Mnuchin: Banks’ credit ample

Analysts say treasury chief’s calls don’t inspire confidence

Treasury Secretary Steven Mnuchin on Sunday declared that the nation’s six largest banks had plenty of credit to extend to Americans and that “the markets continue to function properly.”

Mnuchin made the statement on Twitter after calling the leaders of the six banks — Bank of America, Citi, Goldman Sachs, JPMorgan Chase, Morgan Stanley and Wells Fargo — seeking to address the issue of access to credit, which had attracted little concern ahead of the treasury secretary’s tweet.

The banks’ chiefs “confirmed they have ample liquidity available for lending to consumer, business markets, and all other market operations,” Mnuchin wrote. The banks did not independently verify Mnuchin’s characterizations of the discussion.

Several analysts warned Sunday night that Mnuchin’s outreach to the banks and subsequent statement could backfire.

“It’s like sending out a message saying our space shields can intercept incoming asteroids,” said Jared Bernstein, former chief economist to Vice President Joe Biden. “Uh, I didn’t know there were any coming our way.”

Mnuchin’s statement, which was posted while he was vacationing in Mexico, came hours before Asian markets were set to open and after a sell-off that made last week the worst for U.S. markets in a decade.

It is normal for the treasury secretary to speak with banking executives multiple times a year in various settings. But what was different about Mnuchin’s statement was that it came two days before Christmas during a government shutdown.

“The secretary of treasury calling the nation’s top bankers on a Sunday to confirm they have cash to lend. Not exactly confidence inspiring,” said Ian Bremmer, president of the Eurasia Group.

Analysts note that a sliding stock market does not necessarily mean there are problems in the banking system. And there can be problems in the banking system that aren’t reflected in the stock market’s performance.

“It’s going to raise the question of whether Treasury and Mnuchin know something the markets don’t,” said Brian Gardner, Washington research director at Keefe, Bruyette & Woods, an investment banking firm. “Without clarifying further, it’s going to weigh on the markets.”

“Panic feeds panic, and this looks like panic in the administration,” added Diane Swonk, chief economist at Grant Thornton. “Suggesting you might know something that no one else is worried about creates more unease.”

U.S. markets are open for a half-day today, are closed Tuesday and then are open several more days this year.

President Donald Trump’s anger at the stock market’s sharp drop — many U.S. sectors are down more than 20 percent from their peak — has been directed at numerous people. News outlets reported Saturday that Trump has discussed whether he could fire Federal Reserve Chairman Jerome Powell, who has steadily raised interest rates this year over Trump’s objections. Mnuchin had recommended Powell for the Fed job.

In response to a question about whether Trump believes he has the authority to fire Powell, Mick Mulvaney, who is serving as acting White House chief of staff, said on ABC’s This Week that the president did not believe he did.

“I did speak with the treasury secretary last night about a bunch of things … and he did mention that to me,” Mulvaney said Sunday.

It might be possible to remove Powell from the Fed chairmanship, but he can only be fired from his role on the central bank’s board of governors as a Fed governor for “cause” — usually neglect or misconduct.

Sen. Richard Shelby, R-Ala., who is chairman of the Senate Appropriations Committee, told Politico that Trump needs to be “very careful” how he proceeds with Powell.

“The Federal Reserve is set up to be independent of the presidency,” Shelby said. “Although I disagree with Powell at times, I’ve been on the Banking Committee longer than most people ever have, and I chaired it. I think the Federal Reserve should remain independent, as much as it can.”

“It’s like sending out a message saying our space shields can intercept incoming asteroids. Uh, I didn’t know there were any coming our way.”

— Jared Bernstein, former chief economist to Vice President Joe Biden