WEDNESDAY, JULY 31 , 2019. THE WASHINGTON POST EZ SU A
from U.S. anti-money-laundering
and sanctions controls, Stanton
said.
The Post reported last month
that three Chinese banks were
fined $50,000 a day on April 10 by
U.S. District Chief Judge Beryl A.
Howell of Washington, who
stayed the fines from accruing un-
til after an appeals court decision.
Details in her rulings aligned with
a 2017 civil forfeiture case in which
U.S. prosecutors named the Bank
of Communications, China Mer-
chants Bank and Shanghai Pu-
dong Development Bank (SPDB).
Prosecutors contend the banks
worked with a sanctioned Hong
Kong firm — the now-defunct Min-
gzheng International Trading Lim-
ited — to launder money through
the U.S. banking system for another
designated entity, North Korea’s
state-run Foreign Trade Bank, to
finance the country’s nuclear weap-
ons and ballistic-missile program.
The bank at risk of losing access
to U.S. dollars, the lifeblood of
international finance, appears to
be SPDB, China’s ninth-largest
bank by assets, whose roughly
$900 billion makes it comparable
in size to Goldman Sachs. Match-
ing details in court filings include
SPDB’s ownership structure, lim-
ited U.S. presence and alleged con-
duct with the other banks.
Each of the banks responded
after Howell’s opinions became
public by telling Chinese media
they were not under investigation
for sanctions breaches them-
selves, and indicated along with a
spokesman for China’s foreign
ministry that “cross-border infor-
mation sharing” should be han-
dled via bilateral agreement.
[email protected]hereby affirmed, for the reasons in
the accompanying opinion,” the
appeals court said.
The 44-page opinion by U.S.
appellate Judges David S. Tatel,
Patricia A. Millett and Cornelia
T.L. Pillard, written for the court
by Tatel, remains under seal pend-
ing redactions proposed by each
side.
Lawyers for the three banks did
not respond to requests for com-
ment or declined to comment, as
did a spokeswoman for the U.S.
attorney’s office of the District,
whose national security section is
handling the case.
The ruling comes at a delicate
time in U.S.-China relations. The
Washington Post reported last
week that Huawei Technologies
Co., the Chinese tech giant em-
broiled in President Trump’s trade
war with China and blacklisted as
a national security threat, secretly
helped the North Korean govern-
ment build and maintain the
country’s commercial wireless
network in potential breach of
U.S. restrictions aimed at North
Korea’s nuclear weapons develop-
ment program.
Joshua Stanton, who runs the
website One Free Korea and has
advised House and Senate staffers
on North Korea sanctions law,
said the three banks could appeal
to the U.S. Supreme Court, but the
swift and unanimous decision
against them and the imminent
launching of fines increased pres-
sure to comply.
“What this ruling means is if
[Chinese banks] are going to run
these transactions through our fi-
nancial system, they have to play
by the house rules. They’re not
exempt, and they’re not immune”BY SPENCER S. HSUA U.S. appeals court on Tuesday
ordered heavy contempt fines to
begin against three large Chinese
banks locked in a battle over cus-
tomer financial records with U.S.
prosecutors investigating possi-
ble North Korean sanctions viola-
tions.
It remained unclear whether
the firms, unnamed in court pa-
pers but previously reported to be
the Bank of Communications,
China Merchants Bank and
Shanghai Pudong Development
Bank, will comply with the U.S.
subpoenas, the first upheld by a
U.S. appeals court in a criminal
sanctions probe involving Chi-
nese banks.
In a unanimous ruling, a U.S.
Court of Appeals for the D.C. Cir-
cuit panel rejected the banks’ ar-
guments in written pleadings that
Chinese banking privacy rules
and other laws require that re-
quests for customer records in
U.S. criminal inquiries be made
through a legal assistance pact
between the two countries.
The three-judge panel upheld a
lower court’s contempt finding.
The initial finding, issued April 10,
imposed $50,000-a-day fines on
each bank beginning seven busi-
ness days after an appellate deci-
sion, or Aug. 8. The contempt or-
der also allows for one of the
banks — which is refusing a re-
quest under a provision of the USA
Patriot Act — to be cut off from the
U.S. banking system if that penalty
is ordered by the U.S. attorney
general or treasury secretary.
“The District Court’s contempt
orders against all three Banks ap-
pealed from in these causes is
ther until we have more evidence
things will go south,’ I think that
is a better policy.”
Many former Fed officials wor-
ry that the public might see the
Fed’s actions this week as a sign
that the central bank is caving to
Trump or Wall Street instead of
doing what’s best for the econo-
my. Keeping the Fed independent
of political influence is widely
viewed as critical for a strong
economy and financial markets.
“The Fed has really had a bit of
a communications blunder,” said
Bloom Raskin, a Fed governor
from 2010 to 2014. “If Americans
don’t understand exactly what is
happening and why, they may
think that Chairman Powell is
caving into presidential bullying.”
[email protected]to the economy that “it pays to act
to see if you can fend it off,” a
seeming endorsement of the Fed’s
direction although he does not
like to comment directly on im-
minent Fed moves.
Kohn and former Fed gover-
nors Frederic Mishkin and Sarah
Bloom Raskin urged Fed Chair
Jerome H. Powell and his col-
leagues to be more clear about
why they are doing a cut this
week and what they will watch
going forward.
“The reason the markets are
out of sync with the Fed is be-
cause the Fed is not explaining
itself well enough,” said Mishkin,
who was a Fed governor from
2006 to 2008. “If they cut rates
this week and then come out and
say, ‘But we won’t cut rates fur-stocks sitting at record highs,
unemployment at a half-century
low, modest inflation, and growth
at a pace that most economists
think is healthy.
Dudley’s comments echo what
Yellen said at an Aspen Institute
event on Sunday and are similar
to what Greenspan said in a
Bloomberg TV interview last
week.
“I think in light of the risks, I
would be inclined to cut a bit,”
said Yellen, adding that she
“wouldn’t see this as the begin-
ning, unless things change, of a
major easing cycle.”
Greenspan told Bloomberg on
Wednesday that “forecasting is
very tricky” and while the econo-
my appears on solid footing now,
some events can be so dangerousthe U.S. economy with slightly
lower rates to try to counteract
the negative effects of Trump’s
trade war and weak growth over-
seas. But they said they would
want to see much clearer evi-
dence of trouble before giving the
economy additional aid.
“I think there’s a good chance
the Fed won’t be cutting further
anytime soon,” wrote Dudley in a
Bloomberg Opinion piece Tues-
day in which he said it would not
be a mistake to cut this week. “All
told, the case for lowering rates is
less compelling now than it was
when the [Fed] last met in June.”
This cut would be the first
since December 2008, during the
height of the financial crisis and
Great Recession. Today, the situa-
tion looks very different withcent, but the Fed’s path for the
rest of the year is highly uncer-
tain. President Trump has called
for a “large” cut, and Wall Street is
pricing in three cuts by the end of
the year, a far more dramatic
move that is typically reserved
only for times when the economy
is in trouble.
Six former Fed leaders have
voiced at least some support for a
rate reduction this week, includ-
ing former Fed chairs Alan
Greenspan and Janet L. Yellen,
former vice chair Donald Kohn,
and former New York Fed presi-
dent Bill Dudley. But none ex-
pressed support for any addition-
al easing, as Trump and Wall
Street want.
Many of these former officials
say it would be wise to stimulateBY HEATHER LONGOn the eve of the Federal Re-
serve’s decision about what to do
with interest rates, former top
Fed officials are taking an unusu-
al step to speak out in favor of a
rate cut — but just one.
The Fed is widely expected to
do a modest interest rate cut
Wednesday, taking the bench-
mark U.S. interest rate from its
current level of just shy of 2.5 per-
cent down to just below 2.25 per-
ic deal before they collapsed. De-
spite Trump and Chinese Presi-
dent Xi Jinping agreeing last
month to restart negotiations, the
bargaining has been slow to re-
sume.
“The two sides are still trying
to figure out how to get back to
the table,” said Myron Brilliant,
executive vice president of the
U.S. Chamber of Commerce. “We
were close in May. Now the
ground has gotten shakier.”
Several chamber executives
were in Beijing this month for
talks with Chinese officials, warn-
ing them against waiting for a
better deal after the 2020 elec-
tions. A prolonged delay risks the
appearance of new issues that
could complicate hopes for a com-
prehensive deal, Brilliant said.
Treasury Secretary Steven
Mnuchin and U.S. Trade Repre-
sentative Robert E. Lighthizer are
expected to meet with Xi before
leaving Shanghai on Wednesday.
Such a meeting would be seen as
an indication that China is ready
to bargain seriously, Brilliant
said.
Trump is trying to simulta-
neously negotiate multiple com-
plicated trade deals, stretching
his team thin and raising fears
among business executives that
he doesn’t have the bandwidth to
deliver on his many promises.
An effort to rework the North
American Free Trade Agreement
has bogged down in Congress.
Trump has also threatened the
leaders of the European Union
and Japan with tariffs if conces-
sions aren’t made. And he has
said he is trying to speed along a
trade deal with Britain to help it
complete a withdrawal from the
E.U. None of these initiatives has
been completed, and none appear
TRADE FROM A1 close to completion.
But the China talks have long
been Trump’s primary focus. On
Friday, Trump first flagged the
possibility of discussions drag-
ging beyond the 2020 elections,
but his decision to repeat the
claim Tuesday rattled investors
because it seemed deliberate.
China is one of the United
States’s largest trading partners,
and U.S. companies import more
than $500 billion in goods from
China each year. Trump has al-
leged that China uses unfair trade
practices, such as manipulating
its currency, stealing U.S. intellec-
tual property and flooding global
markets with cheap products to
gain an advantage over U.S. firms.
He had tried to exert pressure on
Chinese officials to agree to quick
concessions, but that strategy has
changed in recent days with his
signal that talks might have to
wait until 2021.
This is at least the second big
part of Trump’s economic agenda
that he has signaled is not likely
to be accomplished in his first
term. He has recently told advis-
ers that he will not be able to
focus on spending cuts until after
his reelection, and cutting the
budget was one of his core cam-
paign promises.
What began with tariffs on
steel last summer has metasta-
sized into a giant trade conflict
that has affected two of the most
powerful engines in the global
economy. In tweets, Trump
crowed about China’s economic
slowdown, claiming the nation
had lost millions of jobs because
of his tariffs.
“China is doing very badly,
worst year in 27,” Trump tweeted.
“... China has lost 5 million jobs
and two million manufacturing
jobs due to Trump tariffs. Trumps
got China back on its heels, and
the United States is doing great.”
Although Trump maintains
that the drawn-out conflict is
mostly hurting China, experts say
the trade war is damaging the U.S.
economy and possibly fueling a
global slowdown. Federal Re-
serve Board Chair Jerome H. Pow-
ell has pointed to head winds
from the trade war as a primary
reason the central bank could cut
interest rates by the time its two-
day meeting ends Wednesday.
In January, the World Eco-
nomic Forum predicted that the
trade war could reduce global
gross domestic product growth
by 0.7 percentage points to
2.8 percent in 2019. And in a
recent research note, Morgan
Stanley’s chief economist warned
that the trade war could spur a
global recession within a year.
Trump and Xi met in Argentina
last year and agreed to negotiate a
broad trade deal. Trump wants
China to purchase more U.S.products, impose strict intellec-
tual property rules, halt subsidies
for China-backed companies and
open its markets to American
companies.
He first set a March 1 deadline
for the talks but repeatedly grant-ed extensions while negotiations
progressed. Then, in May, Trump
more than doubled tariffs on
$200 billion in Chinese goods
after accusing China of reneging
on its commitments.
The president also threatenedto impose tariffs on a further
$300 billion or so in Chinese
goods.
At the Group of 20 leaders
summit in Japan last month,
Trump again met with Xi. Trump
agreed to postpone new tariffs
and claimed that China had
agreed to purchase “almost im-
mediately” a large amount of U.S.
farm products. Those purchases
have yet to happen.
Trump wrote Tuesday that Chi-
na “was supposed to start buying
our agricultural product now —
no signs they are doing so. That is
the problem with China, they just
don’t come through.”
Chinese officials appear to be
under less pressure to cut a deal
than they were a few months ago.
They also have sent signals that
Trump’s repeated threats are not
working.
Hu Xijin, editor in chief of the
nationalist Global Times, a state-
owned news organization in Chi-
na, fired back at Trump on Tues-
day.
“Whenever it’s time to negoti-
ate, the U.S. side comes up with
the trick of piling pressure. Really
not a good habit,” he wrote on
Twitter. “Americans need to
change their negotiating style,
show more sincerity, not just
wield stick. The past one and half
years have proved big stick is
useless to China.”
[email protected]
[email protected]
[email protected]Former Fed officials approve of likely rate cut — as long as there’s only one
Some warn that further
reductions may be seen
as independence in perilCourt upholds fines against three
Chinese banks in sanctions inquiry
Business leaders begin
to worry over the lack
of progress on China deal
GREG BAKER/POOL/ASSOCIATED PRESS
Police watch the crowds walking by the Peace Hotel in Shanghai on Tuesday before the arrival of
Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert E. Lighthizer.*Excludes repairs. Not valid on previous orders or in combination with other offers, orders or discounts. Some exclusions apply. Residential installed sales only. Expires 8/14/19.
**Buyers must qualif y. Financing options may vary and are subject to change without notice. Financing provided by licensed lenders.Schedule a FREE in-home estimate today!
Founded in 1945, Long® Fence is the leader in the residential fence industry.
We’ve helped thousands of residential homeowners improve
the security, use and beauty of their property.longfence.com | 1-800-601-
Build With
A Name You Trust
LIMITED TIME OFFERS
20
%
OFF
*DECKS &
PAVERS!
There are plenty of warm days remaining
to enjoy the outdoors!
Take advantage of our specials on all
Decks and Hardscaping products!20
%
OFF
*ALL
FENCING!
Summer is here and there are many days
of enjoyable temperatures ahead!
Great savings going on now!Interest will be charged to your account
from the purchase date if the purchase
balance is not paid in full within the
promotional period.15
months
NO interest
If paid in full**Example: A purchase of $5975 on Long® Pavers saves $1195 Example: A purchase of $4975 on Long® Fence saves $