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WEDNESDAY, SEPTEMBER 1, 2010 Fedmore split on policy than vote showed


Minutes of Aug. meeting display concerns about buying Treasury bonds


BY NEIL IRWIN Federal Reserve officials were


divided at their Aug. 10 meeting over whether they should resume purchases of Treasury bonds and what impact the move could have on the nation’s economy, accord- ing to minutes released Tuesday. In the end, the Fed’s policy-


FENG LI/GETTY IMAGES


U.S. aluminum makers and workers got a split decision in its case that China unfairly subsidizes its aluminum product makers.


U.S. trade decision avoids clash over China’s currency


BY HOWARD SCHNEIDER TheCommerceDepartment on


Tuesday sidestepped a clash with China over that country’s curren- cy policies, ruling that the value placed on the yuan could not be considered a direct subsidy to Chinese exporters. Ruling in a case brought byU.S. aluminum makers and workers, the Commerce Department agreed that China improperly subsidizes factories that produce window frames, car parts and other aluminum products, and proposed duties of more than $500 million per year to offset that government support. But the companies and unions


that brought the case had raised a larger issue — that their Chinese competitors should be taxed even more because the government in Beijing purposely keeps the value of the national currency cheap on world markets, giving its export- ers an unfair price advantage. Manufacturers of glossy-coated papermadeasimilarargumentin a separate case. TheTuesdaydecision is prelim-


inaryandcouldbechanged.Butit neverthelesssendsastrongsignal thatU.S. trade ruleswon’t be used to intervene in the currency issue, which is currently handled as a top-level diplomatic discussion between the two nations. Commerce officials said they


were prevented from ruling on the currency dispute because un- der U.S. law, export subsidies need to clearly target a particular company or industry — as op- posed to the broad nature of Chi- nese currency policy. Subsidies must “be specific to


the enterprise or industries being investigated,” Ronald K. Lorentzen, deputy assistant Com- merce secretary for import ad- ministration, said in a written statement, while China’s curren- cy policy applies nationwide and is not shaped to favor different industries.


The decision could add mo- mentum to legislation pending onCapitolHill that would impose duties on Chinese products be- cause of currency policies that keeptheyuansubstantiallybelow its market value. TheUnited States has separate


lawsto discourage countries from manipulating their currency to gain a trade advantage. However the Treasury Department has been hesitant to characterizeChi- na’s policies too harshly and has preferred to try to handle the matter through diplomatic nego- tiations. Chinese officials in June said they would allow the value of the yuan to float more freely on world markets, but since then it has been allowed to appreciate less than 1 percent. Some economists estimate the


currency is undervalued by as much as 40 percent. The Obama administration is


“still managing to ignore the ele- phant in the room,” Sen. Charles E. Schumer (D-N.Y.) said in an e-mailed response to the Com- merce Department decision. “Even when the opportunity is thrust into its hands the adminis- tration has refused to take ac- tion.”


Schumer has sponsored legis-


lation meant to toughenU.S. poli- cy toward China’s currency man- agement. Chinese officials dispute the


notion that their currency is ma- nipulated to promote exports, or that changing the value of the yuan, also known as the renmin- bi, would appreciably lower the mammoth U.S. trade deficit with China. In an interview published on


Tuesday in the Wall Street Jour- nal, Hu Xiaolian, deputy gover- nor of the People’s Bank of China, said “the yuan doesn’t have a key role to play in rebalancing bilater- al trade between the U.S. and China . . . I don’t think excessive argument and criticism on this issue will help.” schneiderh@washpost.com


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making committee elected to re- invest money from maturing mortgage securities in govern- ment bonds by a 9 to 1 vote. But the minutes show that there was wider disagreement behind closed doors than that final tally may suggest. Most members of the Federal


OpenMarket Committee thought it unwise to allow the Fed’s bal- ance sheet to contract, which would have happened were it not for their action, because that


would tighten monetary policy when the economic outlook was weakening, according to the min- utes. However, other members “not-


ed that the magnitude of the tightening was uncertain, and a few thought that the economic effects of reinvesting principal . . . likely would be quite small.” The minutes did not identify


specific committee members. Afewpanel members also wor-


ried that the action “could send an inappropriate signal to inves- tors about the Committee’s readi- ness to resume large-scale asset purchases.” And another member argued that it would complicate the Fed’s efforts to exit from its unconventional steps to prop up the economy. According to the minutes,


however, several members had concerns in the other direction. They emphasized that the Fed “would need to consider steps it could take to provide additional policy stimulus if the outlook


were to weaken appreciably fur- ther.” In a speech Friday, Chairman


Ben S. Bernanke said that the Fed would consider launching a new bond purchasing program to try to prop up the economy only if conditions deteriorate more than he now expects or if deflation becomes a risk. One Fed policymaker, Kansas


City Federal Reserve Bank Presi- dent Thomas M.Hoenig, dissent- ed from the Aug. 10 decision, in part because he objected to re- suming asset purchases. Howev- er, the regional bank presidents rotate voting slots, and it is likely that there are other Fed presi- dents who are not voting mem- bers this year but had similar reservations. Jeffrey M. Lacker of Richmond and Charles I. Plosser of Philadelphia, for example,have shown wariness about such Fed action in public statements. But there are also severalmem-


bers who have signaled openness to new steps to try to boost the


economy, including Eric S. Rosen- gren of Boston and James Bullard of St. Louis. There appeared to be greater


consensus among Fed leaders about the state of the economy than about what to do about it. Most meeting participants,


who included the five then-serv- ing Fed governors and 12 presi- dents of Fed regional banks, “saw the incoming data as indicating that the economy was operating farther below its potential than they had thought, that the pace of recovery had slowed in recent months, and that growth would be more modest during the sec- ond half of 2010 than they had anticipated” at their June policy meeting. But the Fed officials did not see


much risk of deflation, a danger- ous cycle of falling prices. “No member saw an appreciable risk of deflation,” the minutes said, though some sawa risk that infla- tion would continue to decline. irwinn@washpost.com


Good news on bank earnings, but not failure risk As the largest banks show BY PHIL MATTINGLY Lenders posted their biggest


quarterly profit in almost three years, even as the number of banks at risk of failure rose to 11 percent of insured institu- tions, the Federal Deposit Insur- ance Corp. said Tuesday. Bank-industry profits totaled


$21.6 billion in the three-month period that ended June 30, an increase from $18 billion in the first quarter, the FDIC said in its quarterly report on the indus- try’s performance. “The economic recovery that


began last year is beginning to be reflected in the rising earnings and improving credit quality,” FDIC Chairman Sheila C. Bair said at a briefing. “Given eco- nomic uncertainties, we believe all banks should continue to exercise caution and maintain strong reserves,” she said.


improvement in earnings and credit quality, the FDIC’s “prob- lem” bank list reached its highest level since 1992 amid slowing recovery fromtheworst econom- ic crisis since the Great Depres- sion, the agency said. The confidential list had 829


banks with $403 billion in assets at the end of the second quarter, a 7 percent increase fromthe 775 included in the first quarter, the FDIC said. Bair said her agency willmove


quickly to create an interim rule to guide resolutions of systemi- cally important financial compa- nies when they are on the brink of failure. The FDIC will release a rule


“fairly quickly, and then we will use that as the vehicle to solicit more comments,” Bair said later Tuesday during a roundtable dis- cussionwith regulators, academ- ics and executives from leading


financial firms. Regulators are closing banks


at the fastest pace since 1992, seizing 118 lenders so far this year after shutting 140 institu- tions in 2009. Total assets held by troubled lenders fell from $431 billion in the first quarter, a reflection of the comparatively poor performance of smaller banks. Overall lending fell 1.4 per-


cent.Net loan and lease balances declined by $95.7 billion amid tighter lending standards and a decrease in consumer demand. “The decrease in loans out-


standing is not unexpected given the still weak economy and the regulatory uncertainty that has been hovering over the industry,” American Bankers Association chief economist James Chessen said in a statement. “Businesses are still reluctant to take on new debt without having hard evi- dence that consumers arewilling


to buy their products.” The FDIC’s deposit insurance


fund, which fell into deficit as bank closings soared last year, dropped to a negative $15.2 bil- lion balance in the second quar- ter from $20.7 billion in the first threemonths of 2010. The deficit has been reduced in each of the past two quarters after reaching a peak of $20.9 billion in the fourth quarter of 2009. The agency last year required


banks to prepay three years of deposit insurance premiums, raising $46 billion. The agency also has the au-


thority to tap a $500 billion credit line with the Treasury Department. The FDIC insures deposits at


7,830 lenders with $13.2 trillion in assets. The insurance fund is used to reimburse customers for deposits of as much as $250,000 when a bank fails. — Bloomberg News


Rankings of federal workplaces published agencies from A1


faction, however, remains effec- tive leadership from senior agen- cy bosses, the survey concluded. Over the years, senior leadership has scored low in the survey, and the Obama administration is no exception. The Nuclear Regulatory Com-


mission, however, had high scores for its senior leadership— 72 percent — and topped the list of large agencies for a third year. It was followed by the Govern- ment Accountability Office, Fed- eral Deposit Insurance Corp. and the Smithsonian Institution. The Department of Housing and Ur- ban Development and National Archives and Records Adminis- tration tied for last among large agencies. The SEC plummeted from 11th


last year to 24th. Management said frontline lawyers, accoun- tants and examiners are still re- covering from a restructuring that started last year with the appointment of Chairwoman Mary Schapiro; the replacement of about a dozen senior manag- ers; and a turnaround in culture. “We would have liked to see


different numbers,” said Jeffrey Risinger, SEC’s chief human capi- tal officer. “But we’ve been through a lot in the last 18 months. When you go through those kinds of efforts, communi- cation is challenging. There are times when you don’t have clear answers to communicate.” The restructuring also exposed


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long-standing morale problems that predated the financial crisis, including complaints about how the agency promotes and evalu- ates workers, said Greg Gilman, president of Chapter 293 of the National Treasury Employees Union, which represents 2,700 SEC staffers. “These issues have reached


back years,” Gilman said. “We feel we’renowin a position to actually be able to address them.” By contrast, the FDIC, which


secures bank deposits, was buoyed by its central role in the recent economic downturn after years of low morale. It took the third spot among large agencies as itmanaged 140bank failures in 2009 and 118 failures so far this


Best and worst federal workplaces Te top and bottom 10 agencies in the Best Places to Work in Federal Government rankings.


Rank


Top 10 1 Nuclear Regulatory Commission


2 Government Accountability Office 3 Federal Deposit Insurance Corp. 4 Smithsonian Institute 5 NASA


6 Social Security Administration 7 State Department


8 General Services Administration 9 Justice Department 10 Intelligence Community


Bottom 10 23 Labor Department


24 Securities and Exchange Commission 24 Agriculture Department 26 Transportation Department


Score


(out of 100) 81.8 81.6 79.2 76.2 74.2 71.6 70.8 69.8 69.3 69.0


62.3 62.0 62.0 60.4


27 Equal Employment Opportunity Commission 60.2 28 Department of Homeland Security 29 Small Business Administration 30 Education Department


31 Dept. of Housing and Urban Development 31 National Archives and Records Administration 57.1


58.6 57.7 57.3 57.1


2009 Ranking


1 2


n/a n/a 3 9 5 8 7 4


18 11


23 30 25 28 26 27 24 29


NOTE: Based on a survey of more than 263,000 federal government employees. Te scores reflect the weighted average of the percentage of employees who responded favorably to three questions: Are you satisfied with your job? How satisfied are you with your organization? Would you recommend your organization as a good place to work?


SOURCE: Partnership for Public Service THE WASHINGTON POST


placed first, with an 86.8; the Selective Service System was last, with 47.4. A bright spot amid this year’s


findings was the Smithsonian In- stitution, where about 4,000 workers are paid by the govern- ment and another 2,000 museum directors, concession workers, and fundraising personnel are paid through private funds. The survey accounted only for the perceptions of the government workers. “It’s almost a cliche, but it’s a


special place and people believe it makes a difference,” said Jim Douglas, the Smithsonian’s head of human resources. “Everyone knows the Smithsonian, and you get a good feeling from being a part of this place.” The Smithsonian was one of 24


agencies participating in the sur- vey for the first time, including GAO, the Peace Corps, the Con- gressional Budget Office and the National Gallery of Art. The survey is emerging as an


important management tool for agencies looking to spot trouble areas, said Partnership President Max Stier. “Particularly in an environ-


ment like the government, where you don’t have profit and loss statements and stock prices, this information becomes even more important,” Stier said. The partnership (which main-


year. “I think everyone feels over-


worked — and we are — but people feel a lot of pride in their work,” Chairman Sheila Bair said. The survey gave several exam-


ples of how an agency’s leader- ship can affect results. The Feder- al Labor Relations Authority, stagnant duringGeorgeW. Bush’s administration, saw its scores more than double thanks to strong reviews for agency leader- ship. It earned the biggest year- to-year jump among small agen- cies. By contrast, low scores for top


leaders at OMB sent the agency from third to 25th among small agencies. The numbers come just weeks after former director Peter R. Orszag departed, after oversee-


bestplaces-g.ai PROOF1


Topic: Fed Page


Run Date: 09 / 01 / 2010 Size: 2 Col x 5.75 in Artist: Chris Canipe


FPO


ing efforts to accelerate the gov- ernment’s hiring process and cut billions of dollars in wasteful gov- ernment contracts and federal building costs. “The political and career lead-


ers here at OMB take the results of this survey very seriously,” said spokeswoman Meg Reilly. Offi- cials are collecting worker feed- back and hope to quickly imple- ment changes, she said. Scores on the survey’s 100-


point scale ranged from an 81.8 forNRCto a 57.1 forHUDand the National Archives. The Transpor- tation Department, which placed last among large agencies in 2009, saw the biggest one-year climb,jumpingfour spots to26th. Among smaller agencies, the Surface Transportation Board


The Federal Diary: The Federal Labor Relations Authority made big strides. B3. To see the lists of large and small agency rankings, go to PostPolitics.com. For all the findings for Best Places go to www.bestplacestowork.org.


tains a content-sharing arrange- ment with TheWashington Post) compiled the rankings using data from the Office ofPersonnelMan- agement’s Federal Employee Viewpoint Survey. Agencies not part of OPM’s survey asked work- ers to complete similar question- naires. The survey also signaled an


encouraging bright spot regard- ing the government’s younger and newer workers: Employees ages 40 and younger were more satisfied with the government as an employer than their older col- leagues. Younger workers with three or fewer years of service also gave the government a satis- faction score almost 10 points higher than the overall average. ed.okeefe@washingtonpost.com reinl@washpost.com

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