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For free real time breaking news alerts sent straight to your inbox sign up to our breaking news emails Sign up to our free breaking news emails Britain is on course for the worst economic performance of the G7, the International Monetary Fund (IMF) predicted as it warned of more turmoil in a “fragile” global […] More
Tory MPs hailed the UK’s entry last week into the Indo-Pacific trading bloc as a major step on the road to re-establishing Britain as a pioneer of free trade.It was a coup for Rishi Sunak, said David Jones, the deputy chairman of the European Research Group of Tory Eurosceptics, who was excited to be aligned with “some of the most dynamic economies in the world”.Trade secretary Kemi Badenoch also used the word “dynamic” to describe the 11 members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). She pushed back against criticism that signing a trade deal with a loose collection of countries on the other side of the world would only add 0.08% to the UK’s gross national product, and then only after 10 years of membership. That figure was an estimate by civil servants 10 years ago, she said in an interview with the Daily Mail. The CPTPP is more important these days.And it might be, but not for the trade it facilitates. The significance lies in the geopolitical realignment it promotes and how such pacts could harm future Labour governments.The CPTPP was signed on 8 March 2018. Australia, Brunei, Canada, Japan, Mexico, New Zealand and Singapore were the first to form a bloc before being joined in the five years that followed by Vietnam, Peru, Malaysia and Chile.Former president Barack Obama hoped the US would also be a founder member before coming up against a Republican Congress that disagreed. Later, Donald Trump abandoned the deal altogether.Obama wanted to throw a friendly arm around Pacific countries threatened by China’s increasingly aggressive attitude to its neighbours – or, looked at another way, maintain open markets for US goods and services across south-east Asia in opposition to Xi Jinping’s Belt and Road investment initiative. Joe Biden, despite having control of Congress, refused to consider reopening talks about US membership, paving the way for China to apply in 2021.Thankfully for Biden, Britain’s application preceeded Beijing’s by six months, putting the UK ahead in the queue; quickly it became apparent that Britain’s role could be to help block China’s entry to the CPTPP without the US ever needing to join. For the Americans, the potential loss of trade was a side issue.Brexit was never considered by Washington to be a positive development, but there was a silver lining once it became clear the UK could be deployed more flexibly in a fight with China – a confrontation that Brussels has so far backed away from.The Aukus defence pact between Australia, the UK and US is another example of this anti-China coalition – and of Sunak’s efforts to win back Washington’s approval.The move also plays to a domestic agenda. In the same way that Margaret Thatcher’s sale of state assets – from council housing to essential utilities – denied Labour the means to directly influence the economy without spending hundreds of billions of pounds renationalising those assets, so global trade deals undermine Labour’s promise to use the state to uphold workers’ rights and environmental protections.Secret courts form the foundation stone of most trade deals and allow big corporations to sue governments when laws and regulations change and deny them profits.Badenoch’s civil servants say they are comfortable with the investor-state dispute settlement (ISDS) tribunal system because the UK government has never lost a case.However, a government that wanted to push ahead at a faster pace with environmental protections, carbon taxes, or enhanced worker’s rights might find themselves on the wrong end of a court judgment.The TUC’s general secretary, Paul Nowak, was quickly out of the blocks to voice these fears when the deal was announced on Friday. That is why the EU parliament has forced Brussels to ban ISDS clauses from future trade deals.Sunak, on the other hand, appears comfortable with the prospect of CPTPP countries beginning to dictate how the UK considers basic rights – and how this could become the price of easier trade, and more importantly, foreign policy. More
A dispute between the Florida governor, Ron DeSantis, and Disney over control of the company’s Florida theme park district hinges on a clause referencing King Charles III and his descendants.The row began after DeSantis in March 2022 passed a “don’t say gay” law banning classroom teaching on sexual orientation and gender identity. The law was highly controversial, with LGBTQ+ activists saying it was discriminatory. Joe Biden denounced it as “hateful”.Under former chief executive Bob Chapek, Disney was initially hesitant to state public opposition to the bill, but did so after pressure. That prompted DeSantis and Florida Republicans to try to revoke privileges Disney has had for decades at its theme park, which employs 75,000 people.However, a new governing board appointed by DeSantis on Wednesday reportedly said it will need to overturn last-minute agreements which would prevent it from taking control.The document states that its provisions will stand until “21 years after the death of the last survivor of the descendants of King Charles III, king of England living as of the date of this declaration”.“Royal clauses” of this kind are used to avoid rules in some places against contracts which last in perpetuity. The British royal family was chosen for the clauses because information about the family tree was readily available, but also because of the “better healthcare available to, and longer life expectancy of, a royal family member compared to a non-royal”, according to the law firm Birketts.In February, the Florida state house passed a bill to end the unusual status that allowed Disney World to govern itself. Under the status, Disney World had its own police and fire departments, planning powers and some other public functions.The bill gave DeSantis the power to appoint the five members of the board that controls government services for the Reedy Creek district.“We’re going to have to deal with it and correct it,” board member Brian Aungst said of the last-minute agreements on Wednesday, according to the Associated Press. “It’s a subversion of the will of the voters and the legislature and the governor. It completely circumvents the authority of this board to govern.”skip past newsletter promotionafter newsletter promotionIn a statement, Disney said: “All agreements signed between Disney and the District were appropriate, and were discussed and approved in open, noticed public forums in compliance with Florida’s ‘Government in the Sunshine’ law.”Buckingham Palace declined to comment. More
The top executive at Fox News was furious one of the network’s reporters was fact-checking Donald Trump’s false claims about the 2020 election, writing in a December 2020 email that it was “bad for business”.Suzanne Scott, the chief executive of Fox News, was responding in early December 2020 to an on-air fact-check by Eric Shawn, one of the network’s anchors. “This has to stop now,” she wrote to Meade Cooper, another Fox executive. “This is bad business and there clearly is a lack of understanding [sic] what is happening in these shows. The audience is furious and we are just feeding them material. Bad for business.”Scott also asked other Fox employees to alert her if the network booked Mike Pompeo, the former secretary of state, or Mike Lindell, a serial promoter of election misinformation. “They would both get ratings,” she said.The message is part of a tranche of internal communications obtained by the voting equipment company Dominion in its $1.6bn defamation lawsuit against Fox. Dominion displayed a copy of the message a court hearing last week as its lawyers argued that Fox knowingly aired false statements about Dominion because it was concerned about losing viewers to rival networks such as Newsmax and One America News (OAN). The Guardian obtained a copy of the message and the slideshow that was presented in court.Weeks earlier, on 19 November, Scott also complained about a different fact-check on air. “I can’t keep defending these reporters who don’t understand our viewers and how to handle stories,” she wrote.“The audience feels like we crapped on [sic] and we have damaged their trust and belief in us,” she wrote, adding that Fox nation had lost 25,000 subscribers. “We can fix this but we cannot smirk at our viewers any longer.”The reporter who did the fact-check, Kristin Fisher, later said she felt she was punished for telling the truth, NPR reported.Fox says it was reporting on newsworthy allegations by the former president and his lawyers, and that its viewers would not have understood its broadcasts about Dominion to be statements of fact. It also says top executives at the company and others who expressed concern about the accuracy of its statements about Dominion were not directly involved in determining what went into each show.Dominion’s slideshow also included messages from Fox News host Maria Bartiromo, whose show was a hotbed for false claims about the election. In one message, Bartiromo appeared to be aware that Sidney Powell, one of Donald Trump’s lawyers, would come on her show the next day to make specious claims about Dominion software switching votes, saying: “OK, Sidney will say it tomorrow.” In notes to herself, Bartiromo noted that Powell was being shut out from meetings with Jared Kushner at the White House because he did not want to hear about “conspiracy theories”.Dominion also revealed a key 13 November 2020 internal fact-check from Fox from a team known as the “brain room” that debunked false claims about Dominion. Even though executives testified that claims debunked by the brain room should not have been aired, Fox continued to make false claims about Dominion after the fact-check.The documents also show internal concern about statements being made by Jeanine Pirro, another host who aired false Dominion claims. In one message, fact-checkers went over a script for one of her shows and highlighted inaccurate statements about Dominion. “The brain room is going through this now. Jeanine dictated it to Tim. It’s rife with conspiracies and BS and yet another example of why this woman should never be on live television,” Jerry Andrews, a Fox executive, wrote in an email.Jury selection in the trial is scheduled to begin on 13 April in Wilmington, Delaware. The trial is scheduled to begin 17 April and last six weeks. More
Starbucks’ former chief executive Howard Schultz was accused at a Senate hearing on Wednesday of running “the most aggressive and illegal union-busting campaign in the modern history of our country”.The hearing, “No Company Is Above the Law: The Need to End Illegal Union Busting at Starbucks”, was chaired by Senator Bernie Sanders, a longtime critic of Starbucks’ anti-union activities.Starbucks had initially resisted calls for Schultz to appear. He agreed after the committee threatened to subpoena him.Nearly 300 Starbucks stores around the US have won union elections since the first Starbucks stores unionized in December 2021, though the rate of election filings slowed after an initial surge. Since that time, Starbucks has fought hard to stop the unionization drive and faces more unfair labor practice allegations than any other private employer in the US.Sanders said: “Over the last 18 months Starbucks has waged the most aggressive and illegal union-busting campaign in the modern history of our country.”Schultz responded by saying to Sanders: “These are allegations, and Starbucks has not broken the law.”He defended the company’s record and said the company gave workers better wages and benefits than its competitors.The Starbucks boss was defended by Republicans on the committee. Senator Rand Paul called the hearing a “witch-hunt” and Senator Bill Cassidy said it was a “smear campaign”.Cassidy said no one is above the law, “but let’s not kid ourselves: this is not a fair and impartial hearing.”Before the hearing, Sanders released a report by the committee’s majority staff outlining Starbucks’ record of unfair labor practice charges.The report found Starbucks broke the law 130 times in six states and is facing an additional 70 cases. Misconduct ranged from firing workers in retaliation for union organizing to shutting down stores, withholding pay and benefits, and comments made by Schultz himself.skip past newsletter promotionafter newsletter promotion“There is mounting evidence that the $113bn company’s anti-union efforts include a pattern of flagrant violations of federal labor law,” the report claims. “Starbucks has engaged in the most significant union-busting campaign in modern history. It has been led by Howard Schultz.”Naomi Martinez, a shift supervisor at a unionized Starbucks in Phoenix, Arizona, said she wanted to hear Schultz publicly explain Starbucks’ response to the union campaign and the numerous labor law violations that the National Labor Relations Board and judges have affirmed in complaints and rulings.“I always see the company state that they are continuing to respect the law, respect legal processes, respect the rights to organize, and we see a different story on the worker side of things,” said Martinez.“I just want to hear from Howard’s mouth himself whether or not he thinks that Starbucks has continuously, really respected rights to organize, fully adhering to the law at every turn. Every time that they have their spokespeople say something like that it really is just, to me at least, a slap in the face, because they are abusing these legal processes at every turn.”Starbucks has denied all allegations of labor law violations and appealed all National Labor Relations Board and court rulings against the company. More
Lawmakers grilled federal banking regulators on Tuesday over their “massive failure in supervision” during the first congressional hearing on the collapse of Silicon Valley Bank (SVB) and Signature Bank.The Senate’s banking committee is the first to question officials on federal oversight of SVB, which was taken over by the federal government earlier this month after a severe bank run depleted its reserve. The collapse of the bank – the biggest bank failure since the 2008 financial crisis – has sparked wider fears about the soundness of the banking sector.Three financial regulators appeared in front of the committee: the Federal Reserve vice-chair for supervision, Michael Barr, the Federal Deposit Insurance Corporation (FDIC) chair, Martin Gruenberg, and the treasury’s undersecretary for domestic financing Nellie Liang.Two different framings were offered by Democrats and Republicans. Democrats emphasized the failure of the bank’s management and deregulation, specifically pointing to the scaling-back of regulation of mid-sized banks under the Trump administration.Sherrod Brown, the Democrat chair of the committee, pointed out that SVB execs were under pressure to grow the company, which led them to risky behavior.“It’s all just a variation of the same theme, the same root cause of most of our economic problems: wealthy elites do anything to make a quick profit, to pocket the reward and when the risky behavior leads to catastrophic failures, they turn to the government asking for help,” he said.Elizabeth Warren, who was a key creator of financial regulations after the 2008 recession, asked the officials one by one if they agree that there should be a strengthening of banking rules.“These collapses represent a massive failure in supervision over our nation’s banks,” she said. “Regulators burned down dozens of safeguards that were meant to stop banks from making risky bets.”Warren noted that the FDIC, under the Trump administration cut back on rules across the board, something that Gruenberg noted he voted against when he was on the FDIC’s board at the time.“I certainly think it’s appropriate for us to go back and review those actions in light of the recent episode,” Gruenberg said.Republicans, meanwhile, say the regulators failed to act despite warning signs. Republican members tried to carefully balance criticizing regulators without promoting stronger regulation, which would typically go against the party’s stance.“The Federal Reserve should have been keenly aware of the impact interest rate hikes would have on the value of securities, and it should have been actively working to ensure the bank and supervisors were hedging their bets and covering their risk accordingly,” said Tim Scott, the Republican ranking member of the committee.skip past newsletter promotionafter newsletter promotionMeanwhile, the regulators said they were well aware of the bank’s problems and had delivered warnings starting in 2021 that SVB managers failed to act on.Barr – who is heading the Fed’s investigation in the SVB collapse that will be published by 1 May – took on a bulk of lawmakers’ questions. Barr said the bank’s rating was a three on the Camels rating system, which measures the strength of a bank on various measures like liquidity and assets on a scale of one to five, with one being the strongest and five being weak.“The risks the bank faced, interest rate risk and liquidity risks, those are the bread and butter of banking issues. The firm was quite aware of those issues. They had been told by regulators, investors were talking about problems with interest rates and liquidity risks publicly, and they didn’t take the necessary actions,” Barr said.Barr said the Fed did not stress-test SVB in 2022, saying that a stress test is not the primary way regulators test for interest rates. He noted that stress testing for rising interest rates would be useful in the future.The Fed’s investigation will “consider whether the supervisory warnings were sufficient and whether supervisors had sufficient tools”, Barr said.“We are evaluating whether application of more stringent standards would have prompted the bank to better manage the risks that led to its failure,” Barr said. “Recent events have shown that we must evolve our understanding of banks, in light of changing technology and emerging risks.” More
The global financial system is facing a crisis of confidence. Which makes this week’s meeting of America’s central bankers critically important.None of the 12 members of the Federal Reserve Board’s Open Market Committee were elected to their posts. The vast majority of Americans don’t even know their names, except perhaps for the chairman, Jerome Powell.But as they try to decide whether to raise interest rates and, if so, by how much, America’s central bankers are deciding on the fate of the American – and much of the world’s – economy.And they’re sitting on the horns of a dilemma.On one horn is their fear that inflation will become entrenched in the economy, requiring more interest-rate hikes.On the other horn is their fear that if they continue to raise interest rates, smaller banks won’t have enough capital to meet their depositors’ needs.Higher rates could imperil more banks, especially those that used depositors’ money to purchase long-term bonds when interest rates were lower, as did Silicon Valley Bank.That means that raising interest rates could cause more runs on more banks. The financial system is already shaky.The two objectives – fighting inflation by raising rates, and avoiding a bank run – are in direct conflict. As the old song goes: “Something’s got to give.” What will it be?The sensible thing would be for the Fed to pause rate hikes long enough to let the financial system calm down. Besides, inflation is receding, albeit slowly. So there’s no reason to risk more financial tumult.But will the Fed see it that way?The Fed’s goal last week was to stabilize the banks enough so the Fed could raise interest rates this week without prompting more bank runs.The Fed bailed out uninsured depositors at two banks and signaled it would bail out others – in effect, expanding federal deposit insurance to cover every depositor at every bank.On top of this, 11 of America’s biggest banks agreed to contribute a total of $30bn to prop up First Republic, another smaller bank caught in the turmoil.This “show of support” (as it was billed, without irony) elicited a cheer from Jerome Powell and the treasury secretary, Janet Yellen, who called it “most welcome”. (Of course it was welcome. They probably organized it.)But investors and depositors are still worried.Other regional banks across the US have done just what Silicon Valley Bank did – buying long-dated bonds whose values have dropped as interest rates have risen. According to one study, as many as 190 more lenders could fail.On Monday, First Republic remained imperiled notwithstanding last week’s $30bn cash infusion. Trading in its shares on the New York Stock Exchange was automatically halted several times to prevent a freefall.Multiple recent downgrades of banks by ratings agencies like Moody’s haven’t helped.Reportedly, the Biden administration is even in talks with Warren Buffett, the chairman of Berkshire Hathaway, who invested billions to bolster Goldman Sachs during the 2008 financial crisis.Meanwhile, on the other side of the Atlantic, the European Central Bank last week raised interest rates by half a percentage point, asserting its commitment to fighting inflation.Yet the higher interest rates, combined with the failure of the two smaller American banks, have shaken banks in Europe.Just hours before the European Central Bank’s announcement, the banking giant Credit Suisse got a $54bn lifeline from Switzerland’s central bank.Yet not even this was enough to restore confidence. After a several days of negotiations involving regulators in Switzerland, the US and the UK, Switzerland’s biggest bank, UBS, agreed over the weekend to buy Credit Suisse in an emergency rescue deal.Finance ultimately depends on confidence – confidence that banks are sound and confidence that prices are under control.But ever since the near meltdown of Wall Street in 2008, followed by the milquetoast Dodd-Frank regulation of 2010 and the awful 2018 law exempting smaller banks, confidence in America’s banks has been shaky.November’s revelation that the crypto giant FTX was merely a house of cards has contributed to the fears. Where were the regulators?The revelation that Silicon Valley Bank didn’t have enough capital to pay its depositors added to the anxieties. Where were the regulators?Credit Suisse had been battered by years of mistakes and controversies. It is now on its third CEO in three years.Swiss banking regulations are notoriously lax, but American bankers have also pushed Europeans to relax their financial regulations, setting off a race to the bottom where the only winners are the bankers. As Lloyd Blankfein, then CEO of Goldman Sachs, warned Europeans: “Operations can be moved globally and capital can be accessed globally.”One advantage of being a bank (whether headquartered in the US or Switzerland) is that you get bailed out when you make dumb bets. Another is you can choose where around the world to make dumb bets.Which is why central banks and bank regulators around the world must not only pause interest rate hikes. They must also join together to set stricter bank regulations, to ensure that instead of a race to the bottom, it’s a race to protect the public.Banking is a confidence game. If the public loses confidence in banks, the financial system can’t function.In the panic of 1907, when major New York banks were heading toward bankruptcy, the secretary of the treasury, George B Cortelyou, deposited $35m of federal money in the banks. It was one of the earliest bank bailouts, designed to restore confidence.But it wasn’t enough. JP Morgan (the man who founded the bank) organized the nation’s leading financiers to devise a private bailout of the banks, analogous to last week’s $30bn deal.Confidence was restored, but the underlying weaknesses of the financial system remained. Those weaknesses finally became painfully and irrevocably apparent in the great crash of 1929.
Robert Reich, a former US secretary of labor, is professor of public policy at the University of California, Berkeley, and the author of Saving Capitalism: For the Many, Not the Few and The Common Good. His new book, The System: Who Rigged It, How We Fix It, is out now. He is a Guardian US columnist. His newsletter is at robertreich.substack.com More
Political fall-out in the US from the collapse of Silicon Valley Bank continued on Sunday when leftwing Senator Elizabeth Warren hit the morning talk shows and repeatedly called for an independent investigation into US bank failures and strongly criticised Federal Reserve finance officials.The progressive Democrat from Massachusetts, who has positioned herself as a consumer protection advocate and trenchant critic of the US banking system, told CBS’s Face the Nation that she did not have faith in San Francisco Federal Reserve president Mary Daly or Fed chairman Jerome Powell.“We need accountability for our regulators who clearly fell down on the job,” Warren said, adding that it “starts with” Federal Reserve Chairman Jerome Powell, who she said “was a dangerous man to have in this position”.“Remember the Federal Reserve Bank and Jerome Powell are ultimately responsible for the oversight and supervision of these banks. And they have made clear that they think their job is to lighten regulations on these banks. We’ve now seen the consequences,” Warren added.Asked if she had “faith” in Daly, under whose jurisdiction SVB fell, Warren said flatly: “No, I do not.”In the wake of the collapse of Silicon Valley and Signature banks, the one-time presidential candidate has in recent days launched a broad offensive on politicians on both the left and the right who supported Trump-era deregulation of smaller US banks.Warren sent a letter to the inspectors general of the US treasury department, the Federal Deposit Insurance Corp (FDIC) and the Federal Reserve, urging regulators to examine the recent management and oversight of the banks which collapsed earlier this month.Last week, Warren unveiled legislation that would repeal that law and raise “stress-tests” on “too big to fail” banks from $50bn to $250bn. On Sunday, Warren also argued for raising federal guarantees on consumers deposits above the current $250,000.“Is it $2m? Is it $5m? Is it $10m? Small businesses need to be able to count on getting their money to make payroll, to pay the utility bills,” Warren said. “These are not folks who can investigate the safety and soundness of their individual banks. That’s the job the regulators are supposed to do.”Warren broadened out her criticism on NBC’s Meet the Press, calling for a stop to interest rates rises when central bankers meet next week and claiming that Powell was pushed by Congress to support deregulation in 2018.“Look, my views on Jay Powell are well-known at this point. He has had two jobs. One is to deal with monetary policy. One is to deal with regulation. He has failed at both,”, she said.US prosecutors are investigating the SVB collapse, a source familiar with the matter told Reuters last week, after the $212bn bank collapsed when depositors rushed to withdraw their money.A blame-game erupted, with some arguing that the bank’s apparent lack of adequate risk management, combined with deregulation and a sharp interest rate rises, had created an accident waiting to happen.US banks have since lost around half a trillion dollars in value. On Friday, President Joe Biden promised that bank customers deposits are safe and the crisis had calmed down.In Warren’s letter published Sunday, the senator also called for executives of the failed banks to be held to account.“The bank’s executives, who took unnecessary risks or failed to hedge against entirely foreseeable threats, must be held accountable for these failures,” Warren said. “But this mismanagement was allowed to occur because of a series of failures by lawmakers and regulators.” More
