Tue, Dec 25, 2018 - Page 10 News List

Mnuchin to convene financial team

REASSURANCE:The CEOs of the US’ six largest banks confirmed that they have ample liquidity, the US Treasury said amid stock declines last seen in the Great Depression

Reuters, WASHINGTON

US Secretary of the Treasury Steven Mnuchin on Sunday called top US bankers amid an ongoing rout on Wall Street and made plans to convene a group of officials known as the “Plunge Protection Team.”

US stocks have fallen sharply in the past few weeks on concerns over slowing economic growth, with the S&P 500 index on pace for its biggest percentage decline this month since the Great Depression.

“Today I convened individual calls with the CEOs of the nation’s six largest banks,” Mnuchin tweeted shortly before financial markets were due to open in Asia.

US equity index futures dropped late on Sunday as electronic trading resumed to start a holiday-shortened week. In early trading, the benchmark S&P 500’s e-mini futures contract was off by about a quarter of a percent.

The US Department of the Treasury said in a statement that Mnuchin talked with the chief executives of Bank of America Corp, Citigroup Inc, Goldman Sachs Group Inc, JP Morgan Chase & Co, Morgan Stanley and Wells Fargo & Co.

“The CEOs confirmed that they have ample liquidity available for lending,” the department said.

Mnuchin “also confirmed that they have not experienced any clearance or margin issues and that the markets continue to function properly,” it said.

Mnuchin’s calls to the bankers came amid a partial government shutdown that began on Saturday following an impasse in the US Congress over US President Donald Trump’s demand for more funds for a wall on the border with Mexico.

Financing for about a quarter of federal government programs expired at midnight on Friday and the shutdown could continue until Thursday next week.

Mnuchin was yesterday to convene a call with the US president’s Working Group on Financial Markets, which includes Washington’s main stewards of the US financial system and is sometimes referred to as the Plunge Protection Team, the department said.

The group, which was also convened in 2009 during the latter stage of the financial crisis, includes officials from the US Federal Reserve as well as the US Securities and Exchange Commission.

Wall Street is also closely following reports that Trump has privately discussed the possibility of firing US Federal Reserve Chairman Jerome Powell.

Mnuchin on Saturday said that Trump told him he had “never suggested firing” Powell.

Trump has criticized the US central bank for raising interest rates this year, which could further dampen economic growth.

The Fed’s independence is seen as a pillar of the US financial system.

Mnuchin’s calls came as a range of asset classes have suffered steep losses.

This month alone, the S&P 500 is down nearly 12.5 percent, while the NASDAQ Composite has slumped 13.6 percent.

The NASDAQ is in a bear market, having declined nearly 22 percent from its record high in late August and the S&P is not far off that level.

Corporate credit markets have been under duress as well and measures of the investment grade corporate bond market are poised for their worst annual performance since the 2008 financial crisis.

The high-yield bond market, where companies with the weakest credit profiles raise capital, has not seen a deal all month. The last time that happened was in November 2008.

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