Washington Extra — Not in the mood for war
French Finance Minister Christine Lagarde said today she was not “in the mind or the mood for war”, describing it as “totally inadequate, inappropriate and unnecessary.” Phew.Global finance chiefs met over breakfast in Washington, just as the September employment report showed the U.S. economy was still shedding jobs and sent the dollar tumbling to a 15-year low against the yen. How about that to focus the mind.
The question is whether they can come up with some form of words at the IMF meetings over the weekend to calm the markets, to show that they are determined to address the imbalances that underlie the tensions over currencies.
Foreign exchange intervention by the Chinese to keep the yuan low is, after all, only part of the story. The bigger problems are the uneven pace of global economic growth, the weakness of the U.S. economy that is fuelling the dollar’s decline, and the export-oriented policies of many other countries.
Everyone knows that countries running huge trade surpluses, like China, need to spend more at home. And everyone is beginning to realize that they can’t afford not to help the United States, that a weak U.S. economy and weak dollar is a problem for everyone.
But a stronger yuan? That might be a problem, after China’s Wen Jiabao made the extraordinary assertion this week that a rapid rise would lead to “social and economic turbulence. In China’s one-party state, where the fear of social unrest is deeply rooted, that is not a line authorities will want to cross.
Breakfast is over. Now it’s time for the world’s financial masters to prove their mettle, and come up with a credible plan.
Here are our top stories from Washington today…
World finance leaders seek to avoid currency clash
Global finance chiefs struggled to put a feeble recovery onto a stronger track and prevent rising tensions over currencies from derailing it. Amid new evidence that the United States, the world’s largest economy, remains so strained that it still is shedding jobs, G20 finance leaders stressed they must work together and find a new way bring about a rebalancing of global growth.
For more of this story by Glenn Somerville and Paul Eckert, read here.
US payrolls fall and investors bet on Fed move soon
The U.S. economy shed jobs for a fourth straight month in September, hit by government layoffs and slower private hiring, hardening expectations of more stimulus from the Federal Reserve. The dollar tumbled to a 15-year low against the yen as investors concluded that Friday’s weak jobs data meant the U.S. central bank at its Nov. 2-3 meeting was almost certain to pump hundreds of billions of new dollars into the economy.
For more of this story by Lucia Mutikani, read here.
BofA’s U.S.-wide foreclosure halt draws call for more
U.S. lawmakers pushed for the country’s largest mortgage lenders to suspend foreclosures in all 50 states after Bank of America Corp announced it would temporarily halt evictions nationwide. BofA, the largest U.S. mortgage servicer, is the first U.S. bank to institute a nationwide moratorium on foreclosures, expanding on a 23-state suspension announced last week while it conducts a review of its procedures.
For more of this story by Joe Rauch, read here.
Fed wary of overlap with new research office
Senior Federal Reserve officials are concerned that a new Treasury Department-based research powerhouse will step on their toes as the central bank expands its role as a systemic risk regulator, a source familiar with the matter said. The Office of Financial Research was created under the financial regulatory reform law to give regulators a real-time view of the financial system — a view sorely lacking ahead of the 2007-2009 crisis that was the biggest since the Great Depression. But while regulators agree they need more detail on markets, some senior Fed officials are wary.
For more of this story by Rachelle Younglai and Kristina Cooke, read here.
New Obama security adviser clashed with military
President Barack Obama named close aide Tom Donilon as his top security adviser, elevating a skeptic of the U.S. troop surge in Afghanistan to oversee a major review of the war. Donilon, 55, has a strong rapport with Obama and will also likely play an influential role as the United States seeks ways to work with an increasingly assertive China and thwart a defiant Iran’s nuclear ambitions
For more of this story by Ross Colvin and Patricia Zengerle, read here.
FDIC to propose rules on financial firm breakups
The banking regulator is expected to propose rules as soon as Friday that set out how creditors will be treated under the government’s new authority to dismantle large financial firms that run into trouble. The proposed rule will make clear that all creditors of big, non-bank financial companies should expect losses in a failure, according to a source familiar with the rule.
For more of this story from Dave Clarke and Rachelle Younglai, read here.
U.S. pulls Abbott’s Meridia diet drug off market
Abbott Laboratories’ has pulled its controversial diet drug, Meridia, off the U.S. market after regulators said it was too dangerous, making it the latest casualty in the troubled obesity drug sector.
For more of this story by Susan Heavey, read here.
Obama calls on China to free Nobel prize winner Liu
President Obama called on China to release imprisoned Nobel Peace laureate Liu Xiaobo as soon as possible. “Over the last 30 years, China has made dramatic progress in economic reform and improving the lives of its people, lifting hundreds of millions out of poverty,” Obama, last year’s Nobel peace laureate, said in a statement.
For more of this story, read here.
For the full story on Liu’s award, read here.
U.S. sends $727 million to community health centers
The Obama administration announced $727 million will go to fix up community health centers across the country, the first of $11 billion for the centers promised by the healthcare reform law. Expanding the centers will allow nearly twice as many patients to get care at them, the Department of Health and Human Services said.
For more of this story, read here.
Photo credit: Reuters/Yuri Gripas (Lagarde attends a signing ceremony at World Bank)