Washington Extra – Ducking the issue
We were all primed for the release of the Treasury’s global currency report this afternoon, which would have included a ruling on whether China was a currency manipulator. But a decision was taken to delay the report until after the Group of 20 summit in Seoul in mid-November.
Pressure from lawmakers and business had been mounting on President Barack Obama to act, but the delay shouldn’t come as a big surprise. After all, Treasury Secretary Tim Geithner told Congress last month he wanted to rally the G20 around the issue and take a multilateral approach. Perhaps more importantly, the administration is conveniently ducking the issue until after the Nov. 2 congressional elections.
Some Democrats, who have made China’s currency practices an issue in their campaigns, are disappointed today. Our Breakingviews columnist James Pethokoukis says Obama should be given credit for resisting populist pressures for the second time this week, after also declining to heed appeals to impose a national moratorium on home foreclosures.
That may be true but Obama also knows no amount of populism is going to help his party in the midterms, and he is already looking ahead.
It is safe to assume the president wants to avoid starting the second half of his term embroiled in a damaging trade war with China, which also happens to be the largest holder of U.S. government debt. The administration clearly thinks a direct confrontation would be counterproductive, make the Chinese dig in their heels and, if they stop buying U.S. debt, potentially push up long-term interest rates. There are also big issues to address around market access and intellectual property rights, which confrontation would have obscured.
So for now, Geithner keeps the ball and brings it with him to the G20 finance ministers’ meeting, which precedes the leaders’ summit. But if the multilateral approach fails to yield results, then the focus shifts to the Senate and a possible vote on the lower chamber’s currency bill in the lame duck session.
Here are our top stories from Washington today…
California Democrats cling to leads in mid-term votes
Democratic candidates are clinging to narrow leads over their Republican rivals in two key California races with less than three weeks to go until Nov. 2 elections, a Reuters/Ipsos poll found.
For the poll results, go to www.reuters.com
U.S. delays China currency report until November
The Obama administration backed away on Friday from a showdown with Beijing over the value of China’s currency that would have caused new frictions between the world’s only superpower and its largest creditor. The Treasury Department delayed a much-anticipated decision on whether to label China as a currency manipulator until after the U.S. congressional elections on Nov. 2 and a Group of 20 leaders summit in South Korea on Nov. 11..
For more of this story by Doug Palmer, read here.
For a snap analysis on the administration’s second try at diplomacy, read here.
US to probe if China clean energy actions WTO-legal
U.S. trade officials said they will investigate whether Chinese support for its clean energy sector is a violation of World Trade Organization rules. “We take the USW’s claims very seriously, and we are vigorously investigating them,” a U.S. trade representative said.
For more of this story, read here.
U.S. inflation slows, keeping pressure on Fed
U.S. inflation slowed more than expected in September even as retail sales picked up, keeping pressure on the Federal Reserve to act soon to lessen the risk of a downward price spiral. The prospect of more easy money threatened to exacerbate global tensions about currency policies.
For more of this story by Corbett Daly and Emily Kaiser, read here.
Bernanke sees case for more Federal Reserve easing
Federal Reserve Chairman Ben Bernanke offered his most explicit signal yet that the U.S. central bank was set to ease monetary policy but provided no details. He warned a prolonged period of high unemployment could choke off recovery and that the low level of inflation presented an uncomfortable risk of deflation. “There would appear — all else being equal — to be a case for further action,” Bernanke said at a conference.
For more of this story by Kristina Cooke, read here.
For a snap analysis on Bernanke’s speech, read here.
For an advance look at the G-20 in light of Bernanke’s comments and the currency report delay, read here.
Pentagon cautions gays about revealing identity
The Pentagon is abiding by a court injunction not to discharge openly gay men and women in the military but warned them against changing their behavior while legal challenges continue. “We note for service members that altering their personal conduct in this legally uncertain environment may have adverse consequences for themselves and others should the court’s decision be reversed,” an undersecretary of defense said in a memo.
For more of this story by David Alexander, read here.
Q+A-How tough will CFTC get on speculators?
Companies that trade energy, metals and agricultural futures and swaps are watching how severe a stance the futures regulator takes against speculators in new position, which determine the maximum number of contracts an investor can hold in a specific instrument.
For questions about what happens next, from this story by Roberta Rampton, read here.
What we are blogging…
Anyone expecting to see a smack-down in the desert would have been disappointed. The first and only debate in the high stakes Senate race between Nevada Democrat Harry Reid and Republican challenger Sharron Angle ended with both candidates still standing.
For JoAnne Allen’s full post, click here.
Condoleezza Rice returned to the White House this afternoon for a chat with the man who succeeded her boss. It’s not totally unheard of for presidents to chat with predecessors’ Cabinet members. But the private meeting was at least worth raising even half an eyebrow, although observers didn’t quite know what to make of it.
For Tabassum Zakaria’s full post, click here.
Sound of silence may top UK Christmas chart
Silence may be golden this Christmas, with an internet campaign lobbying to make experimental composer John Cage’s noteless “4’33”” Britain’s seasonal number one this year.
For more of this story, read here.
For more stories from our Washington correspondents visit www.reuters.com and stay informed.
Have a great evening,
Bureau Chief, Washington
Photo Credit: REUTERS/Kevin Lamarque (U.S. Treasury Secretary Timothy Geithner testifies before a Senate Banking, Housing and Urban Affairs Committee hearing on Capitol Hill in Washington September 16, 2010.)