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IMF members set aside trade split as French vote rattles nerves


WASHINGTON International Monetary Fund members on Saturday dropped a pledge to fight protectionism amid a split over trade policy and turned their attention to another looming threat to global economic integration: the first round of France’s presidential election.

Concerns that far-right leader Marine Le Pen and far-left rival Jean-Luc Mélenchon, both critics of the European Union, could top the field in Sunday’s vote added to nervousness over U.S. trade policy at the IMF and World Bank spring meetings.

“There was a clear recognition in the room that we have probably moved from high financial and economic risks to more geopolitical risks,” IMF Managing Director Christine Lagarde told a news conference.

Lagarde, a former French finance minister who has warned that a Le Pen presidency could lead to political and economic upheaval, added that a policy shift from “growth momentum to more sharing and inclusive growth” was now needed.

A communique from the IMF’s steering committee on Saturday dropped an anti-protectionism pledge, adopting language from the Group of 20 nations that the Trump administration sought last month in Germany as it develops a strategy to slash U.S. trade deficits.

Earlier in the week, the IMF had warned that protectionist policies that restrict trade could choke off improving global growth.

Instead, the International Monetary and Financial Committee (IMFC) statement pledged that members would “work together” to reduce global trade and current account imbalances “through appropriate policies.”

Mexican central bank chief Agustin Carstens, the IMFC chairman, said most countries have some trade restrictions and that protectionism was an “ambiguous” term.

“Instead of dwelling on what that concept means, we managed to put it in a more positive, more constructive framework,” Carstens told a news conference.

Some officials chose to focus on the brightening global economy instead of the risks posed by the French election, new U.S. trade barriers and Britain’s decision to leave the European Union, said James Boughton, a former IMF official.

“There’s an awful lot of forced optimism about what these people are saying,” said Boughton, who is now with the Centre for International Governance Innovation, a Canadian think-tank. “Until the train goes off the tracks, everything looks fine.”

U.S. Treasury Secretary Steven Mnuchin called for the IMF to step up its surveillance of members’ foreign exchange rates.

President Donald Trump “believes in reciprocal trade deals and reciprocal free trade,” Mnuchin told Lagarde in an on-stage interview. “What that means is that if our markets are open there should be a reciprocal nature to other markets which should be open as well.”

CONTINGENCY PLANS

The French election presents free trade advocates with a third potential blow in less than a year after Britain’s EU referendum and Trump’s election on a platform to restrict imports and protect U.S. jobs.

Trump has voiced support for Le Pen, the National Front candidate who has promised a referendum on France’s membership in the EU.

Investors fear that a potential run-off between Le Pen and Mélenchon, who has vowed to end the independence of the European Central Bank, would roil financial markets and drive out capital.

ECB policymaker Ewald Nowotny said on Saturday that the central bank was ready to provide emergency cash to French banks if necessary.

“If there should be problems for specific French banks liquidity-wise, then the ECB has the … ELA, Emergency Liquidity Assistance, but we don’t expect, of course, any special movements,” Nowotny, who heads Austria’s central bank, told reporters at the IMF.

(Reporting by David Lawder, Leika Kihara and Francesco Canepa; Writing by David Lawder; Editing by Paul Simao)

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Trump tax plan may produce some short-term budget issues: Mnuchin


WASHINGTON U.S. Treasury Secretary Steven Mnuchin said on Saturday that the Trump administration’s tax reform plan would produce some “short term issues” when viewed under traditional “static” budget analysis rules.

His comments during an interview by International Monetary Fund Managing Director Christine Lagarde suggested that the plan would not be revenue-neutral and would increase deficits in the short term.

Mnuchin said that the tax plan would pay for itself when viewed through a “dynamic scoring” analysis, which accounts for the increased tax revenues that would be produced by higher growth prompted by the tax changes.

“We’re looking for reforms that will pay for themselves with growth,” Mnuchin said. “Under dynamic scoring, this will pay for itself, under static scoring, there’ll be short term issues.”

Mnuchin also said the tax plan would be aimed at helping the middle class to “get more money in their pockets” and would be much simpler.

“The tax code is way, way, way too complicated. We want to create a system where the average American can file a tax code on a big postcard,” Mnuchin said.

(Reporting by David Lawder; editing by Diane Craft)

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Trump’s ‘big announcement’ on tax to be broad principles: official


WASHINGTON President Donald Trump’s promised “big announcement” next week on overhauling the U.S. tax code, a top campaign pledge, will consist of “broad principles and priorities,” an administration official said on Saturday.

The president unexpectedly said on Friday at a Treasury Department event that there would be “a big announcement on Wednesday having to do with tax reform.”

In a Twitter message on Saturday, he wrote: “Big TAX REFORM AND TAX REDUCTION will be announced next Wednesday.”

Asked for details, the administration official, who asked not to be identified, said, “We will outline our broad principles and priorities” on Wednesday.

Trump has struggled as president to advance his domestic policy agenda, including on taxes, even though his Republican Party controls both chambers of Congress. With his 100th day in office only a week away, he has yet to offer any formal legislation or win passage of a major bill he favors.

Most recent presidents had legislative wins under their belts by this time in their administrations.

Under U.S. law, only Congress can make significant tax law changes, though the president often drives the tax agenda by offering legislation. The administration official said, “We are moving forward on comprehensive tax reform that cuts tax rates for individuals, simplifies our overly complicated system and creates jobs by making American businesses competitive.”

As a candidate, Trump raised high expectations in financial markets and the business community for changes in the complex, loophole-riddled tax system. In his “Contract with the American Voter,” he vowed to work with Congress on tax legislation “within the first 100 days of my administration.” The action plan promised large tax cuts for the middle class and businesses, a reduction of tax brackets to three from seven, simplified tax forms and an offshore profits repatriation tax holiday.

Since then, no legislation or formal tax plan has been presented by Trump. He has at times expressed support for a plan drawn up by House of Representatives Republicans, but his views are unclear on a section that deals with taxing imports.

In February, Trump promised a “phenomenal” tax plan within a few weeks, without offering details. No plan followed.

Last month when an attempt supported by Trump to repeal the healthcare law known as Obamacare collapsed in Congress, Trump said he would refocus on taxes.

Treasury Secretary Steven Mnuchin said on Thursday he expected Congress to approve a tax plan this year.

(Editing by Kevin Drawbaugh and Andrea Ricci)

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Japan’s Aso pushes back on U.S. call for scrutiny of currency moves


WASHINGTON Japanese Finance Minister Taro Aso said on Saturday trade imbalances cannot be fixed through exchange-rate adjustments alone, pushing back against Washington’s calls to have more rigorous IMF scrutiny of currency moves.

Earlier, U.S. Treasury Secretary Steven Mnuchin called on the International Monetary Fund to enhance surveillance of its members’ exchange rates and external imbalances, as large trade imbalances would hamper “free and fair” trade.

But Aso told the IMF’s steering committee there were limits to using exchange-rate assessments to address current account imbalances for a country like Japan.

That is because the recent increases in Japan’s current account surplus are driven largely by rising dividend payments and repatriation of revenues from overseas investments, instead of any boost to exports from a weak yen.

“In cases where ‘excessive’ imbalances exist, they should be addressed by a package of macroeconomic and structural policy measures,” Aso said in a speech to the International Monetary and Financial Committee.

“Adjustment through changes in the exchange rate is not necessarily required,” he said.

U.S. President Donald Trump has criticized countries like Japan, Germany and China for running large trade surpluses with the United States and weakening their currencies to gain an unfair trade advantage.

Japanese policymakers fear the Trump administration may accuse the Bank of Japan of using ultra-loose monetary policy to weaken the yen and bind Tokyo’s hands on currency intervention to address any unwelcome spike in the yen.

“With downside risks and uncertainty persisting, the stability of financial and exchange rate markets is especially important,” Aso said.

“Excess volatility and disorderly movements in exchange rates can have adverse implications for economic and financial stability,” he added, referring to language in the G20 agreement that Tokyo cites as giving it room to intervene in the currency market to stem sharp yen gains.

(Reporting by Leika Kihara; Editing by Paul Simao)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/_eB0n_aWsEQ/us-imf-g20-japan-idUSKBN17O0M8

Mnuchin urges IMF to enhance FX surveillance


WASHINGTON U.S. Treasury Secretary Steven Mnuchin on Saturday called on the International Monetary Fund to enhance surveillance of its members’ exchange rates and external imbalances, as large trade imbalances would hamper “free and fair” trade.

Mnuchin said the global economy continues to exhibit large and persistent external imbalances, “which contribute to the sentiment that the existing international monetary and trading system does not benefit all.”

“In our view, excessively large trade surpluses, like excessively large trade deficits, are not conducive to supporting a free and fair trading system,” he said in a statement to the International Monetary and Financial Committee, the IMF’s steering committee.

U.S. President Donald Trump has threatened to impose measures to restrict imports, and attacked countries like China, Germany and Japan for running large trade surpluses with the United States and benefiting from weak currencies.

Mnuchin called on countries with large external surpluses and sound public finances – likely a reference to Germany – to expand fiscal stimulus to boost growth and help narrow trade imbalances.

He also urged the IMF to scrutinizes its member nation’s exchange rates and identify “specific policy adjustments” for each country to counter global imbalances.

“We look to the IMF to highlight where surplus countries can more forcefully contribute to support symmetric adjustment in pursuit of a fairer global system,” he said.

Mnuchin also urged countries to abide by their exchange-rate commitments, such as to refrain from competitive devaluation, not use monetary policies to target exchanges rates for competitive purposes, and to consult closely on exchange rates.

(Reporting by Leika Kihara; Editing by Andrea Ricci)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/GTBC4FgUNY0/us-imf-g20-usa-idUSKBN17O0HX

U.S. judge sentences Volkswagen to three years probation, oversight


DETROIT A federal judge in Detroit on Friday sentenced Volkswagen AG (VOWG_p.DE) to three years’ probation and independent oversight for the German automaker’s diesel emissions scandal as part of a $4.3 billion settlement announced in January.

The plea agreement called for “organization probation” in which the company would be overseen by an independent monitor.

The sentencing was one of the last major hurdles to VW moving past a scandal that led to the ouster of its chief executive and tarnished the company’s reputation worldwide.

“This is a case of deliberate and massive fraud,” U.S. District Judge Sean Cox said in approving the settlement that required the automaker to make significant reforms. He also formally approved a $2.8 billion criminal fine as part of the sentence.

As well as accepting the agreement reached between VW and the U.S. government, Cox rejected separate calls from lawyers representing individual VW customers for restitution.

The German automaker pleaded guilty in March to fraud, obstruction of justice and falsifying statements after admitting to installing secret software in 580,000 U.S. vehicles.

Since the September 2015 disclosure that VW intentionally cheated on emissions tests for at least six years, the company has agreed to spend up to $25 billion in the United States to address claims from owners, environmental regulators, states and dealers and to make buy-back offers.

Speaking on behalf of Volkswagen, general counsel Manfred Doess said the company “deeply regrets the behavior that gave rise to this case. Plain and simple, it was wrong,” he said.

The U.S. Department of Justice announced Friday it had selected former Deputy U.S. Attorney General Larry Thompson to serve as the company’s independent monitor.

In a statement New York City Comptroller Scott M. Stringer, who oversees investments in Volkswagen on behalf of the New York City Pension Funds, said VW’s “scheme was deceitful.” “Today’s massive fine underscores the extent of the fraud and the need for change at the company.”

The U.S. Justice Department has charged seven current and former VW executives with crimes related to the scandal. One executive is in custody and awaiting trial and another pleaded guilty and agreed to cooperate. U.S. prosecutors said in January that five of the seven are believed to be in Germany. They have not been arraigned.

German prosecutors also are conducting a criminal probe of VW’s excess diesel emissions.

“We have worked tirelessly to address the misconduct that took place within our company and make things right for our affected customers,” the company said in a statement on Friday. “Volkswagen today is not the same company it was 19 months ago.”

(Reporting by Nick Carey in Detroit and David Shepardson in Washington; Editing by Dan Grebler and Andrew Hay)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/76f8Dh2_lEk/us-volkswagen-emissions-idUSKBN17N1SD

U.S., global financial leaders skirt trade frictions, tout collaboration


WASHINGTON Global economic leaders on Friday continued downplaying possible friction with the Trump administration over currencies, trade and other potentially contentious issues, even while acknowledging that much about the U.S. president’s plans remains unclear.

On a day when Donald Trump himself seemed focused on domestic matters – promising a new U.S. tax plan next week and announcing reviews of financial regulations – world officials gathered just blocks from the White House said there was “broad consensus” with the new president’s advisers over the need to keep economic borders open and coordinate on global financial regulation.

“Almost everybody underscored the importance of open markets and free market access,” German central bank governor Jens Weidmann said following meetings among finance ministers from the world’s top 20 economic powers, including U.S. Treasury Secretary Steven Mnuchin. “That was the consensus.”

His remarks come as finance and economic officials attending meetings of the International Monetary Fund and World Bank took heart in an improving world economy, but also spoke of the sudden raft of political issues that could put that progress at risk.

Trump’s tough talk on trade and seeming suspicion of “globalist” groups like the IMF cast a shadow over the start of this week’s session. Similarly, the French elections on Sunday have been frequently cited as the sort of event that could reverse the euro zone’s tentative economic progress.

A WORKING RELATIONSHIP WITH WASHINGTON

The Trump risk, at least for now, seems to have diminished.

Germany currently chairs the Group of 20, an organization that under the administration of President Barack Obama had become a central forum for working out economic issues among the world’s largest economies.

Officials here this week have said Mnuchin and other administration officials seemed ready to continue work on issues like financial regulation, while avoiding overt clashes on issues like the value of China’s currency or Germany’s large trade surplus with the United States.

The Trump administration had previously threatened to impose measures to restrict imports, and verbally attacked Germany for running a large surplus by exploiting a weak euro.

German Finance Minister Wolfgang Schaeuble said earlier on Friday neither topic was discussed in Washington and that he had seen a relaxation in the dispute with the United States over trade.

Steel, of which Germany is a large producer, has become a point of contention.

Speaking at a separate G20 event in Germany, the country’s economy minister, Brigitte Zypries, said a Trump-announced U.S. probe into whether imports of foreign-made steel were hurting national security pointed toward “unwelcome protectionist tendencies.” She said she would discuss the global steel market with U.S. Commerce Secretary Wilbur Ross by telephone next week.

But Schaeuble overall said he believed a “non-confrontational solution” to economic issues would be reached when financial leaders of the world’s 20 top economies meet again in Hamburg in July.

British Chancellor Philip Hammond said he thought the U.S. and U.K. could go further, and strike a bilateral trade deal, while Japanese and other officials said they did not expect any sharp or disruptive moves from Trump.

Officials also said Trump’s intention to roll back some of the financial rules put into place since the 2008 financial crisis won’t damage the world financial system. Trump’s talk of deregulation has unnerved European regulators, but Weidmann said he was confident there would be no “regulatory race to the bottom.”

(Additional reporting by David Lawder; Writing by Howard Schneider; Editing by Andrea Ricci)

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United CEO Munoz will not chair board in 2018 following passenger furor


NEW YORK United Continental Holdings Inc (UAL.N) said on Friday Chief Executive Oscar Munoz will not become chairman in 2018, under an amendment to his employment agreement approved after an uproar over the treatment of a passenger.

In a reversal of his earlier employment agreement, Munoz has opted to leave “future determinations related to the Chairman position to the discretion of the Board,” United said in a U.S. Securities and Exchange Commission filing.

The company also said it would revise its 2017 executive compensation to more directly tie incentives to improvements in customer satisfaction. In 2016, Munoz made $18.72 million.

“United’s management and the Board take recent events extremely seriously, and are in the process of developing targeted compensation program design adjustments to ensure that employees’ incentive opportunities for 2017 are directly and meaningfully tied to progress in improving the customer experience,” the filing said.

Earlier this month, a United passenger, Dr. David Dao, was dragged from his seat off a parked plane at Chicago’s O’Hare International Airport bound for Louisville, Kentucky, to make room for crew members.

The scene was captured on video by fellow passengers and showed Dao bloodied and disheveled in the incident.

Dao’s attorney said his 69-year-old client had incurred a significant concussion, broken his nose and lost two front teeth in the altercation with airport security, and said Dao would likely sue the airline.

Munoz, a former railroad executive who took over United in 2015, had already been pressured by activist investors to improve the airline’s performance, including in customer relations. In April 2016, United agreed with a group of investors to install airline industry veteran Robert Milton as non-executive chairman.

In initial statements following the incident, Munoz and United did not apologize to Dao for the way he had been treated, instead describing him as “disruptive and belligerent.”

Before being hauled from the flight, Dao, who emigrated from Vietnam in the 1970s, repeatedly accused the airline of discriminating against him for being ethnic Chinese, according to fellow passenger Tyler Bridges who was traveling back home from Japan.

The incident, and the company’s response, sparked global outrage. Social media users across the United States, Vietnam and China called for a boycott of the carrier.

United said on Friday it had asked a U.S. Senate panel for an extra week to answer detailed questions about the incident. Munoz wrote that he was “personally committed to putting proof behind our promise” in United’s commitment to reforms.

Committee leaders said in a joint statement that getting answers about what happened and how to prevent a recurrence was a “priority” and any further delay was “unacceptable.”

(Reporting by Alana Wise; Additional reporting by David Shepardson; Editing by Richard Chang)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/1LtkeNU2pr4/us-ual-passenger-idUSKBN17N2H4

Two big California pension systems oppose nine Wells Fargo directors


BOSTON Officials of two large California public retirement systems said Friday they are voting against nine of 15 Wells Fargo Co directors up for election at the bank’s annual meeting next week, citing the bank’s phony-account scandal.

Leaders of the largest U.S. state pension system, known as CalPERS, said in an email it is voting about 13.9 million shares against the bank nominees, including its chairman, Stephen Sanger, ahead of the bank’s April 25 meeting in Ponte Vedra Beach, Florida. Wells Fargo is based in San Francisco.

“We believe these directors failed in their oversight responsibilities during the retail banking controversy at the company,” CalPERS said in a statement posted on its website.

In addition, CalPERS said some Wells Fargo (WFC.N) director nominees have tenures of 12 years or more, “which we believe could compromise director independence.”

Separately, in a statement sent by a spokesman, the California State Teachers’ Retirement System, or CalSTRS, said on Friday it voted its 11.6 million Wells Fargo shares against the same group of nine directors.

According to the statement, “These board members bear responsibility for the failure of oversight of sales practices at Wells Fargo.”

The comments underscore the challenge facing the country’s third-largest bank, which has struggled to move past revelations that thousands of employees created as many as 2 million accounts in customers’ names without permission in order to hit lofty sales targets.

Wells Fargo’s board and management have said steps already taken to fix problems and punish employees responsible for sales abuses show there is now strong oversight and that directors nominated deserve to be elected.

While the board has gained support from its largest investor, Berkshire Hathaway Inc, it also faces a recommendation to vote against 12 directors by leading proxy adviser Institutional Shareholder Services.

CalPERS is the 52nd largest shareholder of Wells Fargo and CalSTRS is the 62nd largest, according to Thomson Reuters data. While they do not command much voting clout, their public comments often can set the tone since larger mutual fund companies rarely make public their votes ahead of corporate annual meetings.

Among its other votes, CalPERS said it is voting “against” the ratification of bank auditor KPMG. Calpers said it has “concerns over a potential lapse of internal controls during the extended period of abusive sales tactics at the company.”

CalPERS also said the company should explore auditor rotation to ensure a fresh perspective.

CalSTRS said that with six directors scheduled to retire in the next four years, “Wells Fargo should expedite the board refreshment process and reach out to their shareholder base for feedback during this process. The board would also benefit from adding directors with greater banking and financial institution experience.”

(Reporting by Ross Kerber; Editing by Bill Trott)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/mgtWKcIz7_8/us-wellsfargo-accounts-calpers-idUSKBN17N2MQ