Banking Worries Ripple Around the Globe

Worries about recent bank failures and bailouts are rippling through the world economy, from New York to Beijing, and central bankers are working to calm depositors and financial markets. Mike O’Sullivan reports from California, where a major player in the tech industry, Silicon Valley Bank, collapsed earlier this month. Rob Garver contributed.

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US Fed Raises Key Rate by Quarter-Point Despite Bank Turmoil

The Federal Reserve extended its year-long fight against high inflation Wednesday by raising its key interest rate by a quarter-point despite concerns that higher borrowing rates could worsen the turmoil that has gripped the banking system. 

“The U.S. banking system is sound and resilient,” the Fed said in a statement after its latest policy meeting ended. 

At the same time, the Fed warned that the financial upheaval stemming from the collapse of two major banks is “likely to result in tighter credit conditions” and “weigh on economic activity, hiring and inflation.” 

The central bank also signaled that it’s likely nearing the end of its aggressive streak of rate hikes. In a statement, it removed language that had previously indicated it would keep raising rates at upcoming meetings. The statement now says “some additional policy firming may be appropriate” — a weaker commitment to future hikes. 

And in a series of quarterly projections, the policymakers forecast that they expect to raise their key rate just one more time – from its new level Wednesday of about 4.9% to 5.1%, the same peak level they had projected in December. 

Still, in its latest statement, the Fed included some language indicating its inflation fight remains far from complete. It said hiring is “running at a robust pace” and noted that “inflation remains elevated.” 


It removed a phrase — “inflation has eased somewhat” — it had included in its previous statement in February. 

Speaking at a news conference, Chair Jerome Powell said, “The process of getting inflation back down to 2% has a long way to go and is likely to be bumpy.” 

The latest rate hike suggests that Powell is confident the Fed can manage a dual challenge: Cool still-high inflation through higher loan rates, while defusing turmoil in the banking sector through emergency lending programs and the Biden administration’s decision to cover uninsured deposits at the two failed banks. 

The Fed’s signal that the end of its rate-hiking campaign is in sight may also soothe financial markets as they digest the consequences of the U.S. banking turmoil and the takeover last weekend of Credit Suisse by its larger rival UBS. 

The central bank’s benchmark short-term rate has now reached its highest level in 16 years. The new level likely will lead to higher costs for many loans, from mortgages and auto purchases to credit cards and corporate borrowing. The succession of Fed rate hikes also has heightened the risk of a recession. 

The Fed’s new policy decision reflects an abrupt shift. Early this month, Powell had told a Senate panel that the Fed was considering raising its rate by a substantial half-point. At the time, hiring and consumer spending had strengthened more than expected, and inflation data had been revised higher. 

The troubles that suddenly erupted in the banking sector two weeks ago likely led to the Fed’s decision to raise its benchmark rate by a quarter-point rather than a half-point. Some economists have cautioned that even a modest quarter-point rise in the Fed’s key rate, on top of its previous hikes, could imperil weaker banks whose nervous customers may decide to withdraw significant deposits. 

Silicon Valley Bank and Signature Bank were both brought down, indirectly, by higher rates, which pummeled the value of the Treasurys and other bonds they owned. As anxious depositors withdrew their money en masse, the banks had to sell the bonds at a loss to pay the depositors. They couldn’t raise enough cash to do so. 

After the fall of the two banks, Credit Suisse was taken over by UBS. Another struggling bank, First Republic, has received large deposits from its rivals in a show of support, though its share price plunged Monday before stabilizing. 

The Fed is deciding, in effect, to treat inflation and financial turmoil as two separate problems, to be managed simultaneously by separate tools: Higher rates to address inflation and greater Fed lending to banks to calm financial turmoil. 

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TikTok Updates Rules; CEO on Charm Offensive for US Hearing

TikTok went on a counteroffensive Tuesday amid increasing Western pressure over cybersecurity and misinformation concerns, rolling out updated rules and standards for content as its CEO warned against a possible U.S. ban on the Chinese-owned video-sharing app. 

CEO Shou Zi Chew is scheduled to appear Thursday before U.S. congressional lawmakers, who will grill him about the company’s privacy and data-security practices and relationship with the Chinese government. 

Chew said in a TikTok video that the hearing “comes at a pivotal moment” for the company, after lawmakers introduced measures that would expand the Biden administration’s authority to enact a U.S. ban on the app, which the CEO said more than 150 million Americans use. 

“Some politicians have started talking about banning TikTok. Now, this could take TikTok away from all 150 million of you,” said Chew, who was dressed casually in jeans and a blue hoodie, with the dome of the U.S. Capitol in Washington in the background. 

“I’ll be testifying before Congress this week to share all that we’re doing to protect Americans using the app,” he said. 

The TikTok app has come under fire in the U.S., Europe and Asia-Pacific, where a growing number of governments have banned TikTok from devices used for official business over worries it poses risks to cybersecurity and data privacy or could be used to push pro-Beijing narratives and misinformation. 

So far, there is no evidence to suggest this has happened or that TikTok has turned over user data to the Chinese government, as some of its critics have argued it would do. 

Norway and the Netherlands on Tuesday warned that apps like TikTok should not be installed on phones issued to government employees, both citing security or intelligence agencies. 

There’s a “high risk” if TikTok or Telegram are installed on devices that have access to “internal digital infrastructure or services,” Norway’s Justice Ministry said without providing further details. 

TikTok also rolled out updated rules and standards for content and users in a reorganized set of community guidelines that include eight principles to guide content moderation decisions. 

“These principles are based on our commitment to uphold human rights and aligned with international legal frameworks,” said Julie de Bailliencourt, TikTok’s global head of product policy. 

She said TikTok strives to be fair, protect human dignity and balance freedom of expression with preventing harm. 

The guidelines, which take effect on April 21, were repackaged from TikTok’s existing rules with extra details and explanations. 

Among the more significant changes are additional details about its restrictions on deepfakes, also known as synthetic media, created by artificial intelligence technology. TikTok more clearly spells out its policy, saying all deepfakes or manipulated content that show realistic scenes must be labeled to indicate they’re fake or altered in some way. 

TikTok had previously banned deepfakes that mislead viewers about real-world events and cause harm. Its updated guidelines say deepfakes of private figures and young people are also not allowed. 

Deepfakes of public figures are OK in certain contexts, such as for artistic or educational content, but not for political or commercial endorsements. 

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IMF Approves $3 Billion Economic Rescue Package for Sri Lanka

The International Monetary Fund has approved a nearly $3 billion financial rescue package for Sri Lanka after several months of negotiations with the economically troubled South Asian island nation.   

The IMF announced Monday that it will immediately release about $333 million to Colombo. The institution said Sri Lanka must undertake a set of economic reforms and anti-corruption strategies as part of the bailout agreement. 

The rescue package was approved only after China, India and Japan, Sri Lanka’s biggest international creditors, agreed to a debt restructuring strategy.  

Sri Lankan President Ramil Wickremesinghe’s office issued a statement saying the agreement will bring in up to $7 billion from the IMF and other international financial institutions. President  Wickremesinghe has already pushed through a number of economic reforms, including raising income taxes and ending generous subsidies for fuel and electricity.  

Sri Lanka’s tourism-dependent economy was devastated by the COVID-19 pandemic, as well as a set of disastrous decisions made by former President Gotabaya Rajapaksa, which depleted its foreign exchange reserves and left it unable to import food, fuel or medicines. Sri Lankans had to endure days of lengthy power outages 

The crisis sparked a popular and often violent uprising that led Gotabaya Rajapaksa to flee Sri Lanka and resign from office, effectively ending his family’s two-decade hold on political power. His brothers Mahinda and Basil also quit their posts as prime minister and finance minister, respectively, amid the anti-government demonstrations.    

Some information for this report came from The Associated Press, Reuters, Agence France-Presse.  

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Amazon Cuts 9,000 More Jobs, Bringing 2023 Total to 27,000

Amazon plans to eliminate 9,000 more jobs in the next few weeks, CEO Andy Jassy said in a memo to staff Monday. 

The job cuts would mark the second largest round of layoffs in the company’s history, adding to the 18,000 employees the tech giant said it would lay off in January. The company’s workforce doubled during the pandemic, however, during a hiring surge across almost the entire tech sector. 

Tech companies have announced tens of thousands of job cuts this year. 

In the memo, Jassy said the second phase of the company’s annual planning process completed this month led to the additional job cuts. He said Amazon will still hire in some strategic areas. 

“Some may ask why we didn’t announce these role reductions with the ones we announced a couple months ago. The short answer is that not all of the teams were done with their analyses in the late fall; and rather than rush through these assessments without the appropriate diligence, we chose to share these decisions as we’ve made them, so people had the information as soon as possible,” Jassy said. 

The job cuts announced Monday will hit profitable areas for the company including its cloud computing unit AWS and its burgeoning advertising business. Twitch, the gaming platform Amazon owns, will also see some layoffs as well as Amazon’s PXT organizations, which handle human resources and other functions. 

Prior layoffs had also hit PXT, the company’s stores division, which encompasses its e-commerce business as well as the company’s brick-and-mortar stores such as Amazon Fresh and Amazon Go, and other departments such as the one that runs the virtual assistant Alexa. 

Earlier this month, the company said it would pause construction on its headquarters building in northern Virginia, though the first phase of that project will open this June with 8,000 employees. 

Like other tech companies, including Facebook parent Meta and Google parent Alphabet, Amazon ramped up hiring during the pandemic to meet the demand from homebound Americans that were increasingly making purchases online. 

Amazon’s workforce, in warehouses and offices, doubled to more than 1.6 million people in about two years. But demand slowed as the worst of the pandemic eased. The company began pausing or canceling its warehouse expansion plans last year. 

Amid growing anxiety over the potential for a recession, Amazon in the past few months shut down a subsidiary that’s been selling fabrics for nearly 30 years and shuttered its hybrid virtual, in-home care service Amazon Care among other cost-cutting moves. 

Jassy said Monday given the uncertain economy and the “uncertainty that exists in the near future,” the company has chosen to be more streamlined. 

He said the teams that will be impacted by the latest round of layoffs are not done making final decisions on which roles will be eliminated. The company plans to finalize those decisions by mid- to late April and notify those who will be laid off. 

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UBS Announces Credit Suisse Buyout to Calm Markets, but Asian Equities Sink

UBS is set to take over its troubled Swiss rival Credit Suisse for $3.25 billion following weekend crunch talks aimed at preventing a wider international banking crisis, but Asian equities sank Monday on lingering worries about the sector.   

The deal, in which Switzerland’s biggest bank will take over the second largest, was vital to prevent economic turmoil from spreading throughout the country and beyond, the Swiss government said.   

The move was welcomed in Washington, Frankfurt and London as one that would support financial stability, after a week of turbulence following the collapse of two U.S. banks.   

After a dramatic day of talks at the finance ministry in Bern — and with the clock ticking towards the markets reopening on Monday — the takeover was announced at a news conference.   

Swiss President Alain Berset was flanked by UBS chairman Colm Kelleher and his Credit Suisse counterpart Axel Lehmann, along with the Swiss finance minister and the heads of the Swiss National Bank (SNB) and the financial regulator FINMA.   

The wealthy Alpine nation is famed for its banking prominence and Berset said the takeover was the “best solution for restoring the confidence that has been lacking in the financial markets recently”.   

If Credit Suisse went into freefall, it would have had “incalculable consequences for the country and for international financial stability”, he said.   

Credit Suisse said in a statement that UBS would take it over for “a merger consideration of three billion Swiss francs ($3.25 billion)”.   

After suffering heavy falls on the stock market last week, Credit Suisse’s share price closed Friday at 1.86 Swiss francs, with the bank worth just over $8.7 billion.   

UBS said Credit Suisse shareholders would get 0.76 Swiss francs per share.   

“Given recent extraordinary and unprecedented circumstances, the announced merger represents the best available outcome,” Lehmann said.   

Asian equities still fell in early trade Monday, with Hong Kong, Tokyo, Sydney, Seoul and Singapore all in the red.   

Hong Kong’s monetary authority sought to calm jitters Monday morning, saying that “exposures of the local banking sector to Credit Suisse are insignificant”, as the bank’s assets make up “less than 0.5 percent” of the city’s banking sector.    

Despite that, the city’s banking stocks tumbled: HSBC dropped six percent, Standard Chartered shed five percent and Hang Seng Bank gave up nearly two percent, in line with a global sell-off in the sector on worries about lenders’ exposure to bonds linked to Credit Suisse.   

“Uncertainty could remain high for quite some time, even if recent bank support measures succeed,” said analyst Stephen Innes of SPI Asset Management.     

‘Huge collateral damage’ risk    

Swiss Finance Minister Karin Keller-Sutter said that bankruptcy for Credit Suisse could have caused “huge collateral damage”.    

With the “risk of contagion” for other banks, including UBS itself, the takeover has “laid the foundation for greater stability both in Switzerland and internationally”, she said.   

The deal was warmly received internationally.   

The decisions taken in Bern “are instrumental for restoring orderly market conditions and ensuring financial stability,” said European Central Bank chief Christine Lagarde.   

“The euro area banking sector is resilient, with strong capital and liquidity positions.”   

U.S. Federal Reserve chair Jerome Powell and Treasury Secretary Janet Yellen said in a joint statement: “We welcome the announcements by the Swiss authorities today to support financial stability.”   

The sentiment was echoed by British Finance Minister Jeremy Hunt.   

The Fed and the central banks of Canada, Britain, Japan, the EU and Switzerland announced they would launch a coordinated effort Monday to improve banks’ access to liquidity.   

The SNB announced 100 billion Swiss francs of liquidity would be available for the UBS-Credit Suisse takeover.   

Keller-Sutter insisted the deal was “a commercial solution and not a bailout”.  

UBS chairman Kelleher said: “We are committed to making this deal a great success. UBS will remain rock solid.”   

Job worries   

The takeover creates a banking giant such as Switzerland has never seen before — and raises concerns about possible layoffs.   

The Swiss Bank Employees Association said there was “a great deal at stake” for the 17,000 Credit Suisse staff, plus tens of thousands of jobs outside of the banking industry potentially at risk.   

Like UBS, Credit Suisse was one of 30 worldwide Global Systemically Important Banks — deemed of such importance to the international banking system that they are colloquially called “too big to fail”.   

But the markets saw the bank as a weak link in the chain.   

Amid fears of contagion after the collapse of two U.S. banks, Credit Suisse’s share price plunged by more than 30% on Wednesday to a record low of 1.55 Swiss francs. That saw the SNB step in overnight with a $54-billion lifeline.   

After recovering some ground Thursday, its shares closed down 8% on Friday at 1.86 Swiss francs, as it struggled to retain investor confidence.   

In 2022, the bank suffered a net loss of $7.9 billion and expects a “substantial” pre-tax loss this year.   

Credit Suisse’s share price has tumbled from 12.78 Swiss francs in February 2021 due to a string of scandals that it has been unable to shake off. 

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As Economy Worsens, Lebanese Juggle Dizzying Rates for Devalued Pound

When Caroline Sadaka buys groceries in the Lebanese capital Beirut, she keeps her phone in hand – not to check her shopping list but to calculate the spiraling costs of goods now priced at volatile exchange rates that vary by store and sector.

As Lebanon’s economy continues to collapse, an array of exchange rates for the local pound has emerged, complicating personal accounting and dimming hopes of fulfilling a reform requirement set out by the International Monetary Fund.

The government’s official exchange rate was set at 15,000 pounds to the U.S. dollar in February, a nearly 90% devaluation from the longtime peg of 1507.5.

But the Central Bank is selling dollars at a rate of 79,000 to the greenback while the finance minister intends to calculate tariffs for imported goods at 45,000 pounds.

The parallel market rate is meanwhile hovering around 107,000 pounds and changing daily. Supermarkets and fuel stations are required to post signs with the value they’ve adopted for the day, but the rate is changing so fast that many are pricing in the relatively stable U.S dollar instead.

Examining a can of tuna, Sadaka illustrated the daily quandary faced by shoppers. “This doesn’t have a (logical) price. If you look, it’s in Lebanese pounds, so is this the price? Or is this an old price, and there’s now a price in dollars?,” she wondered.

She quit her job as a school teacher which paid her in local currency, the value of which has decreased by more than 98% against the dollar on the parallel market since 2019.

That’s when the economy began unravelling after decades of unsound financial policies and alleged corruption.

To solve the exchange rate confusion, the government needs to implement one unified rate. This is among pre-conditions set by the International Monetary Fund nearly a year ago for Lebanon to get a $3 billion bailout.

But the lender of last resort says reforms have been too slow. They have met resistance from politicians who are shielding vested interests and dodging accountability.

In the meantime, the country has been moving towards a cash-based and dollarized economy given spiralling inflation and restrictions by banks on transactions.

Shop owner Mahmoud Chaar told Reuters the exchange rate was changing so fast that his business was losing money overnight.

Like many business owners, Chaar has to pay in U.S. dollars to import goods but sells in Lebanese pounds. One day, he had sold all his goods based on one rate but woke up the next to find it had jumped nearly 10,000 pounds per U.S. dollar.

“Basically, we lost in the exchange rate difference what we had made in profit,” Chaar told Reuters.

Economist Samir Nasr said the varying rates across sectors were making personal accounting “messy” for Lebanese and unifying them was more urgent than ever.

“What is required is a full group of reforms and steps that will allow for the economic situation to stabilize in general – and would then allow the exchange rate to be unified,” he said.

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Starlink Brought Internet to Brazil’s Amazon. Criminals Love It.

Brazilian federal agents aboard three helicopters descended on an illegal mining site on Tuesday in the Amazon rainforest. They were met with gunfire, and the shooters escaped, leaving behind an increasingly familiar find for authorities: Starlink internet units.

Starlink, a division of Elon Musk’s SpaceX, has almost 4,000 low-orbit satellites across the skies, connecting people in remote corners of the Amazon and providing a crucial advantage to Ukrainian forces on the battlefield. The lightweight, high-speed internet system has also proved a new and valuable tool for Brazil’s illegal miners, with reliable service for coordinating logistics, receiving advance warning of law enforcement raids and making payments without flying back to the city.

Agents from the Brazilian environment agency’s special inspection group and the federal highway police rapid response group on Tuesday found one Starlink terminal up and running next to a pit, an officer who participated in the raid told The Associated Press. He spoke on condition of anonymity over concerns for his personal safety.

They also seized mercury, gold and ammunition, and destroyed fuel and other equipment used by miners in an area known as Ouro Mil, controlled by Brazil´s most feared criminal organization, known as the First Command of the Capital, according to federal investigations.

Since taking office this year, President Luiz Inácio Lula da Silva has sought to crack down on environmental violations, particularly illegal mining in Yanomami land, Brazil’s largest Indigenous territory. In recent years, an estimated 20,000 prospectors contaminated vital waterways with mercury used to separate gold. They have disrupted traditional Indigenous life, brought disease and caused widespread famine.

The environment agency, known as Ibama, has seized seven Starlink terminals in Yanomami land over the past five weeks, the agency’s press office said.

Illegal miners have long used satellite internet to communicate and coordinate, but until now that entailed sending a technician, usually by plane, to install a heavy, fixed antenna that cannot be carried off when mining sites move or are raided. And the connection was slow and unstable, especially on rainy days.

Starlink – which first became available in Brazil last year and has spread rapidly – solved those problems. Installation is do-it-yourself, the equipment works even on the move, speed is as fast as in Brazil´s large cities and it works during storms.

Starlink has long viewed the Amazon as an opportunity. That was underscored by Musk’s visit to Brazil last May, when he met with then-President Jair Bolsonaro.

“Super excited to be in Brazil for launch of Starlink for 19,000 unconnected schools in rural areas & environmental monitoring of Amazon,” Musk tweeted at the time.

That project with the government hasn’t advanced, however. SpaceX and the communications ministry haven’t signed any contract, and only three terminals were installed in Amazon schools for a 12-month trial period, the ministry’s press office said in an emailed response to questions.

Nevertheless, Starlink has taken off in the region and begun ushering in change.

In Atalaia do Norte, on the western reaches of the Brazilian Amazon near the borders with Peru and Colombia, Rubeney de Castro Alves installed Starlink at his hotel in December. Now, he can make bank transfers and conduct video calls. He even started bingeing Netflix.

“There are so many new things to watch that I’m not even sleeping,” Alves said, chuckling.

His son once flew all the way to Manaus, the state capital 1,140 kilometers (708 miles) away, just to negotiate with a group of tourists via conference call. Today, internet at his 11-room hotel in Atalaia do Norte is more reliable than in Manaus, and he bought a second terminal for his tour boat to enable communications on its 10-day voyages, Alves said.

With high demand for internet, dozens of the riverside town’s 21,000 residents flock to Alves’ hotel each day. Its balcony is a meeting point for teenagers who spend hours playing online games on their phones.

“It made a revolution in our city,” Alves said.

A world away, in Ukraine, Starlink has yielded advantages on the battlefield in its war with Russia.

Ukraine has received some 24,000 Starlink terminals that allow continued internet in the most vulnerable regions of the southeast even amid ongoing Russian shelling. In large Ukrainian cities, authorities have set up “points of resilience” that offer free internet along with hot beverages.

The benefits of connectivity were immediately apparent to bad actors in the Amazon, Hugo Loss, operations coordinator for Brazil´s environment agency, told the AP in a phone interview.

“This technology is extremely fast and really improves the ability to manage an illegal mine,” Loss said. “You can manage hundreds of mining sites without ever setting foot in one.”

Another official with the environment agency told AP it is just beginning to expel miners from the Yanomami territory and the spread of Starlink has complicated that mission. The official spoke on condition of anonymity because of concerns about personal safety.

An unauthorized reseller of Starlink in Boa Vista, the gateway for travel into Yanomami territory, has been marketing the units in a WhatsApp group for illegal miners and promising same-day delivery. Her price for a terminal is $1,600— six times what Alves pays for service at his little hotel in Atalaia do Norte. Others are selling the Starlink terminals on Facebook groups for illegal miners, like one called “Fanatics for Prospecting.”

As lawbreakers have gained access to superior internet service, authorities have started using Starlink themselves. Federal agents installed a terminal at a new checkpoint on the Uraricoera River – an important corridor for miners entering Yanomami territory. The official who informed the AP about the Tuesday raid used Starlink to send photos and even heavy video files of their operation.

Brazil’s environment agency told the AP via email that it, along with other federal bodies, is studying how to block Starlink’s signal in illegal mining areas, calling it crucial to stopping the activity.

The AP emailed James Gleeson, SpaceX’s Communications Director, questions about Starlink’s presence in Brazil and its use by illegal miners in remote areas, but received no response.

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How the FDIC Keeps US Banks Stable

When the U.S. government announced this month that it had stepped in to take over Silicon Valley Bank (SVB) and Signature Bank, it was a 90-year-old Great Depression-era agency that took the lead in assuring depositors that their funds were safe and quelling a bank run that threatened broader damage to the industry.

The Federal Deposit Insurance Corp. took control of SVB on March 10 and Signature Bank two days later, moves that rendered the publicly traded stock of both institutions worthless but preserved other assets for distribution to account holders and each bank’s creditors.

In a decision some found surprising, the FDIC announced that all deposits held at both banks would be fully guaranteed. Historically, depositors have been protected up to $250,000, a limit designed to keep the overwhelming majority of individual depositors safe from loss.

The agency decided, however, that to prevent “contagion” — panic about one failing bank spreading to broader panic about others — it would make all depositors whole.

The decision was also likely motivated by the fact that many businesses, primarily in the tech sector, kept large accounts at SVB that they used to meet payroll and ordinary business expenses. The impact of so many companies suddenly being unable to pay thousands of employees would have been hard to estimate but could have potentially damaged the economy.

The FDIC and the Biden administration were quick to deny that the two banks had been the subjects of a “bailout,” stressing that bank executives had been fired, stockholders’ equity had been wiped out, and any funds supplied by the agency to make depositors whole would come from an insurance fund financed by premiums paid by insured banks.

The FDIC, however, will have to raise assessments on banks to replenish what money it spends on the resolution of SVB and Signature. Banks will likely pass these costs on to their customers by charging higher fees or increasing interest on loans.


History of the FDIC

The FDIC was created in 1933, after the U.S. weathered years of panic during the Great Depression, which led to the closures of thousands of banks. Between 1921 and 1929, approximately 5,700 banks across the U.S. failed, some because of poor management and many because depositors lost confidence and demanded withdrawals so rapidly that the banks simply ran out of cash.

Things worsened between 1929 and 1933, when nearly 10,000 banks across the country failed. During a particularly difficult week in February 1933, bank panics were so pervasive that governors in almost all U.S. states acted to temporarily close all banks.

The FDIC was created in the aftermath of that crisis, when the federal government finally acted on a long-delayed plan to establish national deposit insurance. The agency originally guaranteed individual deposits of up to $2,500, a level that has been periodically increased over the decades.

The agency is funded by premiums that banks and savings associations pay for deposit insurance coverage. It is managed by a board of five presidential appointees. The current chair of the FDIC is Martin J. Gruenberg. By statute, the director of the Consumer Financial Protection Bureau and the Comptroller of the Currency, whose agency supervises nationally chartered banks, are also members. Two other appointees round out the board, which cannot have more than three members of the same political party.

In its nine decades, the FDIC has closed hundreds of failed banks, but insured deposits have always been repaid in full.

Promoting financial stability

“The mission of the FDIC is to promote financial stability,” said Diane Ellis, the former director of the agency’s Division of Insurance and Research. “The FDIC does that by exercising several authorities. One is to provide deposit insurance so that bank depositors can be confident that they’ll get their money back regardless of what happens with their bank.”

In addition, the agency has the authority to “resolve” failed banks, which can involve selling the bank outright to another institution, creating a “bridge” bank that provides ongoing services to depositors while the agency works toward a resolution, or selling off the bank’s assets to return as much money as possible to depositors whose holdings exceed the coverage limit.

Ellis, now a senior managing director at the banking network IntraFi, noted that the agency also has oversight authority over the banks it insures.

“For open banks, examiners conduct regular examinations to make sure banks are operating in a safe and sound manner … promoting a healthy, stable banking system, which is important for economic growth,” she told VOA.


Avoiding ‘moral hazard’

When the FDIC was established, capping the standard insurance amount per depositor was a central feature of its design. The creators of the agency were concerned about a problem called “moral hazard.” They worried that if the federal government guaranteed 100% of deposits, individuals and businesses would fail to exercise due diligence when deciding what banks to trust with their money, and that lack of scrutiny would result in banks taking excessive risks.

“Legislators wanted to strike a balance, to protect people up to a certain amount, but not everything, so that there’d be an incentive for people to make sure that their money was in a safe bank rather than a dangerous one,” said John Bovenzi, who served as chief operating officer and deputy to the chairman of the FDIC from 1999 to 2009.

Bovenzi, the co-founder of the Bovenzi Group, a financial services consultancy, told VOA that he was initially surprised by the decision of the FDIC and other regulators to make all uninsured depositors whole.

“These weren’t the largest institutions. Silicon Valley and Signature, they were in sort of a second tier and weren’t viewed as ‘too big to fail,'” he said.

However, Bovenzi said, it soon became apparent to regulators that there were other banks in the country that operated with business models similar to that of SVB, which had large amounts of low-interest securities on its books, the value of which was being systematically undercut by the Federal Reserve’s decision to raise interest rates dramatically over the past year.

“What happened was that they saw there was too much spillover effect to other institutions, so they invoked what’s called a ‘systemic risk exception,'” he said. Had this not been the case, he said, the FDIC would have had to conduct the closing in a way that resulted in the least cost to it and the government to save money, “and that would have meant uninsured taking losses. By protecting the uninsured, the FDIC raises its own costs to cover it. And so it needed to say, ‘We don’t want to do it for the institution, but we need to do it for the system.'”

Setting a precedent

The decision to protect all deposits at SVB and Signature was not unique. During the financial crisis sparked by widespread defaults in the subprime mortgage sector from 2007 to 2010, regulators shuttered several hundred banks in the space of a few years, and implemented a policy of protecting all deposits to avoid increasing the damage to the broader economy.

The decision to do so for SVB and Signature, though, absent such a widespread crisis, has raised questions about whether a precedent has been set that will lead depositors to expect to be rescued by the government if their bank fails.

In testimony before Congress Thursday, Treasury Secretary Janet Yellen warned that the treatment of SVB and Signature should not be taken as a signal that similar protection will be extended to other banks in the future.

Such action, she said, would take place only when “failure to protect uninsured depositors would create systemic risk and significant economic and financial consequences.”

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Collapse of Silicon Valley Bank Has Chinese Startups Worried

The collapse of Silicon Valley Bank has caused panic not just in the U.S. tech industry but also in China, where the bank has been a key player for years among Chinese startups.

In recent days, many startups in China have issued statements to reassure their investors that their deposits with SVB will not impact their operations.

Before the bank failed and was taken over by U.S. regulators this month, Silicon Valley Bank was the 16th-largest American bank. In foreign markets, SVB’s reputation for financing about half of all U.S. venture-backed technology and health care companies made it a popular choice for companies, including those based in China and backed by U.S. venture capitalists.

BeiGene, one of China’s largest biotech companies that specializes in the development of cancer drugs, said that the collapse of SVB would have “no major impact” on its operations, and that its uninsured cash deposits in Silicon Valley Bank totaled only $175 million, or about 3.9% of its cash and other investments.

Zai Lab, a biopharmaceutical company headquartered in Shanghai, issued a statement saying that SVB’s collapse would have no impact on its operations, including the ability to pay wages and make payments to third parties.

Other startups, including Andon Health, Sirnaomics, Everest Medicines and Jacobio Pharma, have issued similar statements.

After SVB failed, the Biden administration stepped in and ensured that all customers would be able to get their deposits back, even those who had more than $250,000 in their accounts. That’s the maximum amount that the Federal Deposit Insurance Corporation typically covers when a bank fails, but more than 90% of Silicon Valley Bank accounts were above that amount.

With their SVB deposits frozen, many companies could have been at risk of failing themselves, so the Biden administration said it would step in to guarantee they would get their funds back.

FDIC reimbursements for Chinese customers?

On Chinese social media, there has been concern that the reimbursements may apply only to customers in America.

“Is it true that only depositors who are U.S. citizens can get their money back? What about us?” asked one post on Weibo, the Chinese version of Twitter.

William Hanlon, a partner at Seyfarth Shaw LLP, told VOA Mandarin in an email that the FDIC as receiver “will not categorize account holders by nationality” and “will treat all depositors equally based on their status as depositors.”

David M. Bizar, another partner at Seyfarth Shaw, said the FDIC is continuing to operate SVB as a full-service bridge bank while it searches for buyers of the bank’s assets.

“It can be expected that the United States will continue to maintain these deposit accounts and keep them from losing their value so long as it maintains them in its receivership, and that the FDIC as receiver will not sell these deposit accounts to purchasers who would be permitted under the sale agreements to reduce their values after the transfers,” he told VOA.

So far, several Chinese companies have publicly said they were able to withdraw all their deposits at SVB.

SVB’s role in China

The now-failed SVB carved out a unique role in the Chinese banking scene. It served roughly 2,200 clients and advised government regulators who were eager to build the country’s tech sector. The Santa Clara, California-based bank supported startup companies that not all banks, especially the big commercial ones in China, would accept because of higher risks.

In 2010, then-CEO Ken Wilcox brought the entire board of directors to China to showcase the importance he attached to the China market, according to Chinese media reports. In a 2019 interview, when he was SVB’s chief credit officer, he said SVB was “a model bank for China.”

SVB approached China in two different ways. One involved wholly owned operations in major tech centers, including Beijing, Shenzhen and Shanghai, where it advised startups on how to manage overseas funding. The other involved a 50-50 joint-venture with Shanghai Pudong Development Bank, also known as SPD Silicon Valley bank, that operates under a similar model as SVB.

Following the collapse of SVB, the Chinese policymakers signaled stricter oversight to improve financial market security.

The South China Morning Post quoted Liu Xiaochun, deputy director of the Shanghai Finance Institute, as saying it was inappropriate to set up a similar specialist bank in China.

He argued that to avoid potential losses in supporting tech and health startups, large commercial banks should establish branches to finance innovation, while managing risk exposure at headquarters.

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China Lowers Bank Reserve Requirement in Boost to Flagging Economy 

China’s central bank on Friday announced a cut to the amount of cash banks are required to hold in reserve for the first time this year, in a move designed to shore up an economy weakened by the pandemic.

The People’s Bank of China (PBOC) said it would cut the reserve requirement ratio by 0.25 percentage point starting March 27, which would allow commercial banks to lend more to businesses.

This would bring the weighted average reserve requirement ratio for financial institutions to around 7.6%, the central bank said.

The PBOC said the latest cut was intended to “improve the level of service to the real economy.”

The rate was last cut in November, when the world’s second-largest economy was heavily hit by strict COVID-19 curbs.

China is still grappling with the fallout of its zero-COVID policy, which included harsh lockdowns and mass business closures, hitting supply chains and employment.

The country has set an economic growth target of “around 5%” for 2023, one of the lowest in decades.

Authorities reported a rebound in retail sales in January and February, after the country abandoned zero-COVID controls and a massive exit wave of infections quickly subsided.

But Premier Li Qiang has warned that the growth target was “not easy” to achieve as a grinding property crisis continued and global demand slowed.

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US Experts Urge More Efforts to Thwart China’s Acquisition of US Military Technology 

U.S. former officials and experts are urging greater efforts to thwart Chinese espionage, which many believe has enabled Beijing to develop a range of advanced weaponry on the back of stolen American technology.

James Anderson, a former acting undersecretary of defense for policy, said China stole U.S. military technology for developing its J-20 fighter jet and has benefited immensely.

“They have profited greatly from their thievery over the years,” he said. “They’ve put it to good use, and they’ve come up with an advanced fifth-generation fighter,” noting that it’s “hard to say, short of actual combat,” how the J-20 matches up against the U.S. F-22 Raptor fighter.

Matthew Brazil is a researcher and writer with Jamestown Foundation who served in the U.S. Embassy in Beijing, where he both promoted and controlled U.S. high-technology exports to China. He said the FBI doesn’t have enough people to keep track of China’s activities in the U.S.

Brazil told VOA Mandarin, “Chinese communist espionage is not like an army of cockroaches crawling up our arms with daggers between their teeth. It’s spying. We can handle it with a better counterespionage system that includes both the government and the private sector working more closely together.”

He noted the FBI lacks “enough agents trained in Chinese language, culture and area studies. Congress should step in here and fund this sort of program to train people.”

U.S. Senators Marco Rubio and Mark Warner last month urged the Biden administration to expand the use of existing tools and authorities at the Treasury and Commerce departments to prevent China’s military-industrial complex and entities from benefiting from U.S. technology, talent and investments.

As of March 14, Warner’s office told VOA Mandarin, “We have not yet received a response and are following up with the relevant departments.”

VOA Mandarin emailed the Chinese Embassy in Washington asking for a comment but did not receive a response in time for publication. Anderson, who made his remarks to Fox News Digital last week, was sworn in on June 8, 2020, and resigned in November 2020.

US tech in Chinese weapons

China claims to have independently developed its fifth-generation stealth fighter J-20, which entered service in 2017. John Chipman, head of the International Institute for Strategic Studies, said on February 15 at an IISS event that China’s J-20A production is expected to surpass that of the U.S. F-22 Raptor fighter jet by the end of 2023.

China’s sixth-generation fighter jets, hypersonic weapons and missiles, and even the spy balloons that crossed the continental United States last month all appear to incorporate elements of American technology, according to DefenseOne, a Washington news site devoted to military issues.

U.S. defense officials say China has the world’s leading hypersonic arsenal.

Terry Thompson, a retired U.S. Air Force colonel and war planner at the Pentagon who blogs, told VOA Mandarin that China lacks a solid technological foundation and has a long history of stealing technology.

He said, “If you look back at the epic progression of Chinese aircraft, they say they’ve produced an aircraft that looks like and flies like the F-16 and like the F-15 and the F-18. I mean, they look just like our aircraft. They’re not building something new that comes from their own base of technology. They don’t have a base of technology.”

Thompson said China targets engine and power system technology, but also “the aerodynamics. They didn’t have the capability to coat airplanes with stealth material. They stole that from us.

“But now China is making its way right up to the table that the rest of the free world is playing on, because they are just stealing their pathway to that table.”

Old-style spies and cyberattacks

Anderson told Fox News Digital that China’s intelligence practices include the old-fashioned — spies and bribes to buy American contractors, university professors and government officials — and high-tech cyberactivity to steal key information on military weapons.

“In effect, we end up subsidizing a portion of their research and development budget because they are successfully stealing some of our secrets,” Anderson said.

Kris Osborn, president and editor-in-chief of the U.S. Military Modernization Center, said in an article published last month that China has hired at least 162 Chinese scientists who had worked at the U.S. Los Alamos National Laboratory on deep-penetrating warheads, new hardened heat-resistant nanocomposite materials, vertical-takeoff-and-landing drones and a new generation of submarine “quiet” technologies.

“However, to put things simply and clearly, many of the U.S.-driven technological advances in these critical areas appear to have been stolen by Chinese spies,” Osborn wrote.

A report published in April 2022 by BluePath Labs, a consulting firm commissioned by the U.S.-China Economic and Security Review Commission, said, “Despite a wide body of research on China’s scientific progress, the laboratory system remains a less understood component. … This opacity not only leads to gaps in our knowledge of Chinese defense research, but in many cases has allowed these labs to fly under the radar, leading to cases of close interaction, and even cooperation between Chinese defense labs and U.S. and allied academic institutions.”

In 2023, China’s military expenditure will expand significantly, by 7.2% to $224.8 billion, according to the official budget discussed in an analysis by the Center for Strategic and International Studies.

When meeting with a delegation of the People’s Liberation Army and the Armed Police Force on March 8, China’s President Xi Jinping said China should accelerate the promotion of high-level technological self-reliance.

Emily de La Bruyere, a senior fellow at the Foundation for Defense of Democracies, told VOA Mandarin that China wants semiconductor technology for military functions, development of algorithms and valuable data.

“Stealing technology has been an escalating priority. And I also say that just general aggressiveness of China when it comes to the development of these capabilities, but also its use of international presence in order to coerce – all of those are increasing,” she said. “Not only are they working to catch up, but also if they’re stealing technology from the international system for their military modernization, they’re then able to modernize more cheaply than anybody else.”

Adrianna Zhang contributed to this report.

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New Zealand to Ban TikTok on Devices Linked to Parliament

New Zealand said on Friday it would ban TikTok on devices with access to the country’s parliamentary network due to cybersecurity concerns, becoming the latest nation to limit the use of the video-sharing app on government-related devices.

Concerns have mounted globally about the potential for the Chinese government to access users’ location and contact data through ByteDance, TikTok’s Chinese parent company.

The depth of those concerns was underscored this week when the Biden administration demanded that TikTok’s Chinese owners divest their stakes or the app could face a U.S. ban.

In New Zealand, TikTok will be banned on all devices with access to parliament’s network by the end of March.

Parliamentary Service Chief Executive Rafael Gonzalez-Montero said in an email to Reuters that the decision was taken after advice from cybersecurity experts and discussions within government and with other countries.

“Based on this information, the Service has determined that the risks are not acceptable in the current New Zealand Parliamentary environment,” he said.

Special arrangements can be made for those who require the app to do their jobs, he added.

ByteDance did not immediately respond to a Reuters request for comment.

Speaking at a media briefing, Prime Minister Chris Hipkins said New Zealand operated differently from other nations.

“Departments and agencies follow the advice of the (Government Communications Security Bureau) in terms of IT and cybersecurity policies … we don’t have a blanket across the public sector approach,” Hipkins said.

Both New Zealand’s defense force and Ministry of Foreign Affairs and Trade said on Friday they had already implemented bans on TikTok on work devices.

A spokesperson for the New Zealand Defense Force said in an email to Reuters the move was a “precautionary approach to protect the safety and security” of personnel.

On Thursday, Britain banned the app on government phones with immediate effect. Government agencies in the U.S. have until the end of March to delete the app from official devices.

TikTok has said it believes the recent bans are based on “fundamental misconceptions” and driven by wider geopolitics, adding that it has spent more than $1.5 billion on rigorous data security efforts and rejects spying allegations.

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Nations Crack Down on TikTok

The Biden administration has demanded that TikTok’s Chinese owners divest their stakes in the popular video app or face a possible U.S. ban, the company told Reuters this week.

The move follows the introduction of a new U.S. legislation that would allow the White House to ban TikTok or other foreign-based technologies if they pose a national security risk.

Other countries and entities have also elected to ban the app.

TikTok is owned by China-based ByteDance, the world’s most valuable start-up. Numerous countries have raised concerns over its proximity to the Chinese government and hold over user data across the world.

Here is a list of countries and entities that have implemented a partial or complete ban on TikTok:

New Zealand

Became the latest country to target TikTok, imposing a ban on the use of the app on devices with access to the parliamentary network amid cybersecurity concerns.

United Kingdom

Would ban TikTok on government phones with immediate effect, and asked the National Cyber Security Centre to look at the potential vulnerability of government data from social media apps and risks around how sensitive information could be accessed and used.


Banned TikTok and dozens of other apps by Chinese developers on all devices in June 2020, claiming that they were potentially harmful to the country’s security and integrity.


Is in talks to ban TikTok and video game PUBG, with the Taliban claiming those were leading Afghan youths “astray.”


Banned TikTok at least four times, with the latest ban ending in November, over what the government said was immoral and indecent content on the app.


Belgian federal government employees will no longer be allowed to use TikTok on their work phones, Belgian Prime Minister Alexander De Croo said on March 10.


The nation has banned TikTok on government-issued devices due to security risks.


Banned TikTok and some other Chinese apps on state-owned devices and in December 2022 launched a probe into the social media app over suspected illegal operations on the island.

United States

The U.S. government’s Committee on Foreign Investment in the United States (CFIUS), a powerful national security body, in 2020 unanimously recommended ByteDance divest TikTok because of fears that user data could be passed on to China’s government.

In early March, legislators from both major U.S. parties introduced a bill to ban the popular app in the United States.

Congress previously passed a bill in December 2022 to ban TikTok on federal devices.

US educational institutions

Boise State University, the University of Oklahoma, the University of Texas-Austin, and West Texas A&M University are some of the schools to ban TikTok on university devices and Wi-Fi networks.

US states

Texas, Maryland, Alabama and Utah are among the more than 25 states that have issued orders to staff against using TikTok on government devices.

European Commission and European Parliament

The European Union’s executive arm, the European Commission, has issued an order to ban the use of popular Chinese app TikTok on its staff’s phones due to cybersecurity concerns. Separately, the European Parliament also banned the app from staff phones.

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White House Voices Support for Bipartisan Push to Ban TikTok

Time may be running out in the U.S. for Chinese-owned entertainment platform TikTok, with the White House on Thursday supporting proposed legislation that would effectively ban the app over concerns about the safety of the data of the 100 million Americans who use the trendy video platform.

“The bottom line is that when it comes to potential threats to our national security, when it comes to the safety of Americans, when it comes to privacy, we’re going to speak out, and we’re going to be very clear about that, and the president has been over the last two years,” said White House press secretary Karine Jean-Pierre.

“And so we’re asking Congress to act, we’re asking Congress to move forward with this bipartisan legislation, the RESTRICT Act … and we’re going to continue to do so,” Jean-Pierre said.

When asked if the administration had any concrete evidence that the platform has used data maliciously, she pointed to an ongoing study by the Committee on Foreign Investment in the United States (CFIUS) and said the White House was “not going to get ahead of their process.”

The CFIUS is an inter-agency panel that reviews certain transactions involving foreign investment and national security concerns.

Also Thursday, the U.K. prohibited the use of the app on government-issued devices – a move already imposed by the U.S., the European Union, Canada and India. And in the U.S., other entities, such as universities, have banned use of the app on their networks.

Earlier this week, TikTok leadership told U.S. media that the Biden administration has demanded that the platform’s Chinese owners divest their stakes or face a ban, issuing a statement that said “a change in ownership would not impose any new restrictions on data flows or access.”

In recent weeks, the company has been promoting its $1.5 billion plan, called “Project Texas,” for the Texas software company it has partnered with to construct a firewall between U.S. users and ownership in Beijing.

“The best way to address concerns about national security is with the transparent, U.S.-based protection of U.S. user data and systems, with robust third-party monitoring, vetting, and verification, which we are already implementing,” the statement read.

A Trojan giraffe or just a chocolate one?

TikTok, which is owned by China’s ByteDance, is best known for its bite-sized dance videos and unconventional recipes — one video providing a tutorial for Flamin’ Hot Cheetos macaroni and cheese provoked more than 24,000 reactions, including one commenter who described the recipe as “worse than first-degree murder.” It also has offered some truly revelatory feats of food engineering, like the French pastry chef who made an impressively realistic 8-foot-tall giraffe out of chocolate.

But critics of the platform say its close ties to the Chinese government make it a Trojan horse: Once the compelling app gains entry to users’ devices, it then has access to their data and information.

Earlier in March, a bipartisan group of U.S. senators introduced the RESTRICT Act, which stands for “Restricting the Emergence of Security Threats that Risk Information and Communications Technology.”

“Over the past several years, foreign adversaries of the United States have encroached on American markets through technology products that steal sensitive location and identifying information of U.S. citizens, including social media platforms like TikTok,” said Senator Joe Manchin, a Democrat. “This dangerous new internet infrastructure poses serious risks to our nation’s economic and national security.”

Senator Mark Warner, also a Democrat, one of the bill’s main sponsors, is calling for “a comprehensive, risk-based approach that proactively tackles sources of potentially dangerous technology before they gain a foothold in America, so we aren’t playing Whac-A-Mole [dealing with a recurring problem with no solution] and scrambling to catch up once they’re already ubiquitous.”

This is not the first time the White House has gone after the popular video service — the Trump administration also pushed the platform to divest. In 2020, CFIUS unanimously recommended that ByteDance divest the platform. The company tried to make a deal with Walmart, the largest U.S. retailer, and Austin, Texas-based Oracle Corp. to shift its assets into a new entity.

But analysts are divided on the next move.

“A forced sale is the right move,” said Lindsay Gorman, senior fellow for emerging technologies at the Alliance for Securing Democracy at the German Marshall Fund of the United States.

“The app gives a name and a face to the export of China’s surveillance state around the world. But now there’s bipartisan consensus that TikTok poses a national security threat to the United States’ democracy. The China tech threat — today exemplified by TikTok — may be the only thing Congress agrees on,” Gorman said.

Caitlin Chin, a fellow with the Strategic Technologies Program at the Center for Strategic and International Studies, said stopping TikTok won’t solve the larger issue over apps using data maliciously.

“The strongest approach would be for Congress to establish comprehensive rules across the entire data ecosystem that would limit how all companies — including TikTok — use personal information in ways that could amplify the spread of harmful content,” she said.

“Policymakers should take popular interest in TikTok as an opportunity to implement industrywide protections that could benefit all of society, rather than just a messaging tool primarily geared toward the Chinese Communist Party,” Chin said.

Some information in this article came from Reuters.

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US Treasury Chief: Banking System Is Sound

U.S. Treasury Secretary Janet Yellen told lawmakers on Thursday the U.S. banking system remains sound even though two regional banks failed in the last week.

She told the Senate Finance Committee that Americans “can feel confident” their deposits “will be there when they need them.”

Yellen said the government “took decisive and forceful actions to strengthen public confidence” in the U.S. banking system by ensuring that all depositors, including those holding uninsured funds exceeding $250,000, were protected by federal deposit insurance when Silicon Valley Bank and Signature Bank collapsed.

Some critics of the government’s action have called it a bailout, but investors have lost their financial stakes in the two banks, something that would not occur in the normal definition of a bailout, and their executives have been fired.

Senator Mike Crapo of Idaho, the committee’s lead Republican, said, “I’m concerned about the precedent of guaranteeing all deposits,” calling the federal rescue action a “moral hazard.”

“Nerves are certainly frayed at this moment,” said Democratic committee chairman Senator Ron Wyden. “One of the most important steps the Congress can take now is make sure there are no questions about the full faith and credit of the United States,” referring to raising the country’s $31.4 trillion debt ceiling in the next few months so the government can borrow more money to continue to pay its bills.

Some Republicans have demanded large spending cuts in exchange for raising the debt ceiling, while the White House has requested passage of a debt limit increase that is not tied directly to spending cuts. Both Republican and Democratic lawmakers have said they will not cut health insurance and pensions for older Americans.

Stock markets in both Europe and the U.S. rallied sharply Thursday after Credit Suisse announced it would borrow almost $54 billion from the Swiss central bank to shore up its finances.

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