Obscure Lender Helps Shore Up Bank Balance Sheets; Consumers in China Resume Spending By James Christie
Good day. Eleven government-sponsored home-loan banks have drawn scrutiny in recent weeks because Silicon Valley Bank, Signature Bank and Silvergate Capital Corp. borrowed billions from them. Those banks all went out of business in March in a stunning series of collapses. Critics say that the home-loan banks have gone beyond their mission of supporting housing and that the closures show they sometimes prop up banks that aren't stable. Elsewhere, European banks are gearing up to repay about $525 billion of ultracheap loans to the ECB, the U.K. inflation rate in March remained stubbornly above 10% and data showed that consumer spending in China was playing a stronger-than-expected role in driving a recovery after the country lifted its zero-Covid measures. But for how long?
Now on to today's news and analysis.
Top News Banks Leaned on a Little-Known Lender in March as Customers Fled
Banks are turning to an obscure government-linked lender to shore up their balance sheets following the industry's rockiest period in years.
The Federal Home Loan Bank system-established during the Great Depression to help promote mortgage lending and now a source of liquidity for banks of all stripes-issued a record $495 billion of debt in March to fund loans, which are called advances, the system's Office of Finance said. Banks ramped up borrowing that month as customers pulled out deposits and investors panicked over failures that threw the stability of the U.S. financial system into question.
European Banks Say Goodbye to Easy Money
A $1.2 trillion liquidity crunch looms for Europe's lenders, testing their ability to stand on their own after more than a decade of easy money from the European Central Bank.
U.S. Economy Tax Day: IRS Left Fewer Taxpayers on Hold This Year
The Internal Revenue Service answered 2.4 million more taxpayer phone calls with live assistance this year through April 7, compared with the same period last year. And wait times fell to four minutes , from 27 minutes a year ago.
Nurse Shortage Pushes Hospitals Into the Gig Economy
Some of the nation's largest hospital systems are using apps similar to ride-hailing technology to attract scarce nurses, one of the many ways hospitals are revamping hiring to fill staffing gaps created by persistent labor shortages .
Key Developments Around the World China's Consumers Give Economy a Post-Covid Boost
China reported numbers that showed consumer spending was playing a stronger-than-expected role in driving its recovery after the country lifted its stringent zero-Covid measures. The big question is whether it will last .
World's First Carbon Import Tax Approved by EU Lawmakers
The EU's parliament approved taxing imports based on the greenhouse gases emitted to make them, clearing the final hurdle before the plan becomes law and enshrining climate regulation in global trade rules for the first time.
U.K. Inflation Stays Above 10%
The U.K.'s annual rate of inflation was higher than expected in March and remained in double digits, a level of persistent price increases that could mean further hikes in interest rates in the coming months despite a weak economy.
Decades of Negligence Made Turkey's Earthquake Deadlier
The Hatay international airport was meant to be a gleaming model for what the government called "the New Turkey," kicking off one of the biggest building booms of the 21st century. Danger signs were flashing from the start .
Financial Regulation Roundup Europe Takes Aim at Taxpayer-Funded Bank Bailouts
European authorities want to make it harder for countries to use taxpayer money to rescue failing banks, while also better protecting depositors , after existing rules proved to have too many loopholes.
Republicans Pummel SEC's Gary Gensler Over Crypto Crackdown
Securities and Exchange Commission Chair Gary Gensler defended his agency's crackdown on cryptocurrency markets, saying that he had never seen an industry so routinely break securities laws.
Credit Suisse Failed to Probe Nazi Past, Senate Committee Says
Credit Suisse Group AG failed to fully investigate recent allegations it supplied bank accounts to Nazi party members before and after World War II, according to a U.S. Senate committee investigation.
Crisis Now Undoing the Bond Losses That Sparked It
The ripple effects of the banking crisis are reversing one of the problems that sparked it, as bond yields have fallen since Silicon Valley Bank's failure, trimming unrealized losses at lenders.
Forward Guidance Wednesday (all times ET)
8:15 a.m.: Canada housing starts for March
11 a.m.: ECB's Schnabel speaks at Leibniz-Zentrum für Europäische Wirtschaftsforschung in Mannheim
2 p.m.: Federal Reserve Beige Book
5:30 p.m.: Chicago Fed's Goolsbee speaks on NPR, Marketplace with Kai Ryssdal
7 p.m.: New York Fed's Williams speaks to Money Marketeers
Thursday
8:30 a.m.: U.S. weekly jobless claims
10 a.m.: U.S. existing home sales for March; U.S. Leading Index for March; EU FCCI Flash Consumer Confidence Indicator for April
11:30 a.m.: Bank of Canada's Macklem and Rogers speak to Standing Senate Committee on Banking, Commerce and the Economy
12 p.m.: Fed's Waller speaks at Global Interdependence Center
12:20 p.m.: Cleveland Fed's Mester speaks at Akron Roundtable
3 p.m.: Fed's Bowman speaks at Odessa College
4:15 p.m.: ECB's Schnabel speaks to Stanford Graduate School of Business
5 p.m.: Atlanta Fed's Bostic in discussion with Lynda L. Weatherman, CEO of Economic Development Commission of Florida's Space Coast
7:45 p.m.: Philadelphia Fed's Harker speaks at Samuel Zell and Robert Lurie Real Estate Center Members' Meeting
Research Canada Sees Further Price Cooling as Higher Rates Bite
Canada in March registered its first annual inflation print under 5% since 2021 and the softest rise in its consumer-price index since August 2021, which the Bank of Canada should find encouraging as it suggests the painful medicine of sharply raising interest rates is having the intended effect in the country's most rate-sensitive sectors, Desjardins principal economist Marc Desormeaux says. He continues to believe Canada's economy has yet to feel the full effects of rate increases last year and that more economic weakness this year should help bring prices to heel. As such, Desjardins thinks the central bank will move to cut borrowing costs toward the end of this year.
-Robb Stewart
U.K. Wage Data Provides Room for Further Interest-Rate Increases
Chances for an interest-rate increase in the U.K. have clearly picked up after labor market data showed wage growth remained high, Morgan Stanley U.K. economist Bruna Skarica says in a note. The reversal in the monthly easing dynamics of pay growth will make the Bank of England a touch less certain about the inflection in earnings even though regular earnings growth in the private sector remain in line with the bank's forecasts, she says. U.K. inflation data for March, particularly core inflation, is likely to be the key factor determining the Bank of England's rate decision in May.
-Xavier Fontdegloria
Commentary Chinese Economy Defies Naysayers
Policy mistakes of the Covid-19 era have done some long-term damage to China's prospects, but they won't be enough to remove the country as a formidable global economic force , Nathaniel Taplin writes.
Basis Points U.S. housing starts declined in March after rebounding in February, while building permits fell sharply, according to Commerce Department data. Housing starts fell 0.8% from February to a seasonally adjusted annual rate of 1.420 million and were down 17.2% from a year earlier. Residential permits fell 8.8% in March on month to a seasonally adjusted annual rate of 1.413 million. (Dow Jones Newswires) Global trade flows increased in January as U.S. consumers continued to spend freely, but are likely to slow over the coming months as consumer demand weakens in the face of higher interest rates and still rapid inflation. An indicator of goods trade flows developed by The Wall Street Journal points to a 1.2% rise in January, adjusted for the seasonal ups and downs of exports of goods between countries. That increase was largely driven by exports from and imports to the U.S., with Asian and European flows starting the year weakly. (DJN) Malaysia's consumer-price index is expected to rise 3.6% on year in March, easing slightly from February's 3.7%, according to the median estimate of nine economists polled by the Wall Street Journal. Meanwhile, Malaysia's trade surplus widened in March from the previous month, but exports and imports are both lower on year, mainly due to reduced shipments of electrical and electronic products. (DJN) The outlook for the German economy tumbled unexpectedly in April on uncertain financial markets in the aftermath of turbulence in the banking sector, as high inflation and rising interest rates still put pressure on economic activity. The ZEW economic research institute said its index of economic expectations for Germany fell from 13.0 in March to 4.1 this month. Economists polled by The Wall Street Journal expected a 15.0 reading. (DJN) European Union passenger-car registrations rose in March on the year as each of the bloc's largest markets saw double-digit growth, the European Automobile Manufacturers Association, or ACEA, said. (DJN) The U.K. unemployment rate stood at 3.8% in the December-February period, slightly higher than the 3.7% rate in the three months to January, according to data from the Office for National Statistics. The reading matches economists' expectations in a poll by The Wall Street Journal. (DJN) South Africa's annual inflation rate rose for the second consecutive month in March, prompted again by accelerating food prices. (DJN) Feedback Loop
This newsletter is compiled by James Christie in San Francisco.
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04-19-23 0715ET
