The world is sitting on a $91 trillion problem

US-Treasury-Building

Important Takeaways:

  • Governments owe an unprecedented $91 trillion, an amount almost equal to the size of the global economy and one that will ultimately exact a heavy toll on their populations.
  • Debt burdens have grown so large — in part because of the cost of the pandemic — that they now pose a growing threat to living standards even in rich economies, including the United States.
  • Yet, in a year of elections around the world, politicians are largely ignoring the problem, unwilling to level with voters about the tax increases and spending cuts needed to tackle the deluge of borrowing.
  • In some cases, they’re even making profligate promises that could at the very least jack up inflation again and could even trigger a new financial crisis.
  • Tackling America’s debt problem will require either tax hikes or cuts to benefits, such as social security and health insurance programs
  • In the United States, the federal government will spend $892 billion in the current fiscal year on interest payments — more than it has earmarked for defense and approaching the budget for Medicare, health insurance for older people and those with disabilities.
  • Next year, interest payments will top $1 trillion on national debt of more than $30 trillion

Read the original article by clicking here.

Worst Financial Crisis since WWII says hedge fund giant

Revelations 18:23:’For the merchants were the great men of the earth; for by thy sorceries were all nations deceived.’

Important Takeaways:

  • Hedge fund giant Elliott warns looming hyperinflation could lead to ‘global societal collapse’
  • Hedge fund Elliott Management, who warned that the world is heading towards the worst financial crisis since World War II.
  • The Florida-headquartered firm told clients that they believe the global economy is in an “extremely challenging” situation which could lead to hyperinflation. Elliott did not respond to MarketWatch’s request for comment.
  • They added that the “extraordinary” period of cheap money is coming to an end and has “made possible a set of outcomes that would be at or beyond the boundaries of the entire post-WWII period.”
  • The world is “on the path to hyperinflation” which could lead to “global societal collapse and civil or international strife.”

Read the original article by clicking here.

Yellen says more work needed to shore up weaknesses revealed by pandemic

By Andrea Shalal and David Lawder

WASHINGTON (Reuters) – U.S. Treasury Secretary Janet Yellen said a rapid recovery in the United States would boost overall global growth, but more work was needed to shore up weaknesses the COVID-19 crisis exposed in the non-bank financial sector, global supply chains and the social safety net.

Yellen on Tuesday told leaders of the International Monetary Fund and the World Bank that the Biden administration had decided to “go big” with its COVID-19 response to avert the negative “scarring” impact of long-lasting unemployment, adding that she hoped the U.S. economy would return to full employment next year.

Speaking during the IMF and World Bank spring meetings, Yellen said the crisis had dealt a huge blow worldwide, and it was the responsibility of advanced economies to ensure that years of progress in reducing poverty were not reversed by the crisis.

“We are going to be careful to learn the lessons of the (global) financial crisis, which is: ‘Don’t withdraw support too quickly,'” Yellen said, “And we would encourage all those developed countries that have the capacity… to continue to support a global recovery for the sake of the growth in the entire global economy.”

Yellen said she hoped global finance officials make progress on approving a new allocation of the IMF’s emergency reserve, or Special Drawing Rights, during the meeting, and said it was critical to tackle global debt issues exacerbated by the crisis.

She also underscored the Biden Administration’s commitment to tackling climate change at home and ensuring the needed “transfer of resources” to enable similar actions in developing countries.

“We need to make sure that we help developing countries meet their climate goals along with their development objectives. And the availability of green finance is critical to that,” she said, noting that addressing climate change would also bring opportunities for investment to the private sector.

Yellen said it was critical to ensure the world was better prepared for the next global health crisis, citing the need to improve the resilience of supply chains and social safety nets around the world.

She said the core banking sector had been strengthened after the 2008-2009 financial crisis, but some areas in the non-bank financial sector “showed tremendous stress” during the pandemic and would require attention.

(Reporting by Andrea Shalal and David Lawder; Editing by Chris Reese and Dan Grebler)

How California’s wildfires could spark a financial crisis

By Ann Saphir

(Reuters) – Wildfires across the U.S. West are among the sparks from climate change that could ignite a U.S. financial crisis by damaging home values, state tourism and local government budgets, an advisory panel to a U.S. markets regulator found.

Those effects could set off a cascade of events including defaults and market disruptions, undermining the U.S. economy and sparking a crisis. Here’s how:

MORE FREQUENT AND INTENSE FIRES

Global warming is making the U.S. West hotter and drier, with wildfires more frequent and intense, scientists say.

Economists have traditionally seen natural disasters like wildfires as localized shocks. That’s changing, according to the report, produced by a 35-member panel for the Commodities Futures Trading Commission. The group included representatives of major oil companies, banks and asset managers.

LOWER HOME VALUES

CalFire, California’s fire-fighting agency, says about 3 million of the state’s 12 million homes are at high risk from wildfires.

That designation hurts home values, which in turn increases mortgage default risk, research cited by the report suggested. More defaults would damage banks, mortgage holders and markets where mortgages are sold. Securities based on mortgages were a trigger for the 2007-2009 financial crisis.

INSURERS RETREAT FROM COVERAGE

After 2018, California’s worst fire season in terms of loss of life and property, some insurers balked at renewing homeowner policies, forcing a record number of owners to turn to pricey policies from the state’s insurer of last resort.

Expensive insurance also depresses home prices, said former California insurance regulator Dave Jones, a contributor to the CFTC report.

“You can tell the same story in terms of sea level rise and flooding and more intense storms and their impact on residential real estate value,” said Jones, now a senior director at The Nature Conservancy.

LOCAL GOVERNMENTS

Lower home values reduce cities’ real estate tax revenue and impair their ability to repay debt, potentially leading to bond defaults, according to the report.

Fire-related business disruptions such as a drop in tourism that slashed sales and lodging tax revenue could also hurt municipal finances. Stresses could build in the U.S. financial system in what the report termed “a systemic crisis in slow motion.”

MARKET PERCEPTIONS

Climate catastrophes can make investors aware of risks not priced into markets, the report said.

“A sudden revision of market participants’ perceptions about climate risk could trigger a disorderly repricing of assets, which could have cascading effects on portfolios and balance sheets and, therefore, systemic implications for financial stability,” the report said.

(Reporting by Ann Saphir in Berkeley, Calif.; Editing by Cynthia Osterman)

U.S. slaps sanctions on two former Lebanese ministers over ties to Hezbollah

FILE PHOTO: A man holds a Hezbollah flag at Meis al-Jabal village in south Lebanon, December 9, 2018. REUTERS/Aziz Taher

WASHINGTON (Reuters) – The United States on Tuesday expanded its sanctions on Lebanon, blacklisting the former finance and transport ministers and accusing them of providing material and financial help to Iran-backed Shi’ite group Hezbollah, following a powerful blast last month in Beirut that left the country reeling.

“Corruption has run rampant in Lebanon, and Hezbollah has exploited the political system to spread its malign influence,” U.S. Treasury Secretary Steven Mnuchin said in a statement, announcing the blacklisting of former Lebanese government ministers Yusuf Finyanus and Ali Hassan Khalil.

“The United States stands with the people of Lebanon in their calls for reform and will continue to use its authorities to target those who oppress and exploit them,” he added.

The move freezes any U.S. assets of the two blacklisted and generally bars Americans from dealing with them. Those that engage in certain transactions with the former officials are also at risk of being hit with secondary sanctions, the Treasury said.

Fifteen years after the assassination of Lebanon’s Prime Minister Rafik al-Hariri, Hezbollah has risen to become the overarching power in a country that is now collapsing under a series of devastating crises.

An Aug. 4 blast killed about 190 people, injured 6,000 more, and destroyed large swaths of the Mediterranean city, compounding a deep financial crisis.

Authorities said the blast was caused by about 2,750 tonnes of ammonium nitrate that had been stacked in unsafe conditions in a port warehouse for years.

Washington accused Finyanus of accepting “hundreds of thousands of dollars” from Hezbollah in exchange for political favors and said the former transport minister was among the officials Hezbollah used to siphon funds from government budgets to ensure Hezbollah-owned firms won bids for government contracts.

The Treasury also said Finyanus helped Hezbollah gain access to sensitive legal documents related to the Special Tribunal for Lebanon and served as “a go-between” for Hezbollah and political allies.

Ali Hassan Khalil, who was the finance minister until this year, was one of the officials Hezbollah leveraged a relationship with for financial gain, the Treasury said, accusing him of working to move money in a way that would dodge U.S. sanctions.

Washington said Khalil used his position as the finance minister to get sanctions relief on Hezbollah, and was demanding a certain personal commission to be paid to him directly from government contracts.

(Reporting by Daphne Psaledakis and Humeyra Pamuk; Editing by Tom Brown)

From golden age to war and ruin: Lebanon in turmoil as it hits 100

By Tom Perry and Imad Creidi

BEIRUT (Reuters) – Looking back on his childhood in the newly declared state of Lebanon nearly a century ago, Salah Tizani says the country was set on course for calamity from the start by colonial powers and sectarian overlords.

Tizani, better known in Lebanon as Abou Salim, was one of Lebanon’s first TV celebrities. He shot to fame in the 1960’s with a weekly comedy show that offered a political and social critique of the nascent state.

Now aged 92, he lucidly traces the crises that have beset Lebanon – wars, invasions, assassinations and, most recently, a devastating chemicals explosion – back to the days when France carved its borders out of the Ottoman Empire in 1920 and sectarian politicians known as “the zuama” emerged as its masters.

“The mistake that nobody was aware of is that people went to bed one day thinking they were Syrians or Ottomans, let’s say, and the next day they woke up to find themselves in the Lebanese state,” Tizani said. “Lebanon was just thrown together.”

Lebanon’s latest ordeal, the Aug. 4 Beirut port explosion that killed some 180 people, injured 6,000 and devastated a swathe of the city, has triggered new reflection on its troubled history and deepened worry for the future.

For many, the catastrophe is a continuation of the past, caused in one way or another by the same sectarian elite that has led the country from crisis to crisis since its inception, putting factions and self-interest ahead of state and nation.

And it comes amid economic upheaval. An unprecedented financial meltdown has devastated the economy, fueling poverty and a new wave of emigration from a country whose heyday in the 1960’s is a distant memory.

The blast also presages a historic milestone: Sept. 1 is the centenary of the establishment of the State of Greater Lebanon, proclaimed by France in an imperial carve-up with Britain after World War One.

For Lebanon’s biggest Christian community, the Maronites, the proclamation of Greater Lebanon by French General Henri Gouraud was a welcome step towards independence.

But many Muslims who found themselves cut off from Syria and Palestine were dismayed by the new borders. Growing up in the northern city of Tripoli, Tizani saw the divisions first hand.

As a young boy, he remembers being ordered home by the police to be registered in a census in 1932, the last Lebanon conducted. His neighbors refused to take part.

“They told them ‘we don’t want to be Lebanese’,” he said.

Tizani can still recite the Turkish oath of allegiance to the Sultan, as taught to his father under Ottoman rule. He can sing La Marseillaise, taught to him by the French, from start to finish. But he freely admits to not knowing all of Lebanon’s national anthem. Nobody spoke about patriotism.

“The country moved ahead on the basis we were a unified nation but without internal foundations. Lebanon was made superficially, and it continued superficially.”

From the earliest days, people were forced into the arms of politicians of one sectarian stripe or another if they needed a job, to get their children into school, or if they ran into trouble with the law.

“Our curse is our zuama,” Tizani said.

POINTING TO CATASTROPHE

When Lebanon declared independence in 1943, the French tried to thwart the move by incarcerating its new government, provoking an uprising that proved to be a rare moment of national unity.

Under Lebanon’s National Pact, it was agreed the president must be a Maronite, the prime minister a Sunni Muslim and the speaker of parliament a Shi’ite Muslim.

The post-independence years brought signs of promise.

Women gained suffrage in 1952. Salim Haidar, a minister at the time, took pride in the fact that Lebanon was only a few years behind France in granting women the right to vote, his son, Hayyan, recalls.

Salim Haidar, with a doctorate from the Sorbonne, drafted Lebanon’s first anti-corruption law in 1953.

“This was the mentality … that Lebanon is really leading the way, even in the legal and constitutional matters. But then he didn’t know that all of these laws that he worked on would not be properly applied, or would not be applied at all, like the anti-corruption law,” Hayyan Haidar said.

The 1960’s are widely seen as a golden age. Tourism boomed, much of it from the Arab world. A cultural scene of theatre, poetry, cinema and music flourished. Famous visitors included Brigitte Bardot. The Baalbeck International Festival, set amid ancient ruins in the Bekaa Valley, was in its heyday.

Casino du Liban hosted the Miss Europe beauty pageant in 1964. Water skiers showed off their skills in the bay by Beirut’s Saint George Hotel.

Visitors left with “a misleadingly idyllic picture of the city, deaf to the antagonisms that now rumbled beneath the surface and blind to the dangers that were beginning to gather on the horizon,” Samir Kassir, the late historian and journalist, wrote in his book “Beirut”.

Kassir was assassinated in a car bomb in Beirut in 2005.

For all the glitz and glamour, sectarian politics left many parts of Lebanon marginalized and impoverished, providing fertile ground for the 1975-90 civil war, said Nadya Sbaiti, assistant professor of Middle Eastern Studies at the American University of Beirut.

“The other side of the 1960’s is not just Hollywood actors and Baalbeck festivals, but includes guerrilla training in rural parts of the country,” she said.

Lebanon was also buffeted by the aftershocks of Israel’s creation in 1948, which sent some 100,000 Palestinian refugees fleeing over the border.

In 1968, Israeli commandos destroyed a dozen passenger planes at Beirut airport, a response to an attack on an Israeli airliner by a Lebanon-based Palestinian group.

The attack “showed us we are not a state. We are an international playground,” Salim Haidar, serving as an MP, said in an address to parliament at the time. Lebanon had not moved on in a quarter of a century, he said.

“We gathered, Christians and Muslims, around the table of independent Lebanon, distributed by sect. We are still Christians and Muslims … distributed by sect.”

To build a state, necessary steps included the “abolition of political sectarianism, the mother of all problems,” said Haidar, who died in 1980.

TICKING TIME BOMB

Lebanon’s brewing troubles were reflected in its art.

A 1970 play, “Carte Blanche”, portrayed the country as a brothel run by government ministers and ended with the lights off and the sound of a ticking bomb.

Nidal Al Achkar, the co-director, recalls the Beirut of her youth as a vibrant melting pot that never slept.

A pioneer of Lebanese theater, Achkar graduated in the 1950’s from one of a handful of Lebanese schools founded on a secular rather than religious basis, Ahliah, in the city’s former Jewish quarter. Beirut was in the 1960’s a city of “little secrets … full of cinemas, full of theaters,” she said.

“Beside people coming from the West, you had people coming from all over the Arab world, from Iraq, from Jordan, from Syria, from Palestine meeting in these cafes, living here, feeling free,” she recalled. “But in our activity as artists … all our plays were pointing to a catastrophe.”

It came in 1975 with the eruption of the civil war that began as a conflict between Christian militias and Palestinian groups allied with Lebanese Muslim factions.

Known as the “two year war”, it was followed by many other conflicts. Some of those were fought among Christian groups and among Muslim groups.

The United States, Russia and Syria were drawn in. Israel invaded twice and occupied Beirut in 1982. Lebanon was splintered. Hundreds of thousands of people were uprooted.

The guns fell silent in 1990 with some 150,000 dead and more than 17,000 people missing.

The Taif peace agreement diluted Maronite power in government. Militia leaders turned in their weapons and took seats in government. Hayyan Haidar, a civil engineer and close aide to Selim Hoss, prime minister at the end of the war, expressed his concern.

“My comment was they are going to become the state and we are on our way out,” he said.

In the post-war period, Rafik al-Hariri took the lead in rebuilding Beirut’s devastated city center, though many feel its old character was lost in the process, including its traditional souks.

A Saudi-backed billionaire, Hariri was one of the only Lebanese post-war leaders who had not fought in the conflict.

A general amnesty covered all political crimes perpetrated before 1991.

“What happened is they imposed amnesia on us,” said Nayla Hamadeh, president of the Lebanese Association for History. “They meant it. Prime Minister Hariri was one of those who advanced this idea … ‘Let’s forget and move (on)’.”

‘I LOST HOPE’

The Taif agreement called for “national belonging” to be strengthened through new education curricula, including a unified history textbook. Issued in the 1940’s, the existing syllabus ends in 1943 with independence.

Attempts to agree a new one failed. The last effort, a decade ago, provoked rows in parliament and street protests.

“They think that they should use history to brainwash students,” Hamadeh said. For the most part, history continues to be learnt at home, on the street and through hearsay.

“This is (promoting) conflict in our society,” she added.

Old fault lines persisted and new ones emerged.

Sunni and Shi’ite Muslims fell out following the 2005 assassination of Hariri. A U.N.-backed tribunal recently convicted a member of the Iran-backed Shi’ite group Hezbollah of conspiring to kill Hariri.

Hezbollah denies any role, but the trial was another reminder of Lebanon’s violent past – the last 15 years have been punctuated by political slayings, a war between Hezbollah and Israel and a brush with civil conflict in 2008.

To some, the civil war never really ended.

Political conflict persists in government even at a time when people are desperate for solutions to the financial crisis and support in the aftermath of the port explosion.

Many feel the victims have not been mourned properly on a national level, reflecting divisions. Some refuse to lose faith in a better Lebanon. For others, the blast was the final straw. Some are leaving or planning to.

“You live between a war and another, and you rebuild and then everything is destroyed and then you rebuild again,” said theater director Achkar. “That’s why I lost hope.”

(Editing by Mike Collett-White)

Lebanese demand change after government quits over Beirut blast

BEIRUT (Reuters) – Angry Lebanese said the government’s resignation on Monday did not come close to addressing the tragedy of last week’s Beirut explosion and demanded the removal of what they see as a corrupt ruling class to blame for the country’s woes.

The blast at the Beirut port left a crater more than 100 metres across on dock nine, the French ambassador said on Twitter following a visit to the site by French forensic scientists supporting an investigation into the disaster.

A protest with the slogan “Bury the authorities first” was planned near the port, where highly explosive material stored for years detonated on Aug. 4, killing at least 171 people, injuring 6,000 and leaving hundreds of thousands homeless.

Prime Minister Hassan Diab, announcing his cabinet’s resignation, blamed endemic graft for the explosion, the biggest in Beirut’s history and which compounded a deep financial crisis that has collapsed the currency, paralyzed the banking system and sent prices soaring.

“I said before that corruption is rooted in every juncture of the state but I have discovered that corruption is greater than the state,” he said, blaming the political elite for blocking reforms.

Talks with the International Monetary Fund have stalled amid a row between the government, banks and politicians over the scale of vast financial losses.

“It does not end with the government’s resignation,” said the protest flyer circulating on social media. “There is still (President Michel) Aoun, (Parliament Speaker Nabih) Berri and the entire system.”

For many Lebanese, the explosion was the last straw in a protracted crisis over the collapse of the economy, corruption, waste and dysfunctional government.

SECTARIAN SYSTEM

The Beirut port mirrors the sectarian power system in which the same politicians have dominated the country since the 1975-90 civil war. Each faction has its quota of directors at the port, the nation’s main trade artery.

“It’s a good thing that the government resigned. But we need new blood or it won’t work,” silversmith Avedis Anserlian told Reuters in front of his demolished shop.

Diab formed his government in January with the backing of the powerful Iranian-backed Hezbollah group and its allies, more than two months after Saad Hariri, who had enjoyed the backing of the West and Gulf states, quit as premier amid anti-government protests against corruption and mismanagement.

Aoun is required to consult with parliamentary blocs on who should be the next prime minister, and is obliged to designate the candidate with the most support. The presidency has yet to say when official consultations will take place.

Forming a government amid factional rifts has been daunting in the past. Now, with growing public discontent and the crushing financial crisis, it could be difficult to find someone willing to be prime minister.

A week after the blast, residents of Beirut were picking up the pieces as search operations continued for 30 to 40 people still missing.

“Our house is destroyed and we are alone,” said Khalil Haddad. “We are trying to fix it the best we can at the moment. Let’s see, hopefully there will be aid and, the most important thing: hopefully the truth will be revealed.”

World Health Organisation spokesman Tarik Jarasevic said eight emergency international medical teams were on the ground to support overwhelmed health facilities, under strain even before the blast due to the financial crisis and a surge in COVID-19 infections.

Officials have said the blast could have caused losses of $15 billion, a bill Lebanon cannot pay.

Ihsan Mokdad, a contractor, surveyed a gutted building in Gemmayze, a district a few hundreds metres from the port.

“As the prime minister said, the corruption is bigger than the state. They’re all a bunch of crooks. I didn’t see one MP visit this area. MPs should have come here in large numbers to raise morale,” he said.

(Reporting by Beirut bureau; Additional reporting by Stephanie Nebehay in Geneva; Writing by Ghaida Ghantous; Editing by Giles Elgood)

Exclusive: Amid crisis, China rejected Hong Kong plan to appease protesters – sources

Protesters carry placards as they gather to condemn alleged sexual harassment of a detained demonstrator at a police station, in Hong Kong, China August 28, 2019. REUTERS/Anushree Fadnavis

By James Pomfret and Greg Torode

HONG KONG (Reuters) – Earlier this summer, Carrie Lam, the chief executive of Hong Kong, submitted a report to Beijing that assessed protesters’ five key demands and found that withdrawing a contentious extradition bill could help defuse the mounting political crisis in the territory.

The Chinese central government rejected Lam’s proposal to withdraw the extradition bill and ordered her not to yield to any of the protesters’ other demands at that time, three individuals with direct knowledge of the matter told Reuters.

China’s role in directing how Hong Kong handles the protests has been widely assumed, supported by stern statements in state media about the country’s sovereignty and protesters’ “radical” goals.

Beijing’s rebuff of Lam’s proposal for how to resolve the crisis, detailed for the first time by Reuters, represents concrete evidence of the extent to which China is controlling the Hong Kong government’s response to the unrest.

The Chinese central government has condemned the protests and accused foreign powers of fuelling unrest. The Foreign Ministry has repeatedly warned other nations against interfering in Hong Kong, reiterating that the situation there is an “internal affair.”

Lam’s report on the tumult was made before an Aug. 7 meeting in Shenzhen about the Hong Kong crisis led by senior Chinese officials. The report examined the feasibility of the five demands of the protesters, analyzing how conceding to some of these might quiet things down, the individuals with direct knowledge said.

In addition to the withdrawal of the extradition bill, the other demands analyzed in the report were: an independent inquiry into the protests; fully democratic elections; dropping of the term “riot” in describing protests; and dropping charges against those arrested so far.

The withdrawal of the bill and an independent inquiry were seen to be the most feasible politically, according to a senior government official in the Hong Kong administration, who spoke on condition of anonymity. He said the move was envisioned as helping pacify some of the more moderate protesters who have been angered by Lam’s silence.

The extradition bill is one of the key issues that has helped drive the protests, which have drawn millions of people into the streets of Hong Kong. Lam has said the bill is “dead,” but has refused to say explicitly that it has been “withdrawn.”

Beijing told Lam not to withdraw the bill, or to launch an inquiry into the tumult, including allegations of excessive police force, according to the senior government official.

Another of the three individuals, who has close ties with senior officials in Hong Kong and also declined to be identified, confirmed the Hong Kong government had submitted the report.

“They said no” to all five demands, said the source. “The situation is far more complicated than most people realize.”

The third individual, a senior Chinese official, said that the Hong Kong government had submitted the report to the Central Co-ordination Group for Hong Kong and Macau Affairs, a high-level group led by Politburo Standing Committee member Han Zheng, and that President Xi Jinping was aware of it.

The official confirmed that Beijing had rejected giving in to any of the protesters’ demands and wanted Lam’s administration to take more initiative.

In a statement responding to Reuters, Lam’s office said her government had made efforts to address protesters’ concerns, but did not comment directly on whether it had made such a proposal to Beijing, or received instructions.

Written questions to China’s Foreign Ministry were referred to the Hong Kong and Macau Affairs Office (HKMAO), a high-level bureau under China’s State Council. HKMAO did not respond to a faxed request for comment.

Reuters has not seen the report. The news agency also was unable to establish the precise timing of the rejection.

The two Hong Kong sources said the report was submitted between June 16 – the day after Lam announced the suspension of the extradition bill – and Aug. 7, when the HKMAO and China’s representative Liaison Office in Hong Kong held a forum in nearby Shenzhen attended by nearly 500 pro-establishment figures and businesspeople from Hong Kong.

The question of Beijing’s influence strikes at the heart of Hong Kong’s “one country, two systems” governance, which promised the city a high degree of autonomy and wide-ranging freedoms that don’t exist in mainland China.

More than two months of protests have embroiled Hong Kong in its most severe crisis since the former British colony returned to Chinese rule in 1997.

What began as a movement to oppose the extradition bill, which would have allowed people to be sent to China for trial in Communist Party controlled courts, has morphed into a broader campaign for greater rights and democracy in a direct challenge to Beijing.

‘HER HANDS ARE TIED’

Ip Kwok-him, a senior pro-Beijing politician who sits on Hong Kong’s elite Executive Council, which advises senior officials, including Lam, told Reuters that “if the central government won’t allow something, you can’t do it.” Ip did not know about the proposal to withdraw the bill.

A senior businessman who attended the Shenzhen meeting and has met with Lam recently said “her hands are tied” and Beijing wouldn’t let her withdraw the bill. The businessman spoke on condition of anonymity because of the sensitivity of the matter.

At the Shenzhen meeting, Zhang Xiaoming, the head of the HKMAO, said in televised public remarks that if the turmoil persisted, “the central government must intervene.”

Since then, there have been signs of Beijing taking a harder line.

For instance, officials have likened some protests to “terrorism,” Chinese paramilitary police have conducted drills near the border, several Hong Kong companies have been pressured to suspend staff supporting the protests, and security personnel have searched the digital devices of some travelers entering China.

On Friday, Joshua Wong, a prominent democracy activist, was arrested, according to his political party, Demosisto.

(Reporting by James Pomfret; Additional reporting by Clare Jim, Farah Master and the Beijing newsroom; Editing by Alex Richardson and Gerry Doyle)

Global Banks fearing North Korea hacking, prepare defenses

Binary code is seen on a screen against a North Korean flag in this illustration photo November 1, 2017.

By Jim Finkle and Alastair Sharp

WASHINGTON/TORONTO (Reuters) – Global banks are preparing to defend themselves against North Korea potentially intensifying a years-long hacking spree by seeking to cripple financial networks as Pyongyang weighs the threat of U.S. military action over its nuclear program, cyber security experts said.

North Korean hackers have stolen hundreds of millions of dollars from banks during the past three years, including a heist in 2016 at Bangladesh Bank that yielded $81 million, according to Dmitri Alperovitch, chief technology officer at cyber security firm CrowdStrike.

Alperovitch told the Reuters Cyber Security Summit on Tuesday that banks were concerned Pyongyang’s hackers may become more destructive by using the same type of “wiper” viruses they deployed across South Korea and at Sony Corp’s <6758.T> Hollywood studio.

The North Korean government has repeatedly denied accusations by security researchers and the U.S. government that it has carried out cyber attacks.

North Korean hackers could leverage knowledge about financial networks gathered during cyber heists to disrupt bank operations, according to Alperovitch, who said his firm has conducted “war game” exercises for several banks.

“The difference between theft and destruction is often a few keystrokes,” Alperovitch said.

Security teams at major U.S. banks have shared information on the North Korean cyber threat in recent months, said a second cyber security expert familiar with those talks.

“We know they attacked South Korean banks,” said the source, who added that fears have grown that banks in the United States will be targeted next.

Tensions between Washington and Pyongyang have been building after a series of nuclear and missile tests by North Korea and bellicose verbal exchanges between U.S. President Donald Trump and North Korean leader Kim Jong Un.

John Carlin, a former U.S. assistant attorney general, told the Reuters summit that other firms, among them defense contractors, retailers and social media companies, were also concerned.

“They are thinking ‘Are we going to see an escalation in attacks from North Korea?'” said Carlin, chair of Morrison & Foerster international law firm’s global risk and crisis management team.

Jim Lewis, a cyber expert with Washington’s Center for Strategic and International Studies, said it is unlikely that North Korea would launch destructive attacks on American banks because of concerns about U.S. retaliation.

Representatives of the U.S. Federal Reserve and the Office of the Comptroller of the Currency, the top U.S. banking regulators, declined to comment. Both have ramped up cyber security oversight in recent years.

 

 

(Reporting by Jim Finkle in Washington and Alastair Sharp in Toronto; additional reporting by Dustin Volz in Washington; editing by Grant McCool)

 

Brexit fallout crushes financial stocks

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S. June 27, 2016.

By Yashaswini Swamynathan

(Reuters) – U.S. bank stocks led a steep decline on Wall Street on Monday as aftershocks from Britain’s vote to leave the European Union roiled global markets for a second day.

The S&P financial index was down nearly 3 percent by late morning, with investors increasingly worrying about London’s future as the region’s finance capital.

JPMorgan fell 3.7 percent, while Bank of America dropped 5.4 percent. The stocks were among the biggest drags on the S&P 500.

The Dow has now lost nearly 950 points since the “Brexit” vote outcome, setting it up for the worst two-day decline since August 2015.

European stocks were hammered yet again and the sterling fell more than 2 percent. The European banks index on Monday hit its lowest since July 2012.

“What I can say with certainty is uncertainty will remain,” said Tina Byles Williams, chief executive officer of FIS Group.

The selloff on Friday eroded $2.08 trillion in market capitalization globally – the biggest one-day loss ever, according to Standard Poor’s Dow Jones Indices, trumping the Lehman Brothers bankruptcy during the 2008 financial crisis.

U.S. Treasury Secretary Jack Lew, however, said the market impact from Brexit had been orderly so far and there were no signs of a financial crisis arising from the vote.

At 10:51 a.m. ET (1451 GMT) the Dow Jones Industrial Average was down 316.12 points, or 1.82 percent, at 17,084.63. The S&P 500 was down 42.83 points, or 2.1 percent, at 1,994.58. The Nasdaq Composite was down 118.77 points, or 2.52 percent, at 4,589.21.

Eight of the 10 major S&P sectors were lower. Utilities and telecom service were the only ones in the black.

The Brexit vote, which Federal Reserve Chair Janet Yellen had said would have significant repercussions on the U.S. economic outlook, is expected to scuttle the Fed’s ability to raise short-term interest rates.

Traders have virtually priced out an interest rate increase this year, according to CME Group’s FedWatch tool.

Declining issues outnumbered advancing ones on the NYSE by 2,573 to 363. On the Nasdaq, 2,372 issues fell and 342 advanced.

The S&P 500 index showed 5 new 52-week highs and 24 new lows, while the Nasdaq recorded 10 new highs and 118 new lows.

(Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Saumyadeb Chakrabarty)