March 19, 2024

No Clarity From Fed on Stimulus, Upsetting Wall Street

The confusion over exactly when the Federal Reserve will begin scaling back its huge economic stimulus efforts only deepened Wednesday, with the release of a summary of the deliberations at the central bank’s last meeting in late July.

There were hints that some members of the divided committee are comfortable with beginning to ease the Fed’s program of buying $85 billion a month in government bonds and mortgage securities as soon as their next meeting in mid-September. But there were also indications that another camp within the policy-setting group favors waiting until December, or even later.

The only thing that was clear is that the Fed intends to keep Wall Street — and the rest of the world — guessing.

For one thing, a number of participants at the Federal Open Market Committee raised concerns that economic growth in the second half of the year would prove disappointing, which would tend to encourage them to delay any changes in their current policy,

In June, the Fed’s chairman, Ben S. Bernanke, indicated the stimulus program could be scaled back this year if economic data continued to be relatively positive. But he avoided setting any target dates to begin what many investors refer to as the Fed’s coming “taper.”

The minutes of the meeting did little to clarify the issue. While “a few members emphasized the importance of being patient and evaluating additional information before deciding on any changes to the pace of asset purchases,” a few others “suggested that it might soon be time to slow somewhat the pace of purchases,” the summary of the July 30-31 meeting said.

As a result, longtime Fed watchers came up with analyses so different from one another that it seemed as if they might be reading different documents.

In a report issued shortly before the stock market closed, IHS Global Insight concluded that “the Fed is unlikely to taper at the mid-September meeting,” and predicted a move in December instead.

One minute later, experts at Barclays offered their view that the minutes of the July meeting “do not alter our outlook for a tapering of purchases in September.”

Other institutions, like Goldman Sachs, hedged their bets. “Over all, we think this information is consistent with September tapering, but this is by no means certain,” the firm said.

With Mr. Bernanke all but certain to step down as Fed chairman early next year, most analysts expect the Fed to initiate the tapering process before he leaves office, and to do so at one of the meetings remaining this year — either September or December — where Mr. Bernanke is scheduled to conduct a news conference after the session. The committee will also meet in October, but Mr. Bernanke is not scheduled to address the media then.

On Wall Street, investors were just as uncertain as economists. After selling off immediately after the minutes were released at 2 p.m., stocks briefly rallied, only to fall back more deeply into negative territory by the end of the trading day. The most widely followed measure of the stock market among professionals, the Standard Poor’s 500-stock index, fell 9.55 points, or 0.58 percent, to 1,642.80. The Dow Jones industrial average lost 105.44 points, or 0.7 percent, to 14,897.55. The Nasdaq composite index declined 13.80 points, or 0.38 percent, to 3,599.79.

Bond prices also dropped after the release of the Fed’s minutes, sending interest rates higher. The price of the Treasury’s 10-year note fell 20/32, to 96 20/32, while its yield rose to 2.89 percent, its highest level since July 2011. It was at 2.82 percent late Tuesday. While the difference between a start to the tapering on bond purchases in September vs. December might not seem very significant to most people, the Fed’s decision-making is already affecting such things as the value of 401(k) retirement accounts, mortgage rates for home buyers and currency values in many emerging markets of the world.

By pumping $85 billion a month into the economy through the bond purchases, the Fed has helped push up prices for many kinds of assets, especially stocks. The indications that the infusions might soon come to an end has generated increased volatility both on Wall Street and in stock exchanges around the world.

Article source: http://www.nytimes.com/2013/08/22/business/economy/fed-closer-to-easing-back-stimulus-but-still-no-consensus-on-timing.html?partner=rss&emc=rss

3 Walmart Suppliers Made Goods in Bangladesh Factory

The documents — photographed by a Bangladeshi labor organizer after the fire and made available to The New York Times — include an internal production report from mid-September showing that 5 of the factory’s 14 production lines were devoted to making apparel for Walmart.

In a related matter, two officials who attended a meeting held in Bangladesh in 2011 to discuss factory safety in the garment industry said on Wednesday that the Walmart official there played the lead role in blocking an effort to have global retailers pay more for apparel to help Bangladesh factories improve their electrical and fire safety.

Ineke Zeldenrust, international coordinator for the Clean Clothes Campaign, an anti-sweatshop group based in Amsterdam, said Walmart was the company that “most strongly advocated this position.”

The meeting was held in April 2011 in Dhaka, the country’s capital, and brought together global retailers, Bangladeshi factory owners, government officials and nongovernment organizations after several apparel factory fires in Bangladesh had killed dozens of workers the previous winter.

According to the minutes of the meeting, which were made available to The Times, Sridevi Kalavakolanu, a Walmart director of ethical sourcing, along with an official from another major apparel retailer, noted that the proposed improvements in electrical and fire safety would involve as many as 4,500 factories and would be “in most cases” a “very extensive and costly modification.”

“It is not financially feasible for the brands to make such investments,” the minutes said.

Kevin Gardner, a Walmart spokesman, said the company official’s remarks in Bangladesh were “out of context.”

“Walmart has been advocating for improved fire safety with the Bangladeshi government, with industry groups and with suppliers,” he said, adding that the company has helped develop and establish programs to increase fire prevention.

Ms. Zeldenrust said, “Everyone recognized that fire safety was a serious problem and it was a high time to act on it, and Walmart’s position had a very negative impact.” She added, “It gives manufacturers the excuse they’re looking for to say, ‘We’re not to blame.’ ”

Scott Nova, the executive director of the Worker Rights Consortium, a factory monitoring group based in Washington, was also at the meeting. He said that upgrading the factories’ safety would cost a small fraction of what Walmart and other retailers pay for the clothing they import from Bangladesh each year.

Bloomberg News first reported details of the Dhaka meeting on Wednesday.

Walmart has indirectly acknowledged that the factory, Tazreen Fashions, outside Dhaka, was producing some of its apparel, saying in a statement that a supplier had “subcontracted work to this factory without authorization and in direct violation of our policies.” In that statement, issued two days after the Nov. 24 fire, Walmart said, “We have terminated the relationship with that supplier.” Walmart has declined to name the supplier.

After Walmart was shown some of the documents from the factory on Wednesday, Mr. Gardner replied in an e-mail. “As we’ve said, the Tazreen factory was de-authorized months ago,” he wrote. “We don’t comment on specific supplier relationships.”

The photographed documents from the factory indicate that three suppliers — the International Direct Group, Success Apparel and Topson Downs — used the factory to make shirts, shorts and pajamas for Walmart. One document, written in July, provides product descriptions from Success Apparel for Walmart’s Faded Glory house-brand shorts. A photo taken inside the factory after the fire showed a pair of Faded Glory shorts.

The documents indicate that Success Apparel often worked through Simco, a Bangladeshi garment maker.

Mr. Nova of the Worker Rights Consortium said the documents raised questions about Walmart’s statements after the fire.

“It was not a single rogue supplier as Walmart has claimed — there were several different U.S. suppliers working for Walmart in that factory,” Mr. Nova said. “It stretches credulity to think that Walmart, famous for its tight control over its global supply chain, didn’t know about this.”

Mr. Nova works closely with the Bangladesh Center for Worker Solidarity and made the factory documents available.

Investigators also found apparel made for Sears and Disney inside the factory after the fire. Both companies said suppliers had given orders to the factory without their knowledge and authorization.

Mr. Gardner said accredited outside auditors had periodically inspected the factory on Walmart’s behalf. A May 2011 audit gave the factory an “orange” rating, meaning that there were “higher-risk violations” and that it would be re-audited within six months. If a factory gets three orange ratings over two years, it loses Walmart’s approval.

A follow-up audit in August 2011 for Walmart gave Tazreen an improved “yellow” rating, meaning “medium-risk violations.”


Article source: http://www.nytimes.com/2012/12/06/world/asia/3-walmart-suppliers-made-goods-in-bangladeshi-factory-where-112-died-in-fire.html?partner=rss&emc=rss