Washington Extra – Goldilocks Geithner
Not too hot, not too cold, just right.
U.S. Treasury Secretary Timothy Geithner performed a delicate balancing act on the Hill today. On the one hand, Geithner had to tell an increasingly angry Congress that he was serious about trying to persuade China to revalue its currency, the yuan. On the other, he wanted to head off the kind of unilateral action from Congress that could provoke a trade war, and endanger the administration’s efforts to engage Beijing on a whole slew of issues.
Democratic Senator Charles Schumer raged that “China’s currency manipulation is like a boot to the throat of our recovery,” and accused Geithner of being the only person in the room who did not believe China was manipulating its currency.
“I share your frustration,” was the first part of Geithner’s message to Congress, acknowledging that the pace of the yuan’s appreciation had been too slow. But leave the response to us was the other, unspoken part of the message today. The administration would use the upcoming G20 summit in Seoul in November to try to mobilize other world powers to pressure China for trade and currency reforms, Geithner vowed, adding officials were looking at all the tools at their disposal to “encourage” the Chinese to move more quickly.
China has already warned that pressure from Washington could backfire, and the administration clearly does not want to be caught in the crossfire between a furious Congress and a prickly Beijing. Geithner also seemed to downplay the chances that the administration would declare China a currency manipulator in October. “The only thing that I would observe is, wishing something does not make it so, and issuing a report that requires me to go consult changes nothing,” he said.
Here are our top stories today…
Geithner vows to take China currency dispute to G20
Treasury Secretary Timothy Geithner vowed to rally other world powers to push China for trade and currency reforms as he was grilled by lawmakers demanding a crackdown on Beijing’s policies. China warned that pressure from Washington could backfire.
For more of this story by Doug Palmer and David Lawder, read here.
Senate panel OKs new arms treaty with Russia
Senate panel approved a new strategic nuclear arms control treaty with Russia, advancing one of President Barack Obama’s key foreign policy goals to an uncertain future in the full Senate. The Senate Foreign Relations Committee voted 14-4, with three Republicans joining Obama’s Democrats to endorse the new START treaty.
For more of this story by Susan Cornwell, read here.
Senate passes long-stalled small business bill
The Senate passed a long-stalled measure on Thursday that would boost lending to small businesses, giving President Barack Obama’s Democrats one of their last chances before November elections they are working to revive the sluggish economy. The 61 to 38 vote sends the measure back to the House of Representatives, which has passed a similar bill and is expected to approve the Senate’s version as soon as next week.
For more of this story by Andy Sullivan, read here.
Senate Democrats revive private equity tax proposal
Senate Democrats revived an effort to impose steeper taxes on private equity and other investment fund managers. The legislation would raise about $14 billion over a decade by taxing most of a fund manager’s income at the higher ordinary income rates, now 35 percent, rather than the current 15 percent capital gains tax rate.
For more of this story by Kim Dixon, here.
U.S. advisers reject Arena diet drug
U.S. advisers rejected Arena Pharmaceuticals Inc’s experimental weight-loss pill, a major setback for the company that is trying to win approval for its most advanced drug candidate. A committee of medical experts voted 9-5 that potential risks of the drug, lorcaserin, outweighed possible benefits from modest weight loss. Rats given high doses of the drug developed tumors, and panelists said they were unsure if cancer would increase in people.
For more of this story by Lisa Richwine, read here.
Jobless claims at two-month low
New claims for jobless benefits hit a two-month low last week, hinting at some stability in the labor market, while the contraction in factory activity in the Mid-Atlantic region eased in September. Although the reports confirmed the economy remained on a slow growth path, they further reduced the odds of a double-dip recession and suggested less of a need for the Federal Reserve to launch a fresh round of asset purchases to aid the recovery.
For Lucia Mutikani’s full story, click here.
Analysis: Defense firms privately skeptical on budget outlook
The Pentagon’s new austerity diet assumes growth of 1 percent in the defense budget to keep money flowing into new weapons and upgrades, but industry executives are privately preparing for real cuts and the cancellation of more weapons programs. Across the sector, companies like Lockheed Martin Corp, Northrop Grumman Corps and Boeing Co are laying off workers, consolidating divisions and actively pursuing acquisitions to fill the coming revenue gap.
For Andrea Shalal-Esa’s full story, click here.
U.S. lacks intel on North Korea, including succession
The United States said it lacked intelligence on North Korea and could only guess whether the reclusive state’s leader, Kim Jong-il, will be succeeded by his youngest son. The blunt acknowledgment before a Senate panel by the top State Department official responsible for the region underscores the uncertainty complicating U.S. and South Korea policy toward a regime they say threatens regional stability.
For more of this story by Phil Stewart, read here.
Obama hopes to move forward on trade pacts
President Barack Obama said he wants to advance free trade agreements with U.S. partners, including important ally South Korea, and repeated a vow to double America’s exports over the next five years. “We hope to move forward on new trade agreements with some of our key partners in a way that doesn’t just advance the interests of our businesses, workers and farmers, but also upholds our most cherished values,” Obama said at the White House, marking the release of a national report on exports.
For more of this story by Alister Bull and Patricia Zengerle, read here.
SEC says will not hide information from public
U.S. regulator Mary Schapiro sought to assure lawmakers that the Securities and Exchange Commission would remain accountable to the public amid charges it was using a new law to hide information. Under the recently passed Wall Street reform bill, the SEC does not have to disclose the results of examinations of specific firms.
For more of this story by Rachelle Younglai, read here
Mexico says world should trust U.S. on emissions
Developing countries should trust the Obama administration to cut its greenhouse gas emissions as promised so progress is not derailed on financing to help poor nations deal with global warming, Mexico’s climate chief said on Thursday.
For more of this story by Timothy Gardner, read here.
What we are blogging…
Geithner tells Congress: calling China names doesn’t get you anywhere
U.S. lawmakers are mad and want Treasury Secretary Timothy Geithner to step in and call China a name – ”currency manipulator” — which may not sound like much on city streets but can be quite an insult in world financial circles.
See Toby Zakaria’s full blog here.
For more stories from our Washington correspondents visit www.reuters.com and stay informed.
Photo Credits: REUTERS/Kevin Lamarque (Geithner testifies at a Senate Banking Committee hearing)