The Washington Post - 06.08.2019

A20 EZ RE THE WASHINGTON POST.TUESDAY, AUGUST 6 , 2019

Economy & Business

INTERNET

Britain seeks details

on Facebook’s Libra

Britain’s data protection
watchdog said Monday that it had
joined with its counterparts from
around the world in calling for
more openness about Facebook’s
proposed Libra digital currency.
Facebook’s plans to launch
Libra next year have prompted
warnings from politicians,
regulators and central bankers
that it must be closely regulated
to avoid any disruption to the
international financial system.
Britain’s Information
Commissioner’s Office said
Monday that it had sent a
statement to Facebook and 28
other companies behind the Libra
project that asks them to provide
details of how customers’
personal data will be processed in
line with data protection laws in
connection with the project.
The statement also asks for
assurances that only the
minimum required data will be
collected and that the service will
be transparent, and it requests
details of how data will be shared

between Libra Network

members, the Information

Commissioner’s Office said

— Reuters

COURTS

15-month sentence for

former union official

A federal judge in Detroit on

Monday sentenced the former

United Auto Workers union vice

president in charge of relations

with Fiat Chrysler to 15 months in

federal prison for misusing

money intended for worker

training on luxury travel and

entertainment for himself and

other union officials.

Norwood Jewell, who led the

UAW’s negotiations with Fiat

Chrysler in 2015, is the highest-

ranking UAW official to be

sentenced in connection with a

wide-ranging federal

investigation of corruption

within the union that represents

U.S. factory workers at Fiat

Chrysler Automobiles, General

Motors and Ford Motor.

Jewell pleaded guilty in April

to a charge of violating the Labor

Management Relations Act. At

the time, prosecutors proposed a

prison sentence of 12 to 18

months. U.S. District Judge Paul

Borman rejected Jewell’s request

to avoid prison and serve his

sentence on home release.

— Reuters

ALSO IN BUSINESS

A gauge of service industries

declined in July to an almost

three-year low as orders

continued to cool, indicating a

sluggish start to the third quarter

for the biggest part of the

economy. The

nonmanufacturing index fell to

53.7, the weakest since August

2016 and well below the median

forecast of economists, data from

the Institute for Supply

Management showed Monday.

While still expanding, the

purchasing managers group’s

measures of orders and business

activity were also the lowest since

mid-2016. Readings above 50

indicate growth.

U.S. banks left loan standards

unchanged on commercial and

industrial loans to large and mid-

sized firms during the second

quarter and eased standards on

such loans to smaller firms,

according to a survey of bank

officers published Monday. The

U.S. Federal Reserve’s quarterly

survey of senior loan officers also

showed there appeared to be an

overall easing of standards on

commercial and industrial loans

compared with before the

financial crisis.

Wells Fargo is joining a funding

round for Matcherino, a provider

of software and services for

running competitive video-

gaming tournaments. Wells Fargo

Strategic Capital and technology

investment firm Galaxy Digital

are putting in $1.5 million for an

undisclosed percentage of

Matcherino, bringing the start-

up’s current funding round to

more than $4.1 million, the

esports company said.

James Murdoch is getting into

business with actor Robert De

Niro to help the owner of the

storied Tribeca Film Festival

expand. Murdoch’s Lupa Systems

led a consortium to acquire a

controlling stake in Tribeca

Enterprises, co-founded by De

Niro, the companies said in a

joint statement. Lupa and

Attention Capital will partner

with Tribeca’s management to

expand the business they’re

buying from investors including

Madison Square Garden Co. and

festival co-founder Craig Hatkoff.

— From news reports

COMING TODAY

10 a.m.: Labor Department

releases job openings and labor

turnover survey for June.

Earnings: Walt Disney Co.

DIGEST

ROBIN VAN LONKHUIJSEN/AGENCE FRANCE-PRESSE/GETTY IMAGES

A self-driving shuttle carries passengers around the port area of

Drimmelen, Netherlands, as part of a 10-week experiment. A similar

trial in Vienna was stopped last month after the bus hit a pedestrian.

BY RENAE MERLE

The Federal Reserve an-

nounced Monday that it will de-

velop a service to eliminate the

frustrating delay many Ameri-

cans face between when they de-

posit a check and when it’s recog-

nized in their account.

Such delays cost billions of dol-

lars in late fees and overdraft

charges for millions of people liv-

ing paycheck to paycheck, indus-

try experts and regulators say.

“Immediate access to funds

could be especially important to

households with fixed incomes or

living paycheck to paycheck,” said

Fed governor Lael Brainard dur-

ing a speech before the Federal

Reserve Bank of Kansas City.

The new service, FedNow, is

expected to launch by 2024 and

would allow banks to nearly in-

stantaneously move money into

customers’ accounts, she said. The

Fed board approved the decision

by a 4-to-1 vote Friday, but it

wasn’t announced until Monday.

The announcement could pit

the Fed against some of the coun-

try’s biggest banks, including

Bank of America and JPMorgan

Chase, which have developed rival

technology and fear that Silicon

Valley companies could use the

Fed system to push their way fur-

ther into the banking world.

America’s payment system lags

behind that of many parts of the

world, and U.S. banks are con-

cerned about being left behind,

said Aaron Klein, the policy direc-

tor for the Center on Regulation

and Markets at the Brookings In-

stitution. “I think some of the

large banks don’t want to be the

taxi medallions and be uberized,”

he said, a reference to the impact

of ride hailing on taxi owners.

“The rest of the world went to

real-time payments a long time

ago.”

The Fed’s announcement

comes as big technology compa-

nies are finding other ways into

the banking world. Wall Street has

raised concerns about Facebook’s

efforts to create an alternative

global currency system, known as

Libra. Meanwhile, Square, the

mobile payment company, and

Rakuten, known as the Amazon of

Japan and operator of U.S. re-

wards program Ebates, have ap-

plied for a special banking license

that would allow the companies to

offer checking and savings ac-

counts.

In 2005, Walmart waged a two-

year battle for a similar bank char-

ter but withdrew its application

after small banks objected. But

more than a decade later, Silicon

Valley may pose a bigger threat to

the stranglehold banking indus-

try holds on key parts of the finan-

cial world.

Big tech companies could use

the Fed’s new service to gain di-

rect access to the payment system,

bypassing banks that now act as a

gatekeeper, said Greg Baer, chief

executive of the Bank Policy Insti-

tute, which represents the coun-

try’s biggest banks.

The tech industry would like

the Federal Reserve to give non-

banks more access to the payment

system, said Brian Peters, execu-

tive director of Financial Innova-

tion Now, a lobbying group that

includes Apple, Amazon and

Google. But that is not likely to

happen without congressional ap-

proval and is not why the industry

supports the Fed developing its

own service, he said. “At this point,

we just want to make our payment

system work faster,” Peters said.

For decades, banks flew planes

across the country filled with pa-

per checks ready to be processed.

Now, depositing a check is as sim-

ple as snapping a photo with your

phone.

But there is still often a delay of

a couple of days before the money

is deposited into an account, a

frustrating feature of America’s

antiquated payment system, in-

dustry experts say.

The electronic payment system

was built in the 1960s with physi-

cal checks in mind, not splitting a

dinner bill with friends on a mo-

bile phone app, they say. Retailers

bundled physical checks into

batches before taking them to the

bank to be processed. That same

type of process is now used for

electronic payments.

The Fed decision to develop its

service was cheered by communi-

ty banks, credit unions and big

tech companies that were weary

of depending on a system devel-

oped by big banks.

“Community bankers, we did

it!” Rebeca Romero Rainey, chief

executive of the Independent

Community Bankers of America,

said in a blog post Monday, adding

that the decision would “avoid a

megabank monopoly.”

“I’m glad to see the Fed is heed-

ing our calls to act, and that the

American people will soon have a

payments system that works for

them,” said Sen. Chris Van Hollen

(D-Md.), who co-sponsored legis-

lation directing the Federal Re-

serve to develop a real-time pay-

ments system.

The Federal Reserve is request-

ing comments on how its new

service should be designed. It is

unclear how much it will cost to

build.

The Fed will probably meet re-

sistance from the big banks as it

develops its service. The Clearing

House, which is owned by 24 of

the country’s largest financial in-

stitutions, spent millions of dol-

lars building a system that brings

the typical processing time from a

few days to less than five seconds,

said Steve Ledford, a senior vice

president at the company.

Launched in 2017, the real-time

payments system is used in 16 of

the 10,000 banks and credit

unions across the country.

If the Fed develops a rival tech-

nology that could slow adoption

across the industry, Ledford said

in an interview before the an-

nouncement Monday. “The num-

bers are ramping up,” he said, but

“one of the complicating factors

has been this Fed potential to

move into the market.”

The Fed’s vice chair of supervi-

sion, Randal Quarles, the lone dis-

senting vote on the board, ap-

peared to side with the big banks.

“I do not see a strong justifica-

tion for the Federal Reserve to

move into this area and crowd out

innovation when viable private-

sector alternatives are available,”

Quarles said in a statement.

[email protected]

Fed says it will develop

faster digital banking

BY TAYLOR TELFORD

AND THOMAS HEATH

There wasn’t much to smile
about after Monday’s massive
sell-off on Wall Street — the worst
drop of 2019 — as investors be-
come increasingly alarmed about
fraying U.S.-China trade rela-
tions.
Bright spots were hard to find
in the day-long scrum. Gold
prices, a barometer of fear,
jumped. The Japanese yen and
Swiss franc advanced. Those cur-
rencies “are viewed as safe ha-
vens when the world falls to
pieces because these countries
are politically stable,” said
Joachim Fels, chief economic ad-
viser at Pimco.
Utilities, another go-to sector
in times of stress, edged into
positive territory before suc-
cumbing and turning negative
late in the day. Investors also
flocked to the safety of the 10-year
U.S. Treasury bond, evidence of a
loss of faith in stocks altogether.
The losers were everywhere.
Most stocks. Technology. Retail.
Oil prices, down. Natural gas,
down. Dow transports — a closely
watched marker for the economy
— fell. Even the Russell 2000
index of small-cap stocks
($2.5 billion and below) was off.
The volatility index, VIX, soared
30 percent.
Value stocks such as Verizon,
Procter & Gamble and Johnson &
Johnson were hurting, but not as
much as tech stalwarts such as
Apple, Visa, Facebook, Microsoft
and Google parent Alphabet.
Technology companies, as a
whole, accounted for a major
share of the losses.
“A market like this brings the

high fliers low,” said Michael Farr,

president of Farr, Miller & Wash-

ington. “The Dramamine names

like Pepsi, Coke and J & J, with

stable balance sheets, provide a

somewhat smoother ride.”

China retaliated Monday

against the latest U.S. tariffs by

allowing its tightly controlled

currency to slide to an 11-year low

against the dollar. The move pro-

voked the ire of President Trump,

who has said Beijing unfairly

suppresses the value of the yuan

to bolster Chinese exporters at

the expense of the United States,

and rattled investors who had

just come away from the worst

week of 2019.

The Dow Jones industrial aver-

age tumbled as much as 961

points Monday before scraping

back to a 767-point decline. It

ended the regular session down

2.9 percent, at 25,717.74, for its

fifth down day in a row. The last

two weeks have laid waste to the

Dow, erasing more than 6 percent

since the index hit a record high

on July 15.

The Standard & Poor’s 500-

stock index fell 3.0 percent to

close at 2,844.74 on Monday. The

tech-heavy Nasdaq Composite,

the index most vulnerable to a

China trade war because of the

number of businesses there,

plunged 3.5 percent for its fifth

worst session ever.

All 11 market sectors went neg-

ative Monday, with tech, financial

services and energy the hardest

hit. Even defensive-sector con-

sumer staples took a punch. All

30 Dow stocks fell.

And if history is a tell, there is

more angst to come, as August

has put up some the worst num-

bers for stock investors over the

past three decades.

Apple, which relies on China

for 20 percent of its sales, took a

shellacking. Its stock fell 5.2 per-

cent Monday and is down 9 per-

cent since the start of the month.

“The losers are anybody with

big exposure to China,” said Ivan

Feinseth, chief investment officer

at Tigress Financial Partners.

“Boeing, Caterpillar and the

semiconductor stocks are most

vulnerable. The biggest consum-

er of computer components in-

cluding semiconductors is China.

Nvidia is made there and used

there.”

The yield on the benchmark

10-year U.S. Treasury bond was at

1.72 percent, which means inves-

tors are scared and locking up

their money for safety but very

little return. Mortgage rates fol-

low the 10-year closely, the one

bright spot for consumers com-

ing out of Monday’s mess.

“In the short run, big benefici-

aries of this quick market decline

include anyone in the U.S. who is

looking to borrow money as long-

term rates continue to decline,”

said Wayne Wicker, chief infor-

mation officer at Vantagepoint

Investment Advisers, which has

$29 billion in assets under man-

agement. “Mortgage rates are

down over 1.1 percent from their

peak in the fall of 2018, giving

current and prospective home-

owners another chance to [refi-

nance] or purchase a home at

substantially lower rates. Auto

finance rates may soon start to

reflect better terms as well.”

The plunge arrived after China

struck back against Trump’s

threat to levy further tariffs on

$300 billion in Chinese goods,

effectively escalating the trade

war.

“The Chinese have retaliated

against the U.S.’s proposed

10 percent tariff by lowering the

value of its currency — the yuan

— below the psychologically im-

portant 7-yuan-per-dollar level,”

Sam Stovall, of CFRA Research,

said. “By weakening their curren-

cy, China is attempting to offset

the effects of the 10 percent tariff,

since a weaker currency makes

the cost of China’s exports more

affordable around the globe,

while causing the cost of U.S.

imports into China to go up.”

The trade conflict has tied up

the world’s two most powerful

economic engines for more than a

year, threatening the health of the

global economy and upending

the foundations of international

trade.

The abrupt escalation of the

trade war sent fears rippling

through global markets. Asian

markets slumped, with Hong

Kong’s Hang Seng Index closing

down 2.85 percent. Japan’s Nik-

kei was down 1.7 percent, and

Korea’s Kospi tumbled 2.6 per-

cent. European stocks also fell

across the board, with the Stoxx

600 index slipping 2 percent in

midday trading.

Scrounging for a positive take-

away from Monday’s morass, Fels

offered a bright note.

“If all this leads to a better

trade deal at some stage, then you

will have a lot of winners,” he

said. “This may be the short-term

pain that is needed for a better

trade deal with protections for

intellectual property rights and

fairer trade practices. That’s the

big question.”

[email protected]

[email protected]

Wall St. chalks up worst day of 2019

Losses are widespread as investors become spooked by the escalating U.S.-China trade war

BRENDAN MCDERMID/REUTERS

Traders work on the floor at the New York Stock Exchange. The Dow and S&P 500 fell about 3 percent, while the Nasdaq lost 3.5 percent.



DOW 25,717.

DOWN 767.27, 2.9% 

NASDAQ 7,726.

DOWN 278.03, 3.5% 

S&P 500 2,844.

DOWN 87.31, 3.0% 

GOLD $1,476.

UP $19.00, 1.3% 

CRUDE OIL $54.

DOWN $0.97, 1.7% 

10-YEAR TREASURY

UP $12.00 PER $1,000; 1.72% YIELD

CURRENCIES

$1=106.08 YEN, EURO=$1.