Published: Wed, December 26, 2018
Markets | By Erika Turner

Mnuchin called top USA banks in a bid to ensure market stability

Mnuchin called top USA banks in a bid to ensure market stability

Holding what seemed like an emergency discussion with financial regulators one day before markets close for the Christmas holiday also risked triggering anxieties, just as much as mitigating them.

Whipsaw markets and a string of steep dives have spawned a pervasive anxiety in the White House, according to senior officials, where for the past two years the strength of the USA economy has provided steady reassurance amid even the deepest of political crises.

US Treasury Secretary Steven Mnuchin spoke on Sunday with the heads of the six biggest US banks to confirm they have enough cash to lend following the biggest weekly drop of the benchmark S&P 500 index since the Great Depression.

"He's calling bank CEOs asking about their liquidity".

The benchmark index is now down 19.8 percent from its peak on September 20, close to the 20 percent drop that would officially mean the end of the longest bull market for stocks in modern history - a run of almost 10 years.

"It was totally out of left field and an odd thing to do", the person said, describing the timing of the calls - on a Sunday ahead of Christmas before markets opened - as unusual. He also called James Gorman of Morgan Stanley, Brian Moynihan of Bank of America and Citi's Michael Corbat. The Treasury Department on Sunday said the Working Group will discuss "coordination efforts to assure normal market operations".

Investors took fright last week on a series of worries including a partial government shutdown in Washington, the Fed's latest interest rate hike, the surprise resignation of Defense Secretary Jim Mattis over policy disagreements with Trump, and the US-China trade war's returning to the forefront. One executive involved with a call by Mnuchin described the talk as both puzzling and unnecessary. "It's sending the proper message to the market so they can calculate the real picture into their Monday opening". "This was meant to be a reassuring step and it was consistent with what the Secretary thought bankers would say", the official said.

In his statement Sunday, Mnuchin assured the public that the economy is doing well.

This is why Indonesia's tsunami warning failed
He said it's possible for an eruption to trigger a landslide above ground or beneath the ocean, both capable of producing waves. Roads and infrastructure are poor in many areas, making access hard in the best of conditions.

Jaret Seiberg is an analyst for Cowen & Co.

"We're in a turbulent time and it will be interesting to see how we end the year".

Mnuchin's plan to convene a call with the President's Working Group on financial markets also unnerved investors.

The CEOs who were part of conversations with Mnuchin reported being a little baffled by the context of the conversations.

Mnuchin made calls to top U.S. bankers on Sunday and got reassurances that banks were still able to make loans and had "ample liquidity", the Treasury announced.

"It raises the question of why Treasury needs to reassure if everything is okay", Seiberg wrote. Investors are concerned that Trump may fire Federal Reserve Chairman Jerome Powell. Trump has told some advisers that he views selecting Powell the worst decision of his entire presidency. Markets plunged after the Trump administration sent out confusing signals about markets and the economy. -China trade dispute and signs that economies in Europe and China are slowing.

President Trump, meanwhile, renewed his verbal assault on the Federal Reserve on Monday, blaming the central bank for mounting fears over the United States economy and comparing it to a blundering golfer.

Yet Trump has taken outsized umbrage at the moves, deeming them created to damage him politically.

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