The Biden administration is working to prevent the Taliban from gaining access to more than $400 million in emergency reserves that the International Monetary Fund is scheduled to distribute to Afghanistan next week, a Treasury Department official said on Wednesday.
The I.M.F. is funded with contributions by its 190 member nations, and the United States is the largest shareholder. So its opposition to the Taliban obtaining access to the reserve assets, known as Special Drawing Rights, will carry significant weight as the fund decides what to do in the coming days.
The fund, which was established after World War II to help stabilize the global economy, is monitoring the reaction of its shareholders to the Taliban’s rise to power in Afghanistan to determine if the assets should be released, according to a person familiar with the matter who was not authorized to speak publicly.
The I.M.F. approved a $650 billion allocation of currency reserves earlier this month as part of an effort to help developing countries cope with the coronavirus pandemic. The reserve assets, which can be exchanged for dollars or other currencies, are divided among countries, and Afghanistan is set to receive about $460 million worth of them next week. Afghanistan currently holds about $52 million worth of SDRs.
The swift toppling of Afghanistan’s government and a lack of clarity about whether the Taliban will be recognized internationally have put the I.M.F. in a difficult position. The agency is guided by its member countries, and if a government is not recognized as legitimate then it cannot gain access to existing or new S.D.R.s, the person familiar with the matter said.
Canada, the European Union and Russia have said publicly that they are not ready to recognize the Taliban as the government in Afghanistan.
Jake Sullivan, the White House’s National Security Adviser, said Tuesday that it was too soon to address whether the United States will recognize the Taliban as the legitimate power in Afghanistan.
“Ultimately, it’s going to be up to the Taliban to show the rest of the world who they are and how they intend to proceed,” Mr. Sullivan said. “The track record has not been good, but it’s premature to address that question at this point.”
The United States remains engaged with the Taliban over the transfer of power in Afghanistan but has been careful not to let go of any leverage it has over the group.
The Treasury Department moved over the weekend to block access to $9.4 billion of international reserves held by Afghanistan’s central bank, most of which is stashed in accounts at the Federal Reserve Bank of New York.
There is precedent for the I.M.F. to block countries from their currency reserves. Earlier this year, the fund said that Venezuela would not have access to the $5 billion of S.D.R.s that it would have received because of a dispute over the Maduro government’s legitimacy.
The Biden administration backed the allocation of new S.D.R.s over the opposition of some Republican lawmakers who argued that the United States was giving money to adversaries such as Russia, China and Iran. Treasury Secretary Janet L. Yellen has dismissed that idea, arguing that the United States would not agree to exchange dollars for S.D.R.s with a country it considers to be a bad actor.
A group of lawmakers sent a letter to Ms. Yellen on Tuesday, urging her to intervene in the scheduled release of $650 billion in International Monetary Fund emergency reserves.
“The potential of the S.D.R. allocation to provide nearly half a billion dollars in unconditional liquidity to a regime with a history of supporting terrorist actions against the United States and her allies is extremely concerning,” they wrote.
The Treasury official would not say what steps the U.S. was taking to block the Taliban from getting access to the S.D.R.s.
An I.M.F. spokeswoman declined to comment on when it would be determined if the currency reserves would be transferred to Afghanistan.
The former acting governor of the Afghan central bank, who has fled the country, said on Wednesday that nearly all of the bank’s $9 billion in reserves were beyond the reach of the Taliban, who took over the country’s government over the weekend.
Ajmal Ahmady, who was appointed to the central bank just over a year ago, said nearly all the money was held overseas, including $7 billion in assets by the Federal Reserve. In a series of Twitter posts, he added that $1.3 billion in assets were held by other international accounts and about $700 million were held by the Bank of International Settlements, which is based in Switzerland and acts as a bank for central banks.
“We can say the accessible funds to the Taliban are perhaps 0.1-0.2 percent of Afghanistan’s total international reserves,” he wrote. “Not much.”
On Tuesday, a Biden administration official said access has been blocked to Afghan central bank reserves held in the United States. This action, which was taken by the Treasury Department, will put economic pressure on the Taliban as they seek to keep public services operating.
Separately on Tuesday, a group of lawmakers sent a letter to the Treasury secretary, Janet L. Yellen, urging her to intervene in the scheduled release of $650 billion in International Monetary Fund emergency reserves this month. The allocation, of so-called special drawing rights, would potentially give Afghanistan and the Taliban access to $450 million.
On Wednesday, Mr. Ahmady wrote that Afghanistan was reliant on obtaining shipments of cash every few weeks because it had a large current account deficit. (Afghanistan imports about five times more goods than it formally exports.)
“The amount of such cash remaining is close to zero due a stoppage of shipments as the security situation deteriorated, especially during the last few days,” Mr. Ahmady wrote.
On Friday, the central banker received a call saying the country wouldn’t get further shipments of U.S. dollars, though the next one was supposed to arrive on Sunday. On Saturday, Afghan banks requested large amounts of dollars to keep up with customer withdrawals, but Mr. Ahmady said he had to limit the currency that could be sent to the banks to conserve the central bank’s supply. He said it was the first time he made such a move.
Mr. Ahmady added that he told President Ashraf Ghani about the currency shipments being canceled and that the Afghan president then spoke with Secretary of State Antony J. Blinken. Though he said the shipments were approved “in principle,” they never arrived the next day.
“Please note that in no way were Afghanistan’s international reserves ever compromised,” he wrote.
Without access to these reserves, Mr. Ahmady wrote, the Taliban will probably have to put capital controls in place and limit access to dollars, beginning a cycle in which the national currency, known as the afghani, will depreciate and inflation will rise rapidly. On Tuesday, the afghani reached a record low of 85.4 to the U.S. dollar, but appreciated about 3 percent on Wednesday, according to Bloomberg data.
Federal Reserve officials are preparing to slow the central bank’s large purchases of government-backed bonds, the first step toward a more normal monetary policy setting as the economy heals from the pandemic, and notes from their latest meeting provided insight into the policy debate over when that should happen.
Minutes from their July 27-28 meeting showed that Fed officials generally thought they would soon meet their standard for slowing bond purchases — “substantial further progress” toward the central bank’s maximum employment and inflation goals.
“Most” of them “judged that the standard set out in the committee’s guidance regarding asset purchases could be reached this year,” the release showed. But precisely when remained a matter of active debate.
Some officials at the meeting pushed the Fed to get moving sooner, the account of the meeting released Wednesday showed, while others stressed a need to wait.
“Some” officials wanted to slow bond purchases soon to guard against the risk of higher inflation, and “a few” were worried that continued big purchases could lead to financial system risks. But “a few” others argued for a slower process, stressing that rising Delta variant coronavirus cases posed risks to the economic outlook, and “several” worried that in coming years inflation — though high today — could dip to uncomfortably low levels again. “Several” pointed to big lingering uncertainties, like when workers would return to jobs.
The snapshot of Federal Open Market Committee deliberations comes ahead of the central bank’s closely watched annual gathering, an economic symposium in Jackson Hole in Wyoming that will take place next week. Jerome H. Powell, the Fed’s chair, will deliver a speech at the event, and many investors expect that he could provide hints or details about the central bank’s coming policy move.
The Fed is still holding interest rates near zero and plans to do so until the labor market is more fully healed, which means monetary policy will continue to support the economy even once the bond buying begins to slow. Fed officials have suggested that they may favor raising interest rates in 2022 or 2023, depending on the pace of the recovery.
Mr. Powell and his colleagues are working against a complicated backdrop as the economy grows rapidly and inflation and asset prices pop, but the job market recovery remains incomplete.
Prices climbed 4 percent in the year through June, based on the Fed’s preferred gauge of inflation, as pandemic-affected categories pushed increases far above the central bank’s 2 percent average target. At the same time, nearly 7 million jobs are still missing compared with employment levels at the start of the pandemic, in February 2020.
Some officials who are eager to soon start the taper of bond purchases have emphasized that moving early will allow the Fed to be more flexible when it comes to raising borrowing costs. The Fed is currently buying $120 billion in Treasury and mortgage-backed debt each month, and officials have said they would prefer to bring that policy to a close before lifting the federal funds rate.
Facebook’s mission is to “bring the world closer together.” Increasingly, that’s about not just connecting friends and family to share messages, but also serving as a platform for people’s financial lives.
Some $100 billion in payments have been enabled by Facebook over the past year, said David Marcus, who runs the company’s financial services unit. But that’s just the start of the social network’s ambitions in the finance industry, Mr. Marcus writes in a new memo about the country’s “broken” payments system, reported in the DealBook newsletter.
At the center of Facebook’s push into payments is Novi, a digital wallet intended for users to move money around the world quickly and cheaply (free, in many cases). The company had a plan to pair it with a “stablecoin” cryptocurrency called Libra, but that was shelved amid regulatory scrutiny, and now the scaled-back project, known as Diem, is overseen by an outside nonprofit group seeking the necessary government approvals.
In recounting some of Facebook’s setbacks in trying to break into the crypto payments industry, Mr. Marcus describes the tech giant, the subject of antitrust inquiries around the world, as an underdog.
Facebook faces unfair resistance in the financial industry, he wrote. “I’ve heard multiple conversations about how this proposal would be so great if only Facebook wasn’t involved,” he said. “I understand and accept the need for extra scrutiny due to our scale.”
But Mr. Marcus describes Facebook as a “challenger in the payments industry,” with no specific plan yet to monetize use of the Novi wallet, which won’t charge for person-to-person payments, even across borders.
He added that allowing users to pay with dollars, euros and other fiat currencies via the Novi wallet would bring a lot of value.
“So why not just do that and call it a day?” he wrote. “Well, we might.” But before deciding on that, he doesn’t want to “waste our shot” at incorporating stablecoins into an “open, interoperable protocol” for online payments. “To have the maximum impact, building a closed system using fiat only wasn’t going to cut it,” he said in the memo.
Crypto advocates say that blockchain technology allows for products that eliminate middlemen, credit checks and fees, and that it allows people excluded from traditional financial services to transact anytime, anywhere. Mr. Marcus believes that a well-designed stablecoin pegged to a fiat currency, backed one to one in cash reserves, could offer strong consumer protections. It would also provide quicker access to funds than traditional bank accounts.
In practice, regulators are wary of stablecoins. An investigation of the popular stablecoin Tether by the New York attorney general’s office found that the company minted tokens without reserves to back them. In recent weeks, crypto tokens have raised concerns from the Treasury secretary, Janet L. Yellen; the Securities and Exchange Commission chair, Gary Gensler; and Senator Elizabeth Warren, Democrat of Massachusetts.
Mr. Marcus is seeking to allay those concerns. “We will continue to persevere and demonstrate we can be a trusted player in this industry,” he wrote, adding that the Novi wallet has licenses or approvals in nearly every U.S. state and that the Diem stablecoin project “has addressed every legitimate concern.”
Facebook’s digital wallet is ready to come to market, Mr. Marcus said, and “we deserve a fair shot.” To judge by Facebook’s difficulties getting to this point, regulators remain to be convinced.
Airlines are just barely beginning to recover, but investors seem to think there’s room for at least one more.
Breeze Airways, a low-fare carrier that started flying less than three months ago, said Wednesday that it had raised $200 million, bringing its total capital to more than $300 million.
“It just says a lot about our plan and our people and our opportunity going forward,” said David Neeleman, the airline’s founder and chief executive. “It solidifies our future, and we’re very excited about it.”
Breeze’s business model rests on offering flights between cities that tend not to be directly connected by other airlines. Its first flight was on May 27, from Tampa, Fla., to Charleston, S.C. The airline now offers 39 routes and flies to 16 cities, including New Orleans, Oklahoma City, San Antonio and Akron, Ohio.
“It’s just easier to be successful when you have no competition,” Mr. Neeleman said.
He has founded five airlines, the most prominent of which is JetBlue Airways. That company started flying more than two decades ago with about $135 million in capital, he said. Azul Linhas Aéreas Brasileiras, another airline he founded in Brazil, started more than a decade ago with $235 million.
Breeze’s funding round was led by BlackRock and Knighthead Capital Management, which also invested in Azul. The airline’s earlier investors, including Peterson Partners and Sandlot Partners, also contributed to the round.
Breeze, which is based in Salt Lake City, claims that it uses planes and technology more efficiently than other airlines, allowing it to offer lower fares. The airline currently flies 13 Embraer jets, and it will start receiving 60 new Airbus A220 planes in October at a pace of about one each month over the next five years. The airline hopes to have the first new Airbus planes in operation early next year, pending regulatory approvals.
The pandemic complicated Breeze’s launch, but it has helped in some ways, too. The company was able to buy planes more cheaply as other airlines reduced their fleets to cut costs. Like the rest of the industry, it has enjoyed strong demand this summer following widespread vaccinations in the spring, though recently travel has slowed somewhat with the spread of the Delta variant of the coronavirus. Breeze plans to dedicate at least two planes to full-time charter service, and the airline has identified 400 city pairs that align with its approach.
“We have a lot of great things, so having this capital in the bank, having this cushion is really good for us,” Mr. Neeleman said.
The Daily Beast digital news site named Tracy Connor as its next top editor on Wednesday.
Ms. Connor, 54, will take over as editor in chief immediately, the company said in a statement. She had been acting in the role since Noah Shachtman recently left it for the top job at Rolling Stone magazine.
A native New Yorker, Ms. Connor worked at the city’s tabloids, The New York Post and The Daily News, for more than a decade. She then moved to NBC News and spent time in its investigative unit, where she helped lead an investigation into serial sexual abuse by the former gymnastics doctor Larry Nassar.
In 2018, she joined The Daily Beast as executive editor, working under Mr. Shachtman. She said in an interview that she had come to The Daily Beast because it seemed “like an almost perfect blending of my tabloid background and also the passion that I had developed for deep digging.”
Ms. Connor will now lead all of the editorial strategy and functions of the publication’s newsroom.
“I really want to double down on investigations and impact,” she said, adding, “What we want to do is find the scandal before the scandal breaks.”
Ms. Connor said she also planned to expand The Daily Beast’s opinion section.
“We’re definitely known for our sharp political columns,” she said. “I’d like to expand that ‘voiciness’ into more columns on a broader array of topics, whether it’s culture and entertainment and lifestyle topics, and then also more columns that are pivoting right off national news that is happening outside of D.C.”
With a newsroom of 65, The Daily Beast has become known for its frequent scoops and scrappy tabloid style. The website was started in 2008 by Tina Brown, the former Vanity Fair and New Yorker editor, and Barry Diller, the chairman of IAC, which owns The Daily Beast.
“I’m always most pleased to promote from within, and Tracy Connor is a fine example of that preference: talented, savvy and more than capable of leading The Beast,” Mr. Diller said in a statement.
Heather Dietrick, the chief executive of The Daily Beast, said in a statement that Ms. Connor had a “ferocious appetite for unearthing the biggest stories and an unwavering commitment to excellence.”
A spokeswoman for IAC said the publication’s overall revenue in the last quarter was up more than 50 percent from a year earlier. She added that revenue from memberships, which provide additional content, had more than doubled year over year. The website had its highest traffic on record last month, she said.
Propelled in part by surging demand during the pandemic, people spent more than $610 billion on Amazon over the 12 months ending in June, according to Wall Street estimates compiled by the financial research firm FactSet. Walmart on Tuesday posted sales of $566 billion for the 12 months ending in July.
Wall Street firms had been expecting this retail baton to change hands in the coming years, Karen Weise and Michael Corkery report for The New York Times. But the pandemic accelerated the timeline, as people stuck at home relied on deliveries. Walmart’s sales rose sharply during the pandemic, but it has not matched Amazon’s.
Alibaba, the giant online Chinese retailer, is the world’s top seller. Neither Amazon nor Walmart is a dominant player in China.
Walmart’s sales grew $24 billion in the last year, the company said Tuesday. During roughly the same period, the total value of everything people bought on Amazon rose by nearly $200 billion, analysts estimate.
Although the figures are calculated differently, analysts regularly use them as a rough comparison. Knowing the full value of Walmart’s sales is simple, because they nearly all come from its own inventory and are disclosed publicly each quarter. But analysts must estimate the value of Amazon’s overall sales because most of what people buy on its site are products owned and listed by outside merchants. The company publicly reports only the fees it takes from those transactions.
With Amazon’s success has come greater scrutiny. And the company has started to receive many of the same complaints that Walmart faced during its biggest periods of expansion more than a decade ago. READ THE FULL ARTICLE →
The Australian airline Qantas will require vaccinations for all employees. Pilots, flights attendants and other airport workers must be fully vaccinated by Nov. 15, while other employees will have until March 31. In a survey of nearly 12,000 employees, 89 percent said they were or planned to get vaccinated, with 4 percent saying they were unwilling to do so, the airline said. About three-quarters of those surveyed supported a mandate.
Coffee roasters have a problem. The cost of the beans that they import has soared this year, leaving roasters anguishing over whether their customers, from grocery stores to cafes to people looking for their daily latte, will tolerate higher prices.
Climate shocks in Brazil and shipping bottlenecks have pushed the price of coffee beans higher — and farmers and roasters are feeling the effects.
That also means your coffee could get more expensive. Here’s why →
U.S. stocks fell in midday trading Wednesday, with the S&P 500 down about 0.2 percent ahead of the release of the minutes of the Federal Reserve’s policy-setting meeting last month.
The Fed will release the details of its deliberations on Wednesday afternoon, and investors will scour them for insight on when the central bank might start to wind down some of its pandemic-driven money policies.
Wednesday’s decline followed Wall Street’s sharpest drop in a month. The S&P 500 fell 0.7 percent on Tuesday, following a report from the Commerce Department that showed retail sales fell 1.1 percent in July.
Target dropped about 2 percent in midday trading after the retailer reported that sales growth was slowing after the big-box chain’s revenue surged during the pandemic. The company forecast single-digit growth in comparable-store sales for the second half of the year.
Lowe’s shares rose more than 10 percent, rebounding from a drop on Tuesday, after the home improvement chain reported that profits rose 6 percent from a year earlier, driven by home installation services and home décor products. Lowe’s same-store sales declined by 1.6 percent in the quarter.
The British pound rose 0.2 percent against the U.S. dollar after data showed Britain’s annual inflation rate fell more than expected in July to 2 percent from 2.5 percent the previous month. But economists expect prices to rise again next month. July’s decline was largely explained by base effects and the ability to collect prices last year as lockdown’s eased, the national statistics office said.