horse-trade with the president. Not bad for someone who’s only held national elected office for 10 months.

Welcome to our live blog coverage of renewed activity on Capitol Hill to end the government shutdown and lift the debt ceiling. 

They seem serious this time. A meeting Thursday afternoon between House Republican leaders and the president produced late-night talks on what could be a broad deal. Big budget questions appeared to be on the table, in addition to the two emergencies. A pair of influential House Republicans, the chairmen of the appropriations and budget committees, said publicly that the talks had legs. The White House said the president “looks forward to making continued progress.”

Shelved was the Republican “offer” of Thursday morning to temporarily raise the debt limit. Gone was the notion that the Tea Party would redouble its fight to cripple Obamacare. House Republicans left a Friday breakfast talking about passing a stopgap spending bill to reopen the government, according to Robert Costa of the National Review. That step previously seemed beyond reach because of the strength of hard-right resistance.

Coincidentally, NBC News and the Wall Street Journal released one of their regular polls Thursday evening showing that the Republican party had, through the shutdown and default brinksmanship, achieved its worst rating in the history of the poll: 24% positive, 53% negative. The poll said the public blames Republicans more than the president for the shutdown by a margin of 53-31. The poll showed that Obamacare is rising in popularity.

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In May, the US treasury was able to employ some “extraordinary measures” to keep borrowing. These measures run out on 17 October. If the USS America goes down, little HMAS Australia will find it tough not to get sucked into the vortex…

 


Powered by Guardian.co.ukThis article titled “Why Australia should fear a US government default” was written by Greg Jericho, for theguardian.com on Monday 7th October 2013 07.34 UTC

The current US government shutdown has little impact on Australia, but if the US hits the debt ceiling Australia will feel the consequences of a bitterly partisan US political system.

One of the more ironic aspects of the US government shutdown is that if it goes on for much longer, the government won’t be able to calculate its economic impact because it won’t be able to collect the data.

Last Friday was supposed to be the most recent release of US jobs figures, and yet those logging on to the BLS website would have seen this:

During the shutdown the BLS won’t be able to collect the data to calculate the employment figures. Similarly the Bureau of Economic Analysis is also shut down, which rather makes collating data for the GDP figures a tad tricky.

But for Australians the big issue is not so much the shutdown. Costly as it is to the American economy – wiping about 0.1% of GDP growth each week – it does not have a great direct impact outside its borders. After all there are not many Australians employed by the US government or about to go to a US national park this weekend. The real bitter pill for the rest of the world (and US) comes in a couple weeks when the US reaches its debt ceiling.

The debt ceiling is often lazily referred to as the US government’s credit card limit, but it is not about giving the US government the right to spend more, but the ability to borrow to pay off spending it has already undertaken.

The debt ceiling is currently at $US16.699tn, and was actually reached in May but the US treasury was able to employ some “extraordinary measures” to keep borrowing. These measures will run out on 17 October.

At that point the US will no longer be able to borrow money to pay its bills. In the short run that is OK, because the US government gets enough cash from tax revenue to cover its expenses. But on 1 November it gets a bill for US$67bn for social security, medicare and veterans benefits. By 15 November the US government will be short about US$108bn. And that means defaulting on its payments.

No one really knows what will happen if the debt ceiling is not raised. Views range from, it’ll be fine, to it’ll be Armageddon. The US Treasury for its part has put out a paper that paints a pretty scary picture.

After looking at what has occurred in 2011 when the US nearly reached the debt limit, it concluded that a debt default “could have a catastrophic effect on not just financial markets but also on job creation, consumer spending and economic growth”.

It also noted that “many private-sector analysts believing that it would lead to events of the magnitude of late 2008 or worse, and the result then was a recession more severe than any seen since the Great Depression”.

And just in case you are a glass-half-full kind of person and you still have some optimism, the report ends on this less than upbeat note: “Considering the experience of countries around that world that have defaulted on their debt… [the] consequences, including high interest rates, reduced investment, higher debt payments, and slow economic growth, could last for more than a generation.”

Cheery.

Thus far the markets have been rather sanguine. The US Treasury 10-year bond yields are lower now than they were a month ago – suggesting investors are not too spooked about the long-term US economy. There is also a sense that investors are a bit jaded – the debt ceiling fight is now becoming an annual event.

But in the past few days, investors have become very worried about holding US treasury bonds which mature in the next month.

The spread of the six-month to one-month treasury bonds fell off a cliff, to the point where investors are now demanding a higher return for buying a one-month US treasury bond than for a six-month.

Should the default actually occur you could expect those jaded investors would suddenly get very alert. A US government default would put the world economy into uncharted waters. Around 87 % of all foreign exchange transactions involve US dollars. If the US government can no longer guarantee it will pay its bills (even for a short time), that rather upsets the integrity of the entire system.

In 2011 when the debt ceiling was almost breached, the US’s credit rating was downgraded to AA. It hurt US confidence, put a big hand brake on economic growth, and the turmoil on financial markets reduced American household wealth by around US$2.4tn.

For Australia, in 2011 our dollar at the time soared to US$1.10 as the American currency lost value. With the value of our dollar already rising the last thing our manufacturing sector needs is for the dollar to be given a boost.

For the moment most expect congress to back down and raise the debt ceiling (or perhaps even suspend it for a few more months like they did last year).

But Australians should hope that the US gets its act in order soon. While it is nice to think that we are now bound to China, a look over the past 20 years shows that aside from extraordinary circumstances – such as the dotcom bubble and September 11 attack, and our mining boom in 2006 – Australia and the US’s GDP growth is quite closely linked.

Our economy is like a dinghy in the ocean of the international economy. If the US scuttles itself though political intransigence, without another mining boom, little HMAS Australia would find it tough not to get sucked into the vortex as USS America goes down.

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House and Senate fail to reach deal before deadline. Estimated 800,000 federal workers told to stay at home. National parks and museums closed, Nasa affected. Signs of splits among Republicans over tactics. The President plans to make a statement today…

 


Powered by Guardian.co.ukThis article titled “US government shutdown begins as Congress fails to reach deal – live” was written by Tom McCarthy in New York, for theguardian.com on Tuesday 1st October 2013 16.12 UTC

Guardian Washington correspondent Paul Lewis (@PaulLewis) is in the streets of Washington DC, a city in which the government is not just the main employer, but the lifeblood of the city. The impacts of the shutdown were immediately visible, Paul writes:

By mid-morning, downtown Washington DC had the throng of a busy lunchtime, as furloughed workers from all the major government buildings trickled out onto the streets after closing down their offices.

Everywhere from obscure government agencies to the White House was operating on a slimmed-down staff, with all so-called ‘non-excepted’ employees ordered to return home after turning up to work on Tuesday morning.

DC’s mayor, Vincent Gray, immunised many staff working for the city’s government from the shutdown, by declaring them all ‘essential’ workers, a legally contentious measure. But it at least kept the city movement, and guarded America’s capital from less sightly impacts of the last shutdown, in the 1990s, when uncollected trash piled up on the street.

Later we’ll have Paul’s interviews with tourists and federal workers talking about how the shutdown is affecting them.

Updated

Veterans of World War II have stormed their own memorial on the National Mall, barricades be damned, reporter Leo Shane III of Stars and Stripes tweets:

Honor flight vets just knocked over the barriers at the WWII memorial to get inside, #shutdown or no.

No sign of folks leaving. The vets have control of the memorial. #shutdown

John McCain may be trying to make a point by publicizing polling showing Americans oppose the GOP strategy of tying the shutdown to health care cuts, but most national polls on who gets blamed are rather useless in understanding what’s going through the mind of the House GOP, Guardian polling analyst Harry J Enten (@ForecasterEnten) writes.

Harry argues that, district-for-district, Republicans really aren’t vulnerable to voter outrage in midterm elections in 2014 because the districts are rigged:

While there are a number of reasons why House Republicans were willing to shut down the government, no answer is probably as satisfying as the fact that majority of House Republicans don’t live in districts that look anything like the rest of the nation. Thanks to urban packing and gerrymandering, Republicans don’t have to worry about losing to a Democrat.

The average vote share for President Obama in 2012 in Republican House districts was only 40.4%. Only 17 members of the Republican House caucus are from districts that voted for Obama in 2012. More than half of Republicans in the House come from districts that are 10 points more Republican than the nation as a whole. The average Republican district is over a 11 points more Republican than the nation.

The thing that most worries most members is likely a primary challenge, not a general election. The fact that more Republicans support a shutdown to stop Obamacare, as Quinnipiac found, is what’s most important for them.

That analysis leaves open the question on whether blowback from the shutdown represents potential damage to a party’s national brand, with consequences for membership, fundraising, turnout, activism, public support in hard policy fights and more.

Shut down: Tweets from Voyager 2. 

Not to be confused with Voyager 1, which recently entered interstellar space. Voyager 2 is only 15.37bn km away, according to the Nasa site that tracks it, which interestingly is still online here.

Updated

Shut down: the US Census Bureau online. 

You can’t visit the web site here, but you can read a shutdown notice.

(h/t @kennelliott)

Updated

Senator Mike Lee of Utah, who with Ted Cruz of Texas led the charge to tie stopgap spending legislation to changes to Obamacare, is delivering a speech on the Senate floor calling for a focus on people whose livelihoods will be damaged by the government shutdown. “I want to focus our attention in the coming days and hours on those people,” Lee says, gravely.

It turns out however that mostly Lee wants to continue his critique of the Affordable Care Act. “I’d like to turn for a moment to people who are and for a number of months have been already [hurting],” he says. “Obamacare happens to be the No.1 job-killer in the country.”

Threatened by shutdown: airport efficiency(!).

Here’s a question from the comments:

Can someone tell me will airport be affected? Ie will take ages to get through security?

Answer, in short: Yes, expect some delays, but security will remain tight. The Transportation Security Administration, part of the department of Homeland Security, is expected to furlough certain nonessential employees, but those do not include most screeners. Air traffic controllers will report for work as usual.

John McCain, Republican of Arizona, argued Monday against the House Republican shutdown strategy, telling the House to accept fate and pass a “clean” spending resolution.

This morning McCain indulges in a preliminary bit of “I told you so,” directed at Republican colleagues:

From the Bloomberg story:

By 72 percent to 22 percent, Americans oppose Congress “shutting down major activities of the federal government” as a way to stop the Affordable Care Act from going into effect, the national survey from Quinnipiac University found. [...]

A majority of the public, 58 percent, is opposed to cutting off funding for the insurance program that begins enrollment today. Thirty-four percent support defunding it.

Note that the poll featured in the story McCain links to is from last week; while the Bloomberg story is from today, it does not reflect new polling from today.

Updated

Here’s the tabloid view, then and now:

Shut down: Freedom of Information Act requests.

The justice department claims it can’t meet FOIA deadlines in an Electronic Frontier Foundation lawsuit over phone metadata collection because of the shutdown, Politico’s Josh Gerstein reports:

Just hours after the partial government shutdown kicked in, Justice Department lawyers filed a motion Tuesday morning with a federal judge in Oakland, Calif. seeking to postpone all deadlines in connection with a suit brought by the Electronic Frontier Foundation.

The motion submitted to U.S. District Court Judge Yvonne Gonzalez Rogers (and posted here) says the government will be unable to continue reviewing documents for release because both DOJ lawyers and intelligence community personnel involved in the process are being furloughed.

Read the full piece here.

Senate minority whip John Cornyn, Republican of Texas, says Democrats are “whistling past the graveyard” in asserting that the Affordable Care Act is not negotiable:

“This is the law of the land. It’s perfect. Couldn’t be better,” Cornyn, on the Senate floor, ridicules his Democratic colleagues as saying. “That’s like whistling past the graveyard.”

Then Cornyn accuses Democrats of engineering the shutdown because polls show Republicans will take the blame:

They’re looking at polls…They’re willing to risk shutdown of the federal government just to gain political advantage… The Democrats have doubled down on their strategy, hoping to gain political advantage at the expense of people hurt.

Part of the difficulty this morning for 2m federal workers is that many did not find out until they showed up for work as usual whether they were part of the “essential” core that would be kept on the job. Some were told to stay. Others were sent home.

The Guardian’s Paul Lewis (@PaulLewis) and Dan Roberts (@RobertsDan) are watching the shutdown unfold in Washington:

Some federal workers were reportedly instructed to switch off their BlackBerry smartphones to prevent them from working remotely, a disciplinary offence.

From 7am, forlorn-looking commuters could be seen heading to government buildings and agencies across Washington DC, where they would learn their fate. The city, where the government is a huge employer, will feel the impact of the federal shutdown more acutely than anywhere else in the US. The White House said it estimates a one-week shutdown would cost the wider US economy $10bn.

Read the full piece here.

Dan also has the inside story of how the shutdown played out in the halls of Congress last night:

Unfortunately, much of Washington acted as if it had seen this movie before. The metaphorical tumbleweed blowing down the corridors of Capitol Hill reflected not a fear of being caught in the crossfire, but a cynical war-weariness that left many lawmakers on the sidelines until it was too late. After three years of similar standoffs over the federal budget that were resolved at the last minute, no one could quite believe that this one would finish with shots fired.

Read the full story here.

The Senate has killed the House GOP request for a budget conference, again along party lines, 54-46.

Senate majority leader Harry Reid is on the floor of the Senate decrying the House request as a cynical 11th-hour ploy meant to portray the GOP as being serious about making a budget deal when in fact the party has, Reid says, ignored six months’ worth of Senate requests for a conference. Here’s Reid:

Sen. Murray [Patty Murray, D-Washington, budget committee chairwoman] has asked to go to conference 18 times. [McCain] has asked eight times himself. This has gone on for six months.

But it’s a clock tick past midnight… Boehner demanded the very conference they shunned us with for six months.

This display I hope would be embarrassing for House Republicans and Senate Republicans… what a deal!

If the House passes the piece of legislation they have over there… to reopen government, we’re happy to go to conference – why wouldn’t we? We’ve been asking to do that for months and months.

Updated

Senator John McCain, Republican of Arizona, sees the shutdown as a boon to the president because it distracts from the administration’s woes elsewhere:

“Obamacare is going to have a lot of problems in its rollout… the president’s poll numbers are falling in every category,” McCain told MSNBC. “Yet the story to the American people is Republicans are fighting Republicans – that’s not helpful.”

The president plans to make a statement today at 12.25pm ET in the Rose Garden, the White House advises.

As the two parties try to reach a spending agreement, they also are trying to pin the blame for the shutdown on the other side. In a statement in the briefing room yesterday afternoon the president said Republican maneuvers resulting in a government shutdown would be the “height of irresponsibility.” Expect the president to expand on that theme this afternoon.

Last time the government shut down, the Republican Congress caught the blame and the Democratic president emerged the stronger. That fact is not lost on the Obama administration, which is using president Clinton’s playbook, Bloomberg reports:

Five administration officials, including Treasury Secretary Jack Lew and budget director Sylvia Burwell, were central figures during the shutdowns of 1995 and 1996. That two-stage battle pitted a House Republican majority against Democratic President Bill Clinton and resulted in a public relations defeat for the Republicans.

Now, Like Clinton, Obama is casting his Republican rivals as partisan warriors willing to put the country’s economic future at risk to score political points with their base.

While Clinton chided Republicans for putting “ideology ahead of common sense” in a 1995 address, Obama told reporters yesterday that “House Republicans continue to tie funding of the government to ideological demands.”

Read the full piece here.

Updated

Are you a federal employee forced to stay home because of the shutdown? Is one of your family members an essential employee who has to work without pay? We want to hear from you:

* Where do you work? What is your role?

* What have your supervisors told you to expect in coming weeks? Please be specific. How will furloughs or payment delays affect you and/or your family?

* Is there anything you’d say to members of Congress? to President Obama or House Speaker John Boehner? Do you see the shutdown as necessary? Is there a silver lining?

Please share your views in the comments or reach out to us directly at ruth [dot] spencer [at] theguardian [dot] com. We’ll be featuring your comments here. Thanks for writing!

Welcome to our live blog coverage of the partial government shutdown, which went into effect at midnight. America is waking up to shuttered parks, silent call centers for veterans’ services, empty Pentagon offices and skeleton crews in White House and congressional offices. It’s the first government shutdown in 17 years.

The president signed a bill late on Monday defending against one of the most painful effects of a shutdown: the bill ensured there would be no delay in delivering paychecks to active-duty military personnel. The core services of other big government programs, including Medicare and social security, were expected to operate as usual.

The House and Senate played ping-pong on Monday with stopgap spending resolutions that would have kept the government open if they were able to agree on one. The last House resolution retained delays in the rollout of the Affordable Care Act that the Senate leadership had made clear would be rejected. The resolution was rejected, and at about 11.40pm ET the office of management of the budget sent out a memo ordering agencies to “execute plans for an orderly shutdown due to the absence of appropriations.” Read Jim Newell’s play-by-play of last night’s action here, and Graeme Wearden’s early-morning updates here.

Just before the shutdown, House Republicans made a significant move on the overall budget issue, electing to join a conference with the Senate to cut an actual budget deal, a step the House leadership had been resisting. Senate majority leader Harry Reid said he would not bargain over the current spending measure at a budget conference.

Updated

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No ‘taper’ to central bank’s support of US economy. Fed requires ‘more evidence that progress will be sustained’. Markets cheer the announcement while the US dollar falls. The Fed’s decision underlines the fragility of US recovery…

 


Powered by Guardian.co.ukThis article titled “Ben Bernanke: no change in Federal Reserve’s stimulus – live” was written by Tom McCarthy in New York, for theguardian.com on Wednesday 18th September 2013 21.15 UTC

Summary

We’re going to wrap up our live blog coverage. Here’s a summary of where things stand:

• The Federal Reserve announced no change to its program of monthly asset purchases designed to stimulate the economy. The central bank will continue to buy mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month. ”The Committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases,” the central bank said in a statement.

The news sent markets through the ceiling. The Dow Jones Industrial Average, which had been concerned that the central bank would take the economy off life support, hit an all-time high on the announcement.

• However the decision to maintain the stimulus pointed to a diagnosis on the part of the Fed of sustained, underlying economic weakness. In June, Fed chairman Ben Bernanke said the central bank may begin tapering its asset purchases. There was no sign of such talk today, three months later.

• Bernanke said that unemployment was lower but not low enough (the Fed has set a 6.5% benchmark) and growth is up but not far enough. Bernanke said the current unemployment rate of 7.3% “understates the amount of true unemployment in the economy” because of the job markets cycle and demographic trends.

• The news floored analysts and reporters, who reminded Bernanke that as recently as June he was talking about “tapering” quantitative easing. “I don’t recall stating that we would do any particular thing in this meeting,” he replied.

• Bernanke said the economy continued to show signs of recovery, and sectors closest to the QE program – housing and autos – showed some of the best improvement. “There has been a lot of progress,” he said. “Labor market indicators are much better today than they were when we began… more than a year ago.”

• Bernanke warned of the potential “very serious consequences for financial markets and the economy” if the country defaults on debt or if the federal government has to shut down due to a congressional failure to reach a budget deal.

• Bernanke dismissed the idea that quantitative easing is turning, against the central bank’s will, into a very long-term policy. He said easing would last until there’s “substantial improvement” in the outlook of the labor market. At the moment there’s some improvement, he said, but “ultimately we will reach that level of substantial improvement.”

Updated

Bernanke is done. The news conference has ended. For the time being, he’s not going anywhere.

Pushing back against the impression that Fed policy helps the affluent most, Bernanke says the Fed is working to help the middle class by seeking to strengthen the jobs market and ensuring price stability.

He acknowledges that the rich are getting richer and the poor are getting poorer. Then he says the Fed can’t do much about that:

Our economy is becoming more unequal. The very rich people and the people in the lower half who are not doing well.

This has been going on for decades…. It’s important to address these trends, but the Federal Reserve doesn’t really have the tools to address these long-run… trends.

Bernanke says there are signs quantitative easing is working: 

It’s difficult to get a precise measure. There’s a large academic literature.. . my own assessment is that it has been effective… some of the leading sectors like housing and autos” are tied most directly to asset purchases.

There has been a lot of progress. Labor market indicators are much better today than they were when we began… more than a year ago.

Bernanke addresses the question raised by my colleague Dominic Rushe earlier. If the economy continuously fails to meet the benchmarks the Fed has laid out for ending asset purchases, how will it ever get out of QE?”

“The criterion for ending purchases is a substantial improvement in the outlook for the labor market,” Bernanke says. He says there has been some improvement and “ultimately we will reach that level of substantial improvement.”

Then easing can end.

A potential failure next month in Congress to raise the debt limit or pass a budget is “obviously part of a very complicated set of legislative decisions, strategies, battles” that Bernanke won’t comment on.

But he says “a government shutdown and failure to raise the debt limit could have very serious consequences for financial markets and the economy.”

Bernanke says the central bank tries to take into account such potential threats, but the Fed is relatively powerless in this field.

Is the Fed concerned about confusing investors by mentioning tapering and then not doing it?

I don’t recall stating that we would do any particular thing in this meeting. What we are going to do is the right thing for the economy, Bernanke says… We try our best to communicate.. We can’t let market expectations dictate our policy actions.

The markets really like it. 

0-2: At the start of the blog we speculated that Bernanke might simultaneously announce that he’s winding down QE and winding down his career as Fed chairman. In fact he has done neither.

Bernanke is asked whether he’s leaving:

“I prefer not to talk about my plans at this point.”

Could tapering begin by the end of 2013? Bernanke says there’s no fixed schedule:

There really is no fixed calendar… If the data confirm our basic outlook… then we could move later this year. But even if we do that, the subsequent steps will [rely] on continued progress in the economy.

The criteria include an improved labor market including lower unemployment.

Bernanke is asked whether he was speaking out of turn in June, when he said the fed could start tapering its stimulus program. Was it a mistake to talk about tapering back in June?

I think there’s no alternative … but to communicate as clearly as possible. As of June we had made meaningful progress in terms of labor [market],” Bernanke says. He says green shoots in the jobs market convinced the committee that it was the time to start talking tapering.

The question: what changed, to make the talk stop?

Updated

Bernanke says low job market participation is partly cyclical:

“There’s a cyclical proponent to participation. The unemployment rate understates the amount of true unemployment in the economy.”

“There’s also a downward trend in participation in our economy,” Bernanke says, but he pins the trend on external factors including an aging population.

The focus of course is on the Fed’s decision to leave its asset purchase program unchanged but a relevant question is “why.” “It seems as though there are two major reasons for the decision,“ Guardian business correspondent Dominic Rushe (@dominicru) writes:

1. The rise in mortgage rates is contributing to a tightening of financial conditions, which the Fed is obviously worried about.

2. The Fed inserted a new sentence that begins with “taking into account the extent of federal fiscal retrenchment.” The Fed has long been worried about their fiscal brethren and that worry crept further into today’s statement.

Even though the Fed acknowledges that things have picked up since they began QE3 late last year, they “decided to await more evidence that progress will be sustained before adjusting the pace of its purchases.”

This is not what we expected. However it is, from the Fed’s point of view, understandable.

But there’s a rather unsettling conclusion to Dominic’s analysis:

However, if the tightening of financial conditions, which was partially a result of the Fed’s decision to discuss slowing asset purchases, is enough to forestall an actual reduction, then in theory the Fed can never cease purchasing assets unless there is no adverse reaction in asset markets. It becomes a negative cycle in which the Fed would find itself trapped.

Guardian finance and economics editor Heidi Moore (@moorehn) is performing Bernanke-to-English tranlsation:

Bernanke says there are signs the economy is improving.

He says that unemployment is falling [Editor: if only by 1.8% over the last two years]; 2.3m private sector jobs have been created; aggregate hours of work are up; and weekly unemployment claims are falling. ”

All this “despite substantial fiscal headwinds,” Bernanke says.

Bernanke is discussing the FOMC projections for interest rates, unemployment and inflation.

He says the collective projections of the committee members have rates moving from 2.0-2.3% in 2012 to 2.5-3.3% in 2016.

Unemployment is expected to move from 7.1-7.3% in 2013 to 5.4-5.9% by 2016, “about the long-run normal level.”

Inflation is projected to move from 1.1-1.2% in 2013 to 1.7-2.0% in 2016.

Updated

Bernanke is speaking. Watch live on CSPAN here.

Anything to instill confidence?

Updated

If the Fed keeps buying long-term government debt – and the board of governors just announced that that will continue to the tune of $45bn per month – return to investors on that debt will not be as strong. Also see this chart:

Bloomberg columnist Caroline Baum posed this question for Bernanke in the event that the Fed decided to maintain its stimulus program, which it now has: Why?

Various Fed studies suggest that the third round of asset purchases has had a negligible effect on long-term interest rates, that the real benefit comes from forward guidance. Why, then, have you decided to stick with the program? Ten-year yields are up 120 basis points since May. Any bang for the buck seems to have dissipated.

Read Baum’s Ten Burning Questions for Ben Bernanke here.

Fed chair Ben Bernanke is scheduled to meet the press in about 10 minutes. He’s likely to face sharp questions about why the Fed has decided to stick with a policy, quantitative easing, that seems to have born little fruit over three rounds and almost five year.

Guardian finance and economics editor Heidi Moore (@moorehn) sees the move as a symptom of how dire the economic situation is. Easing isn’t working – but there isn’t a plan B.

Try, try again. And again. And

What just happened? You can read the full Fed board of governors statement on the decision that has emerged from the two-day meeting of the open markets committee here.

In short the central bankers did not judge the economy to have hit benchmarks that would have dictated a change in stimulus policy – in this case slowing the purchase of mortgage-backed securities, Treasury bills and bank debt.

At a deeper level, the Fed self-evidently retains belief in these levers to move the economy. The tools still work, this decision says, and the Fed intends to keep applying them.

Here’s the key graph from the Fed statement, with this key sentence: ”the Committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases.”

Taking into account the extent of federal fiscal retrenchment, the Committee sees the improvement in economic activity and labor market conditions since it began its asset purchase program a year ago as consistent with growing underlying strength in the broader economy. However, the Committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases. Accordingly, the Committee decided to continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative, which in turn should promote a stronger economic recovery and help to ensure that inflation, over time, is at the rate most consistent with the Committee’s dual mandate.

Read the full Fed statement here.

The markets like it.

Updated

Guardian business correspondent Dominic Rushe has some early details of the Fed announcement that it has no immediate plans to phase out or “taper” its $85bn-monthly asset purchase program.

The Fed says it is waiting for “more evidence that progress will be sustained before adjusting,” Dominic reports.

Reactions

No taper. More to come. 

And …

All the major US stock markets are trading slightly lower ahead of Fed announcement, GuardianUS business correspondent Dominic Rushe (@dominicru) reports:

 The S&P 500 is down 0.11% and the Dow 0.26%. Blame nerves. As until the announcement comes this afternoon, no one outside the Fed really knows whether Bernanke is going to start the “tapering” the $85bn a month quantitative easing stimulus programme or not.

That shoe took a long time to drop. President Obama is prepared to name Federal Reserve vice chairman Janet Yellen as the next chairwoman of the Federal Reserve, the Washington Post reports, citing a White House official and “people close to the White House”:

Federal Reserve Vice Chairman Janet Yellen is the leading candidate to be President Obama’s nominee to lead the Fed as chairman, a White House official said Wednesday. Barring any unexpected development, that likely means that Yellen will get the nomination, perhaps as soon as next week.

People close to the White House said this week that Yellen was the front-runner after the unexpected withdrawal by former White House economic adviser Lawrence Summers, who was facing sharp resistance on Capitol Hill.

Full piece here. Summers’ withdrawal did not leave Yellen the lone horse in the race, however. Wonkblog’s Neil Irwin today handicapped a competition between Yellen and Donald L. Kohn, her predecessor as Fed vice chairman. Irwin concluded it could go either way on the merits, but Yellen may be the more politically expedient choice:

The president has a choice between two very qualified, experienced central bankers for the job, with the differences between them more subtle variations in style and temperament than any vast chasm in monetary policy views. Against that backdrop, if he passes over Yellen, who would be the first woman in the job and has been endorsed by Wall Street economists and many in Congress, he’ll face tough questions on why.

Read the full piece here.

“After three years of money-pumping, quantitative easing is evidently doing nothing to bring the country to full employment, which is one of the two tasks the Fed exists to perform,” Guardian finance and economics editor Heidi Moore (@moorehn) wrote at the start of this month. That’s one reason “it’s worth examining whether QE has outlived its usefulness”:

The hard news is this: it’s a smart idea for the Fed to taper, to start opening the door for the end of stimulus. It’s not a smart idea because the economy is healthy – it isn’t – but because the economy needs to come off life-support and breathe for itself.

Quantitative easing is a drug that seems to be long past its due date. After three years, the returns are in: there are likely no more benefits coming to the economy from holding down interest rates and buying up mortgage bonds.

The economy isn’t recovering, Heidi writes; it’s “in some kind of unresponsive fugue state that we’ve arbitrarily chosen to call a ‘recovery.‘” Read the full analysis here.

Good midday and welcome to our live blog coverage of Ben Bernanke’s eagerly awaited remarks on two topics he uniquely owns: quantitative easing and Ben Bernanke. There’s a chance the Fed chair will use his press conference this afternoon to show them both the Out door.

There’s money on the line. Markets will be listening for signals that the Federal Reserve bank plans to wind down its $85bn in monthly asset purchases known as quantitative easing. For nearly five years the stimulus program has helped markets find confidence in a discouraging landscape. Bernanke has signaled that it won’t last forever. But it was supposed to last until the economy – and specifically the unemployment rate – improved. Or until rising interest rates grew too worrisome.

Neither has happened. The landscape remains discouraging, with unemployment at 7.3% and job market participation at an all-time low. Inflation has yet to rise to the 2% target Bernanke has proposed (he calls it the “objective” rate).

Clearly, easing isn’t working. Unless it is, and the numbers would be even more terrible without it. For two days the fed’s open markets committee (FOMC) has been discussing this and other questions. This afternoon Bernanke is expected to indicate what the group decided.

Additionally Bernanke may talk about his own plans to step down as Fed chair, a seat he’s occupied since President George W Bush appointed him in 2006. The conclusion that Bernanke will leave when his current term expires at the end of January is so foregone that the secret struggle to replace him already has produced public losers.

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Federal Reserve chair says bond-buying could slow. No firm plan for policy adjustment, however. Jobs market ‘far from satisfactory,’ Bernanke testifies. The Fed anticipates curtailing its assets purchasing program by the end of the year contingent on an improving economic picture…

 


Powered by Guardian.co.ukThis article titled “Ben Bernanke: ‘We’re very focused on Main Street’ – as it happened” was written by Tom McCarthy, for theguardian.com on Wednesday 17th July 2013 15.44 UTC

1.31pm ET

Summary

We're going to wrap up our live blog coverage of Fed chair Ben Bernanke's House testimony. Here's a summary of where things stand:

Bernanke said the economy hasn't recovered enough for the Fed to take its foot off the gas – yet. "We need accommodative monetary policy for the foreseeable future," he said. 

The Fed anticipates curtailing its assets purchasing program, known as quantitative easing, by the end of the year, but that's contingent on an improving economic picture, which Bernanke emphasized isn't a given. Stocks were up and bonds were down slightly on the perceived signal that asset purchases could taper.

• Bernanke said the economy's still too weak to recommend raising interest rates. He reiterated two key benchmarks for moving rates: unemployment below 7% or inflation of 2%. We're not there yet.

Committee members thanked Bernanke for his service on the occasion of what may be his last appearance before the House as Fed chair. But it wasn't his last Hill appearance: he testifies before the Senate tomorrow. 

1.15pm ET

After 3+ hours of testimony before the House today, guess what Ben Bernanke gets to do tomorrow? Testify before the Senate. 10.30 am ET – be there.

1.13pm ET

And they're done. Adjourned.

1.12pm ET

Michele Bachmann, Republican of Minnesota, is up. She has a debt ceiling question. She says that for 56 days, federal debt on the books mysteriously stayed just under the debt ceiling.

"Has the federal government been cooking the books on this?" Bachmann asks.

Could be a good question – for the Treasury.

"This is not the federal reserve," Bernanke says. "You'd have to ask the secretary of the treasury."

Bachmann's follow-up: Have we exceeded our debt limit?

"Uh, I don't think so," Bernanke says.

1.04pm ET

Andy Barr, Republican of Kentucky, asks Bernanke about sustained unemployment: is it the Fed's fault or Obama's fault?

The economy has weak spots, but "it is the case that we have made some progress since 2009… we're doing better than a lot of other industrial countries," Bernanke replies.

Barr says there's "gotta be a fiscal policy problem here," because the Fed's expansionary policy has been responsible. But Barr isn't another self-hating Congressman. The implication is that it's Obama's fault.

12.59pm ET

University of Michigan professor Justin Wolfers notes that bond prices are down slightly... after months of steep climbing.

12.49pm ET

Guardian emergency responder Alan Yuhas clarifies the IRS Star Trek video reference. Alan wrote about it back in March:

The IRS has apologized for spending tens of thousands of taxpayer dollars to film a Star Trek parody, but has defended the value of Gilligan's Island parody made at the same time. The agency estimates that total expenditures were about ,000.

The Star Trek video features a spaceship on a "never-ending mission to seek out new tax reforms, to explore strange new regulations, to boldly go where no government employee has gone before". They set off to the planet Notax, whose fiscally irresponsible aliens live in chaos. The six-minute video has special effects, elaborate costumes, and two crewmen banter: "Back in Russia, I dreamed someday I'd be rich and famous." "Me too. That's why I became a public servant." The ship's captain throws up his hands in dismay as the crewmen bump fists.

Read the full fun piece here.

12.45pm ET

Congress.

"I feel like Bette Midler,' says Denny Heck, Democrat of Washington – "the very last guest on the very last episode of the Tonight Show. She famously quipped to Johny Carson, 'You are the wind beneath my wings.'"

Heck says Bernanke's like that, with the economy. 

Updated at 12.50pm ET

12.42pm ET

Dennis A. Ross, Republican of Florida, has said something about an "IRS Star Trek video." He does not elaborate. We'll wait for him to circle back around on that. He's calling for a healthy debate on the debt ceiling – he thinks that the brinksmanship that led to the downgrading of US debt was a good thing. Unclear whether there's a question coming here.

Bernanke says the debt ceiling fights are bad. 

"We did get a pretty big shock to consumer sentiment and it did do harm to the economy."

Updated at 1.19pm ET

12.36pm ET

Bernanke, still going strong, ish, 150 minutes in. Currently talking: Joyce Beatty, Democrat of Ohio, the second-least-senior member of the committee.

12.32pm ET

Randy Hultgren, Republican of Illinois, returns to a concern of many lawmakers on the GOP side, that the Fed is over-regulating community banks, which Hultgren says are being hurt by an interest-rate crunch.

Bernanke says the low rates are meant to strengthen the economy. Throughout the hearing he's deflected the assertion that local banking is crippled. "We're very focused on Main Street," he said early on.

Updated at 12.33pm ET

12.18pm ET

We're not going anywhere! This is the part where Bernanke drops the surprise that turns the economy on a dime. Any second now. 

Updated at 12.20pm ET

12.13pm ET

Marlin A. Stutzman, Republican of Indiana, asks whether Obamacare is hurting the economy. Bernanke admits there have been signs that employers are having some difficulty navigating the new rules requiring them to provide insurance if they carry a certain number of full-time employees:

"It's very hard to make any judgment. One thing that we hear… is that some employers are hiring part-time in order to avoid the mandate there. So we have heard that. But … the high level of part-time employment has been around since the beginning of the recovery, and we don't fully understand that.

Stutzman asks whether it might be smart to push back Obamacare compliance deadlines. Bernanke replies:

This is beyond my pay grade. This would depend on how well, and how much time is needed, to fully implement the bill.

12.04pm ET

Guardian finance and economics editor Heidi Moore flags an exchange between Bernanke and Republican Stephen Lee Fincher of Tennessee, who is worried about private sector dependence on federal largesse – except when he's not worried about that.

Updated at 12.05pm ET

11.44am ET

Emanuel Cleaver, Democrat of Missouri, has a koan-like question for the Fed chair:

What would be the consequences of easing quantitative easing prematurely? 

Bernanke replies with half of this and half of that. The Fed plans to decrease asset purchases unless that's not called for in which case they'll be continued.

11.38am ET

Guardian finance and economics editor Heidi Moore agrees with the congressman's assessment that the legislature hasn't done diddly to bring the jobs market back. In April she wrote, under the headline "When will this do-nothing Congress wake up to America's job crisis?":

While the unemployment rate is dropping, and the number of jobs goes up and down, the labor force participation rate has been steadily falling since the economy started weakening in 2007. [...]

This situation is, economically, a catastrophe. It has existed for the past five years, and no lawmaker in Washington has done very much about it. Somehow, a small group of Republican lawmakers have hijacked the national conversation about financial matters to blather about deficits and long-term budgets. (Leave aside the fact that not a single lawmaker, of either party, seems capable of putting together any kind of practical budget at all.)

Most Democrats and the White House have gone along with this empty rhetoric, accepting that the current standard of wise budgeting is "discipline" and "long-term goals". It's not. The current standard for the creation of a reasonable budget should be "do something that encourages job creation". This task has gone too long unaddressed.

Read the full piece here.

11.35am ET

Congress has to do more to instill confidence in consumers that "we will do things to help create jobs," Al Green, Democrat of Texas, says. "We have not done enough… your good work still needs some help from the policy makers.

"Consumers say to me, 'I need confidence.'" Really?

Bernanke is diplomatic. "No one has a magic formula" for creating consumer confidence, he says. 

11.28am ET

Stephen F. Lynch, Democrat of Massachusetts, is up. He notes that Bernanke is a scholar of the Depression era and wonders whether 30-year mortgages were available back then. They weren't; Lynch's point is to underscore the importance of government support for the housing market.

We want to keep "a preservable, 30-year fixed mortgage, keep that market going, without having the taxpayer take all the risk up front," Lynch says.

Bernanke says the government can't unilaterally move prices but it can step in when the market won't self-correct. "The argument for thinking about government participation is exactly like the situation we faced in the last few years, where there's a big housing problem" and private lenders aren't willing to act counter-cyclically, Bernanke says. 

Lynch thanks the Fed chair for his service. "I've heard stories that this might be your last appearance before this committee for this purpose," he says.

11.19am ET

Bernanke's lips are talking tapering, but that may not be the take-home message here:

Updated at 11.19am ET

11.16am ET

Suggested reading via the National Journal:

11.13am ET

Carolyn B. Maloney, Democrat of New York, is up. She defers to Ed Perlmutter, Democrat of Colorado, because he didn't get to ask a question last time Bernanke appeared.

Perlmutter thanks Bernanke for his steady hand on the economic rudder. Then he goes back to … the sequester. How do we better understand what this 1.5% in lost growth means, practically speaking, he asks.

Bernanke says losses could be thought of in terms of 760,000 "full-time equivalent jobs" or unemployment down "another seven or eight tenths, something like that."

"So it makes a very big difference," Bernanke says. "It's very substantial." 

11.08am ET

Dominic Rushe is keeping an attentive eye on the tickers. Stock markets are still rising as Bernanke speaks, he notes – the Dow is now up +24.13 points or 0.16%.

Hold onto your seats.

11.03am ET

Guardian US business correspondent Dominic Rushe captures the Fed chair in a pensive moment:

11.02am ET

Democrat William Lacy Clay of Missouri is up with a question about how the sequester may be hurting the jobs market.

"In this recovery, even as the private sector has been creating jobs, government at all levels has been cutting … 600,000 jobs," Bernanke says. He says that's unusual during an attempted recovery. 

He refers back to the CBO estimate that the sequester is dulling growth by 1.5% a year. Whose idea was the sequester again? Did we decide whom to blame? The Democrats keep bringing it up, apparently confident the public believes it's the fault of John Boehner's Congress. Insofar as the public is thinking about it.

Updated at 11.04am ET

10.58am ET

Isn't it true, Huizenga asks Bernanke, that Wall Street has benefited more from loose money and bond-buying than Main Street has? 

"I don't think so," the Fed chair replies. "We're working through the mechanisms we have, which of course are financial interest rates and financial asset prices."

"We're very focused on Main Street," Bernanke says.

Updated at 10.58am ET

10.55am ET

Bill Huizenga, Republican of Michigan, asks Bernanke if his buddy should refinance his house – is now a good time?

"I'm not qualified to respond as a financial adviser," Bernanke jokes. Ha.

10.52am ET

We have a self-hating Congress.

10.50am ET

Ranking Democrat Maxine Waters of California is up. She asks Bernanke about an IMF recommendation to repeal the sequester and raise the debt ceiling. The president would like that. Does Bernanke agree?

Bernanke says the sequester is hurting growth, to the tune of about 1.5% in 2013.

"As I've said many times, I think that fiscal policy is focusing too much on the short run and not enough on the long run," he says. 

10.46am ET

Bernanke answers a question from committee chair Jeb Hensarling, Republican of Texas.

Bernanke defends the Fed's decision to telegraph its intentions of keeping rates low, pegged to the unemployment and inflation benchmarks. He says markets are figuring out the Fed's intentions and relative stability is the result.

Updated at 10.46am ET

10.41am ET

If Bernanke testifies and no one hears him, did he make a sound?

10.40am ET

Bernanke testifies that the economy is recovering "at a moderate pace" but he doesn't sound inspired. Home sales and construction are up. Unemployment is down slightly – it hit 7.6% in June – but "the jobs situation is far from satisfactory." Inflation has not touched the 2% benchmark.

The Fed may begin to ease its bonds purchases "later this year," Bernanke says. But it's conditional on sinking unemployment or new indicators of inflationary pressure:

Committee participants also saw inflation moving back toward our 2 percent objective over time. If the incoming data were to be broadly consistent with these projections, we anticipated that it would be appropriate to begin to moderate the monthly pace of purchases later this year. And if the subsequent data continued to confirm this pattern of ongoing economic improvement and normalizing inflation, we expected to continue to reduce the pace of purchases in measured steps through the first half of next year, ending them around midyear. At that point, if the economy had evolved along the lines we anticipated, the recovery would have gained further momentum, unemployment would be in the vicinity of 7 percent, and inflation would be moving toward our 2 percent objective. Such outcomes would be fully consistent with the goals of the asset purchase program that we established in September.

10.31am ET

It works! They fixed it. Bernanke begins. Once more his remarks are here. CSPAN has yet to fix its online feed. The Wall Street Journal has a feed that's working fine.

10.29am ET

Now the committee members and the witness are just sitting uncomfortably staring at each other as presumably terrified techs try to sort out what's wrong.

Bernanke has his arms folded at the witness table and appears not the least put out at the unexpected twist. It's exactly the kind of composure the markets look for in a Fed chair. 

10.26am ET

Heidi Moore is the Guardian's finance and economics editor.

10.23am ET

Committee members are making opening statements, but they're hard to hear because either the mics or the speakers – it seems like a speaker issue – aren't working. CSPAN is not running its usual online video stream on account of the technical issue. 

The statements from committee members are barely audible on television with the volume turned up to around 40. What words can be made out sound safely dull.

It's like Bernanke mumblecore. 

10.15am ET

The Guardian's Dominic Rushe is watching the markets as we prepare to watch Bernanke. So far so good, he reports:

All the major US markets are up – a bit – ahead of Bernanke's testimony. The Dow is up 21 points, 0.14%. This despite the fact that the sequester has obviously taken a huge bite out of Congress's broadcast budget.

10.12am ET

Bernanke's testimony is delayed due to an audio problem in the hearing room. 

SELL! Sell!

While we wait you can read Bernanke's prepared remarks here

9.13am ET

Good morning and welcome to our live blog coverage of Federal Reserve chairman Ben Bernanke's testimony before the House Financial Services Committee. Bernanke's testimony has been released in advance of his 10am ET start in an effort to forestall any undue market excitement.

According to his prepared remarks, Bernanke will announce a possible winding down of the central bank's program to add fuel to a sputtering economy by buying bn in bonds each month, cyclical purchases known as quantitative easing. "Our asset purchases depend on economic and financial developments, but they are by no means on a preset course," Bernanke will testify, according to Reuters:

Bernanke set off a brief but fierce global market sell-off last month when he outlined plans to reduce the quantitative easing program, and he has joined a slew of Fed officials since then who have spelled out their intention to keep interest rates near zero well after the asset purchases.

Bernanke will take questions from committee members on the health of the economy, expectations for unemployment, inflation and other indicators in his semi-annual trip to the Hill – potentially his final appearance as Fed chair. Watch it with us here. 

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Dismal jobs report showed only 88,000 new jobs in March after economists expected the US would create 200,000, raising concerns that the economy may be losing momentum. February’s numbers revised up from 236,000 to 268,000…

 


Powered by Guardian.co.ukThis article titled “March jobs report shows slowdown in hiring with only 88,000 jobs added” was written by Dominic Rushe in New York, for The Guardian on Friday 5th April 2013 20.56 UTC

The recovery in the US jobs market hit the skids in March with just 88,000 new jobs being created, less than half the figure economists had been expecting. The figure, the first since Washington implemented deep spending cuts, reanimated fears that the still lackluster recovery would suffer a "spring swoon".

The unemployment rate dipped slightly to 7.6%, the Bureau of Labor Statistics announced, but the dip from 7.7% came only because 496,000 people stopped looking for work and fell out of the workforce. The surprisingly poor numbers triggered a sell-off on the US stock markets, with the Dow Jones Industrial Average falling 139 points as the market opened, and closing down over 40 points after two up days.

The number was far worse than expected. Economists polled by Dow Jones Newswires had forecast that 200,000 new jobs were created in March – down from 236,000 jobs added in February. Private companies added only 95,000 jobs. Federal government payroll jobs fell by 14,000 as 12,000 postal workers were laid off.

If the trend continues, this would be the third consecutive spring that jobs growth has slowed after good growth through the winter.

Gus Faucher, senior macroeconomist at PNC bank, said it was hard to see anything positive in the report. "Even wages are flat. It's very disappointing," he said.

Faucher said tax hikes brought in at the start of the year or business concerns about the the so-called sequester budget cuts may have caused the slowdown.

"It could be a one off. The previous months' figures have been revised up, which is good, but we'll have to wait and see," he said.

In a statement, Alan Krueger, President Obama's chief economic adviser and chairman of the council of economic advisers, blamed sequestration for the slowdown.

"It is important to bear in mind that the March household and payroll surveys are the first monthly surveys to look at employment since the beginning of sequestration. While the recovery was gaining traction before sequestration took effect, these arbitrary and unnecessary cuts to government services will be a headwind in the months to come, and will cut key investments in the Nation's future competitiveness."

The data drew fire from Republicans. "The president's policies continue to make it harder for Americans to find work. Hundreds of thousands fled the workforce last month and unemployment remains far above what the Obama administration promised when it enacted its 'stimulus' spending plan," House speaker John Boehner said.

He called on president Barack Obama to deliver a balanced budget next week, "one that includes entitlement reforms that are not conditional on enactment of more tax increases, which will suppress growth instead of encourage it."

The economy added an average of 187,000 jobs a month from September to February. January's figure was revised up from 119,000 to 148,000, and February's was revised up from 236,000 to 268,000.

But the figures follow Thursday's report from the Labor Department, which reported claims for unemployment benefits spiked in the latest week to the highest level in four months. Weekly claims for unemployment benefits have risen for three weeks, the department also cautioned the Easter holidays could have skewed figures.

The rise come a month into the government spending cuts agreed to as a compromise over the US budget crisis. The so-called sequestration cuts began on March 1 and affect all areas of government spending from the military to park services.

On Wednesday, ADP, the payrolls giant, released its latest survey of private sector employment. According to ADP, the US added 158,000 new jobs in March, below the 200,000 economists had been expecting. Gains were largely in the service sector. Construction, which was hit hard in the recession, added no net jobs over the month following average monthly gains of 29,000 in the three months prior.

Commenting on the ADP figures, Mark Zandi, chief economist of Moody's Analytics, which helps compile the report, said: "Job growth moderated in March. Construction employment gains paused as the rebuilding surge in the wake of Superstorm Sandy ended. Anticipation of healthcare reform may also be weighing on employment at companies with close to 50 employees. The job market continues to improve, but in fits and starts."

The latest jobs news is unlikely to solve the dilemma facing the Federal Reserve. Chairman Ben Bernanke has been pumping bn a month into the US economy with the aim of keeping interest rates at rock bottom and encouraging investment in jobs making ventures. But the policy has split the Fed's board of governors with some increasingly vocal in their concern about the long term impact of open-ended bond buying program – known as quantitative easing.

Long-time critic Esther George, the president of the Federal Reserve Bank of Kansas City, said Thursday that the Fed should scale back immediately.

"To be clear, I support an accommodative stance of monetary policy while the economy recovers and unemployment remains high. But I view the current policies as overly accommodative, causing distortions and posing risks to financial stability and long-term inflation expectations, with the potential to compromise future growth.

"As the Fed's balance sheet continues to expand, the risks and costs increase in my view," she said in a speech in Oklahoma.

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Fiscal cliff deadline just hours away as Congress returns. No agreement has been reached between White House and Republicans in early morning talks. Latest deal to raise taxes on incomes over $450,000. Harry Reid says: ‘We really are running out of time’…



Powered by Guardian.co.ukThis article titled “Fiscal cliff deadline looms as talks on a deal continue – live updates” was written by Richard Adams in Washington DC, for guardian.co.uk on Monday 31st December 2012 17.19 UTC

12.19pm ET

Republican senator John Cornyn of Texas tweets:

11.50am ET

This may be a good sign. Or a bad sign. It’s too soon to say.

Updated at 11.52am ET

11.44am ET

Politico takes a metaphor and mixes it to death:

The last-ditch horse-trading underscored the urgency of the situation….

Old Politico saying: never switch a gift horse in the ditch.

11.22am ET

GOP senator: ‘There has been a lot of progress’

Senate minority whip Jon Kyl is making happy noises to Reuters:

Senator Jon Kyl on Monday said a “lot of progress” has been made in talks to avert the “fiscal cliff” but he cautioned that it is unclear if the progress will spur legislation the Senate can vote on before a midnight deadline when taxes and spending cuts kick-in.

“There is no agreement yet,” Kyl said. “Conversations are still ongoing. There has been a lot of progress.”

Then Kyl has a little joke at Reuters’ expense:

Asked how long talks could go on, Kyl said: “I guess until 11.59.”

Updated at 11.24am ET

11.06am ET

Harry Reid: ‘discussions continue as I speak’

The Senate has just got underway, and here’s the Democratic majority leader Harry Reid:

Discussions continue today, Reid notes:

There are a number of issues on which the two sides are apart but discussions continue as I speak….

We really are running out of time, Americans are threatened with a tax hike in a few hours.

That was short and sweet from Reid. And believe it or not, that tells us a lot, because Reid didn’t bash the Republicans as he has done on every available occasion in the last week.

Equally significant: Mitch McConnell didn’t take the floor after Reid.

So a deal is on the way, is the bet.

Updated at 11.09am ET

11.00am ET

This one is for total US politics geeks only:

If you know what that means, you’ll know what that means. If you know what I mean.

Updated at 11.01am ET

10.57am ET

Deal is on the cards, reports ABC News

Are Joe Biden and Mitch McConnell getting close to a deal? ABC News thinks so:

An emerging tentative agreement would extend current tax rates for households making $450,000 or less; extend the estate tax at its current level of 35% for estates larger than $5m; and prevent the Alternative Minimum Tax from hammering millions of middle-class workers, sources said.

The deal would also extend unemployment benefits set to expire Tuesday and avert a steep cut to Medicare payments for doctors.

Both sides also seem willing to delay by three months automatic spending cuts to defense and domestic programs, the sources said, setting the stage for continued fiscal debate in the next few months tied to the debt ceiling.

Still have to get it through the House, though.

Updated at 10.57am ET

10.48am ET

The ‘dairy cliff’ explained

Bloomberg has some background on the little-known ‘dairy cliff‘, which is triggered by the failure to pass a new farm bill of agricultural support and subsidies, as well as food stamps:

The most recent farm law, enacted in 2008, expired after attempts to pass a new five-year proposal failed. Without that plan, agricultural programs automatically return to rules passed in 1949, the basis of all subsequent legislation.

The effects of that transition have been delayed because of the growing seasons of different crops. Dairy production, a year-round business, is the first major commodity affected. In November, the US Department of Agriculture put the price of a gallon of fresh whole milk at just under $3.54.

Under President Harry Truman’s farm policy, the government bought supplies of a product until its price reached “parity” with the cost immediately before World War I. Adjusted for a century of inflation, the Agriculture Department’s milk-support price today would be $39.08 per hundred pounds, more than double the dairy futures price in Chicago on December 28.

Updated at 10.49am ET

10.41am ET

McConnell and Biden have early talks

There’s a flurry of fiscal cliff stuff going on, as the House starts its session, and the Senate prepares to get going at 11am, with comments expected from majority leader Harry Reid and (presumably) minority leader Mitch McConnell.

Politico is reporting on optimistic signs of a deal emerging:

Senate Minority Leader Mitch McConnell and Vice President Joe Biden engaged in furious overnight negotiations to avert the fiscal cliff and made major progress toward a year-end tax deal, giving sudden hope to high-stakes talks that had been on the brink of collapse, according to sources familiar with the discussion.

It also says that conversations between Biden and McConnell occurred early Monday morning, at 12.45am and 6.30am, and quotes a McConnell spokesman:

The leader and the VP continued their discussion late into the evening and will continue to work toward a solution. More info as it becomes available.

Updated at 10.41am ET

10.10am ET

‘Dairy cliff’ approaches sell-by date

Aside from the fiscal cliff, what about the so-called “dairy cliff,” the possibility of a sharp hike in the price of milk if a new farm bill isn’t passed quickly?

There was some positive movement over the weekend, when leaders in both parties on the House and Senate agriculture committees agreed on a one-year extension of the previous farm bill.

But hold on, what’s this? Via AP:

A spokesman for House Speaker John Boehner said Sunday that Republican leaders had not decided how they would proceed on the farm extension, though a vote could come as soon as Monday.

Oh well, so much for that outbreak of bipartisanship. It turns out the House GOP is also considering two other extensions: a one-month extension and an even smaller bill that would merely extends the current policy that expires on 1 January.

Update: ‘Diary cliff’? Yes we only have a few hours left to get our 2013 calendars (hat tip: @Mattywills). Anyway, dairy cliff…

Updated at 10.31am ET

9.54am ET

Is Obama caving in to the Republicans?

Is President Obama giving away too much? In New York magazine, Jonathan Chait fears that Obama is caving in to the Republicans on taxes, and wants a stiffer backbone:

[Obama] is allowing Republicans to whittle down the sum by essentially threatening to shoot themselves in the head. And this is the most ominous thing about it. The big meta question looming over Obama’s term is whether he has learned to grapple with Republican political hostage-taking. Hostage-taking is not simply aggressive or even irrational negotiating. It is the specific tactic of extracting concessions by threatening to withhold support for policies you yourself endorse, simply because your opponent cares more about the damage.

9.49am ET

The effects of the budget cuts contained within the fiscal cliff could be felt in short order on the US military, as the Associated Press reports:

A senior defense official said if the sequester were triggered, the Pentagon would soon begin notifying its 800,000 civilian employees that they should expect some furloughs — mandatory unpaid leave, not layoffs. It would then take some time for the furloughs to begin being implemented, said the official, who requested anonymity because the official was not authorized to discuss the internal preparations.

9.43am ET

Deal or no deal? Where the two sides differ

So where are the two sides at this point? Based on various reports, here’s where things stood at the end of the weekend in talks between Senate republicans, Democrats and the White House.

• Income tax: Senate Republicans propose higher taxes on incomes above $450,000. Democrats propose tax rises on incomes over $360,000

• Estate tax: Republicans want to tax inheritances valued above $5m at 35%. Democrats want to tax inheritances above $3.5m at 45%

• Budget cuts: a “pause” before implementing the across-the-board cuts demanded by the sequester – Democrats in favour, Republicans oppose

• Spending: Proposals to avoid a cut in Medicare payments to doctors and extend benefits for the long-term unemployed – Republicans say they should be paid for through budget cuts elsewhere

• Alternative minimum tax: Democrats want any deal to include a permanent revision to stop the AMT hitting middle class taxpayers

Updated at 9.48am ET

9.30am ET

With only hours remaining until midnight, can America’s political system avert the fiscal cliff of tax hikes and sweeping budget cuts before 2013 is ushered in?

Congress reconvenes this morning after hopes of a deal between the Democratic and Republican leaders in the Senate over the weekend, came to naught. The talks faltered after Republicans threw up a string of objections – leading the Republican Senate minority leader Mitch McConnell to open a new line of dialogue with vice president Joe Biden.

Harry Reid, the Senate majority leader, left the field yesterday evening, telling journalists “Talk to Joe Biden and McConnell” as his farewell remark.

Congress went home for the night soon after. But there was some progress, based on reports leaking out of the two caucuses. The New York Times reported:

On some of the biggest sticking points, the two sides are now inches apart. Barely a week after House Republicans refused to vote to allow taxes to rise on incomes over $1m, Senate Republicans proposed allowing tax rates to rise on incomes over $450,000 for singles and $550,000 for couples. Democrats countered with a proposal to extend expiring Bush-era tax cuts up to $360,000 for singles, $450,000 for couples. For both sides, that meant major movement. Mr Obama has been holding firm at a $250,000 threshold.

Despite that shift, Republicans first insisted that a new measure of inflation, known as “chained CPI”, be used to calculate future – and slower – increases in social security payments. Democrats rejected that but the Republicans produced a new objection, based on the putative deal’s delay of the severe budget cuts that form one half of the feared fiscal cliff.

President Obama weighed in via an appearance on NBC’s Meet The Press on Sunday morning, blaming Republicans intransigence for their failure to reach a deal:

We have been talking to the Republicans ever since the election was over. They have had trouble saying yes to a number of repeated offers.

We’ll be bringing you all the action or inaction as the clock ticks down. It could be a late night.

Updated at 10.59am ET

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