Day: August 24, 2018

U.S. Commerce Secretary Wilbur Ross has appointed a former federal prosecutor to monitor China’s ZTE Corp — after people familiar with the matter said he rescinded an offer to a former U.S. official for signing a “Never Trump” letter before the 2016 presidential election.

A new monitor for ZTE is required as part of a June settlement that ended a ban on U.S. companies selling components to China’s No. 2 telecommunications equipment maker. The ban threatened ZTE’s survival and became a source of friction in trade talks between Washington and Beijing.

Roscoe Howard, a former U.S. attorney in Washington, will lead a compliance team designed to help ensure that ZTE does not illegally sell products with American parts to Iran and other sanctioned countries.

Howard, who got his law degree from the University of Virginia in 1977, is a partner in Barnes & Thornburg’s litigation department in Washington, and served as associate independent counsel during the Clinton and George H. W. Bush administrations.

Howard was not the first choice of Commerce Department officials.

Peter Lichtenbaum, a former assistant secretary for export administration at the Commerce Department, received a letter on Aug. 15 offering him the post, sources said.

Ross then learned that Lichtenbaum was among the dozens of former national security officials who signed a letter in August 2016 saying Trump was not qualified to be president and they would never vote for him, the sources said on condition of anonymity.

Last Friday, two days after making the offer, the department withdrew it, the sources said.

“This is the final decision. Period,” a Commerce Department spokesman said about Ross’ decision to rescind the offer to Lichtenbaum and choose Howard.

Trump, a former real estate magnate and reality television star, drew opposition from establishment Republicans who opposed his candidacy during the 2016 presidential campaign. His administration has been known to reject people who opposed him.

Violations by ZTE

ZTE, which relies on American-origin components for its smartphones and computer networking gear, pleaded guilty last year to violating U.S. sanctions by illegally shipping U.S. goods and technology to Iran.

The ban on ZTE was imposed in April after officials said the company made false statements about disciplining 35 employees tied to the wrongdoing.

As part of the 2017 guilty plea, ZTE paid nearly $900 million. To lift this year’s ban, it paid an additional $1 billion penalty, placed $400 million in escrow in case of future violations, and installed a new board and senior management.

Two monitors​

Under the latest agreement, the Commerce Department is selecting a monitor to oversee compliance for ZTE and its worldwide affiliates for 10 years. Howard will have a staff of at least six people funded by ZTE, including at least one expert in export controls, the Commerce spokesman said.

The government monitor has been designated as a “special compliance coordinator” to distinguish from another monitor for ZTE appointed by a U.S. judge in Texas when the company pleaded guilty last year.

That monitor, James Stanton, a lawyer who has handled personal injury cases among others, was picked by U.S. District Judge Ed Kinkeade, sources told Reuters last year. Kinkeade has control over that monitor.

A key reason the Commerce Department sought a second monitor, according to sources, was to have a qualified person police the company and report directly to the department and the company.
…

Federal Reserve Chairman Jerome Powell signaled Friday that he expects the Fed to continue gradually raising interest rates if the U.S. economic expansion remains strong.

Powell added that while annual inflation has risen to near the Fed’s 2 percent target rate, it doesn’t seem likely to accelerate above that point. That suggests that he doesn’t foresee a need for the Fed to step up its rate hikes. Late next month, the Fed is widely expected to resume raising rates.

Speaking to an annual conference of central bankers in Jackson Hole, Wyoming, Powell said the Fed recognizes that it needs to strike a careful balance between its mandates of maximizing employment and keeping price increases stable. He said a gradual approach is the best way for the Fed to navigate between the risks of raising rates too fast and “needlessly shortening the expansion” and moving too slowly and risking an overheated economy.

“My colleagues and I,” the Fed chairman said in his speech, “are carefully monitoring incoming data, and we are setting policy to do what monetary policy can do to support continued growth, a strong labor market, and inflation near 2 percent.”

Powell made no mention of the recent public criticism from President Donald Trump, who has said he’s unhappy with the Fed’s rate hikes. The president has complained that the Fed’s tightening of credit could threaten the continued strong growth he aims to achieve through the tax cuts enacted late last year, a pullback of regulations and a rewriting of trade deals to better serve the United States.

Many have seen Trump’s complaints about the Fed’s rate hikes as an intrusion on the central bank’s longstanding independence from political influence. On Thursday, two top Fed officials made clear Thursday that Trump’s criticism won’t affect their decisions on whether to continue raising rates.

Powell also made no mention in his speech of what many economists see as the most serious threat to the economy: The trade war that Trump has launched with America’s main trading partners — a conflict that risks depressing U.S. and global economic growth the longer it goes on.

The Fed chairman focused his remarks in part on the difficulty the Fed faces in setting interest-rate policies at a time when the economy seems to be undergoing changes that challenge long-standing beliefs of how low unemployment can fall before it ignites inflation pressures. He said there is also much uncertainty over the “neutral” rate of inflation —  the point at which the Fed’s policy rate is neither stimulating economic growth or holding it back.

The Fed’s economic projections, compiled from estimates of all Fed officials, estimates the current neutral rate at 2.9 percent. But Powell noted that there’s a wide difference of opinion about it.

After having kept its key policy rate near zero for seven years to help lift the economy out of the Great Recession, the Fed has raised rates seven times, most recently in March and June this year. Most Fed watchers foresee two more hikes this year — next month and then in December.

Powell said the Fed’s incremental approach to raising rates has so far succeeded.

“The economy is strong,” he said. “Inflation is near our 2 percent objective and most people who want a job are finding one. We are setting policy to do what monetary policy can do to support continued growth, a strong labor market and inflation near 2 percent.”
…