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Russian missile wrecks apartment block, killing 3, as EU leaders visit Kyiv

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  • Zelenskiy gives gloomy assessment on Russian offensive in east
  • Russian strike destroys apartment building; 4 dead – officials
  • Lavrov says Russia will respond to long-range rocket deliveries
  • European Commission chief in Kyiv to discuss Ukraine’s EU bid
  • Zelenskiy vows more anti-corruption measures

KYIV, Feb 2 (Reuters) – A Russian missile destroyed an apartment building in the eastern Ukrainian city of Kramatorsk, killing at least three people, police said, as top European Union officials arrived in Kyiv for talks seen as key to Ukraine’s pivot towards the West.

Ukraine’s President Volodymyr Zelenskiy vowed more anti-corruption measures as authorities continued raids ahead of Friday’s EU meeting, reflecting his determination to show that Kyiv can be a reliable steward of billions of dollars in aid.

“We are here together to show that the EU stands by Ukraine as firmly as ever. And to deepen further our support and cooperation,” the head of the European Commission, Ursula von der Leyen, tweeted as she arrived in Kyiv by train on Thursday.

Ukraine sees the meeting as important to its hopes of joining the bloc, a process likely to take years.

In his evening video address, Zelenskiy also gave another bleak assessment of the battlefield situation as Russian forces continued to make incremental gains in the east of the country as the first anniversary of Moscow’s invasion looms on Feb. 24.

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In Kramatorsk, a Russian Iskander-K tactical missile struck at 9:45 p.m. (1945 GMT) on Wednesday, killing at least three people and injuring 20 others, police said.

“At least eight apartment buildings were damaged. One of them was completely destroyed,” police said in a Facebook post.

“People may remain under the rubble.”

Kramatorsk is about 55 km (34 miles) northwest of Bakhmut, currently the main focus of fighting in eastern Ukraine.

‘TOUGHER’ ON EASTERN FRONT

Russia, determined to make progress before Ukraine gets newly promised Western battle tanks and armoured vehicles, has picked up momentum on the battlefield and announced advances north and south of Bakhmut, which has suffered persistent Russian bombardment for months.

“Definite increase has been noted in the offensive operations of the occupiers on the front in the east of our country. The situation has become tougher,” Zelenskiy said in his evening video broadcast.

“The enemy is trying to achieve at least something now to show that Russia has some chances on the anniversary of the invasion,” he added.

Bakhmut and 10 towns and villages around it came under Russian fire, the Ukrainian military said late on Wednesday.

Avdiivka, another major Russian target, the nearby town of Maryinka and some neighbouring settlements were also hit, the military added.

Russian forces are pushing from both the north and south to encircle Bakhmut, using their superior troop numbers to try to cut it off from re-supply and force the Ukrainians out, Ukrainian military analyst Yevhen Dikiy said.

“This for us is the most difficult scenario,” Dikiy told Espreso TV.

“The enemy is able to use its sole resource, which it has in excess, its men,” he said, describing a landscape to the northeast of Bakhmut “literally covered with corpses”.

Ukraine and its Western allies say Moscow has taken huge losses around Bakhmut, sending in waves of poorly equipped troops, including thousands of convicts recruited from prisons as mercenaries.

A former commander of Russia’s Wagner mercenary group who fled to Norway in January told Reuters he wanted to apologise for fighting in Ukraine and was speaking out to bring perpetrators of atrocities to justice.

“First of all, repeatedly, and again, I would like to apologise,” Andrei Medvedev, 26, said.

ROCKETS

Ukraine has secured pledges of weapons from the West offering new capabilities – the latest expected this week to include rockets from the United States that would nearly double the range of Ukrainian forces.

“We’re focused on providing Ukraine the capability that it needs to be effective in its upcoming anticipated counter- offensive in the spring,” U.S. Defense Secretary Lloyd Austin said during a visit to the Philippines on Thursday.

The new weapons would put all of Russia’s supply lines in eastern Ukraine, as well as parts of Crimea, within range of Ukrainian forces.

Moscow says such rockets will escalate the conflict but not change its course.

“The greater the range of the weapons supplied to the Kyiv regime the more we will have to push them back from territories which are part of our country,” Foreign Minister Sergei Lavrov told Russian state TV on Thursday. Moscow claims to have annexed four Ukrainian provinces last year, as well as Crimea which it seized in 2014.

Russian forces are probing areas of weakness in Ukraine’s defences on the western edges of Luhansk region, its governor Serhiy Gaidai told Ukrainian TV on Thursday.

“The amount of shelling has increased, the number of attacks in the direction of Svatove-Kreminna has increased… They are piling up our positions with bodies,” Gaidai said.

Reuters could not confirm the battlefield reports.

President Vladimir Putin sent troops into Ukraine last February in a “special military operation” to “disarm” its neighbour. He now casts the campaign as a fight to defend Russia against an aggressive West. Ukraine and the West call it an illegal war to expand Russian territory.

Reporting by Reuters bureaux
Writing by Himani Sarkar and Gareth Jones
Editing by Robert Birsel and Peter Graff

Our Standards: The Thomson Reuters Trust Principles.

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Entertainment

Taylor Swift concert fiasco leads to U.S. Senate grilling for Ticketmaster

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WASHINGTON, Jan 24 (Reuters) – U.S. senators slammed Live Nation Entertainment’s lack of transparency and inability to block bot purchases of tickets on Tuesday, in a hearing called after a major fiasco involving ticket sales for Taylor Swift’s upcoming concert tour.

Live Nation Entertainment Inc (LYV.N) subsidiary Ticketmaster, which has been unpopular with fans for years, has drawn fresh heat from U.S. lawmakers over how it handled ticket sales last fall for Swift’s “Eras” tour, her first in five years. Experts say Ticketmaster commands more than 70% market share of primary ticket services for major U.S. concert venues.

“We apologize to the fans, we apologize to Ms. Swift, we need to do better and we will do better,” Joe Berchtold, who is president and chief financial officer of Live Nation, told the U.S. Senate Judiciary Committee hearing on Tuesday.

“In hindsight there are several things we could have done better – including staggering the sales over a longer period of time and doing a better job setting fan expectations for getting tickets,” Berchtold said.

Republican Senator Mike Lee said in an opening statement that the Ticketmaster debacle highlighted the importance of considering whether “new legislation or perhaps just better enforcement of existing laws might be needed to protect the American people.”

LACK OF COMPETITION

Senators slammed Berchtold for Live Nation’s fee structure and inability to deal with bots which bulk buy tickets and resell them at inflated prices.

“There isn’t transparency when no one knows who sets the fees,” Democratic Senator Amy Klobuchar said, responding to Berchtold’s claim that Live Nation fees fluctuate based on “ratings.”

Republican Senator Marsha Blackburn called Live Nation’s bot problem “unbelievable,” pointing out that much smaller companies are able to limit bad actors in their systems.

“You ought to be able to get some good advice from people and figure it out,” she said.

[1/2] Taylor Swift arrives at the 2022 MTV Video Music Awards at the Prudential Center in Newark, New Jersey, U.S., August 28, 2022. REUTERS/Eduardo Munoz

“I’m not against big per se, but I am against dumb,” Republican Senator John Kennedy said, referring to Live Nation’s dominance in the ticket sales market. “The way your company handled ticket sales for Ms. Swift was a debacle, and whoever in your company was in charge of that should be fired.

“If you care about the consumer, cut the price! Cut out the bots! Cut out the middle people and if you really care about the consumer, give the consumer a break!”

Jack Groetzinger, cofounder of ticket sales platform SeatGeek, testified that the process of buying tickets is “antiquated and ripe for innovation” and called for the breakup of Live Nation and Ticketmaster, which merged in 2010.

“As long as Live Nation remains both the dominant concert promoter and ticketer of major venues in the U.S., the industry will continue to lack competition and struggle,” he told lawmakers.

Ticketmaster has argued that the bots used by scalpers were behind the Taylor Swift debacle, and Berchtold asked for more help in fighting the bots that buy tickets for resale.

Other witnesses include Jerry Mickelson, president of JAM Productions, who has been among critics of Ticketmaster.

In November, Ticketmaster canceled a planned ticket sale to the general public for Swift’s tour after more than 3.5 billion requests from fans, bots and scalpers overwhelmed its website.

Senator Klobuchar, who heads the Judiciary Committee’s antitrust panel, has said the issues that cropped up in November were not new and potentially stemmed from consolidation in the ticketing industry.

In November, Ticketmaster denied any anticompetitive practices and noted it remained under a consent decree with the Justice Department following its 2010 merger with Live Nation, adding that there was no “evidence of systemic violations of the consent decree.”

A previous Ticketmaster dispute with the Justice Department culminated in a December 2019 settlement extending the consent agreement into 2025.

Reporting by Diane Bartz, Moira Warburton and David Shepardson; editing by Jonathan Oatis

Our Standards: The Thomson Reuters Trust Principles.

Diane Bartz

Thomson Reuters

Focused on U.S. antitrust as well as corporate regulation and legislation, with experience involving covering war in Bosnia, elections in Mexico and Nicaragua, as well as stories from Brazil, Chile, Cuba, El Salvador, Nigeria and Peru.

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Business

Fed to deliver two 25-basis-point hikes in Q1, followed by long pause

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BENGALURU, Jan 20 (Reuters) – The U.S. Federal Reserve will end its tightening cycle after a 25-basis-point hike at each of its next two policy meetings and then likely hold interest rates steady for at least the rest of the year, according to most economists in a Reuters poll.

Fed officials broadly agree the U.S. central bank should slow the pace of tightening to assess the impact of the rate hikes. The Fed raised its benchmark overnight interest rate by 425 basis points last year, with the bulk of the tightening coming in 75- and 50-basis-point moves.

As inflation continues to decline, more than 80% of forecasters in the latest Reuters poll, 68 of 83, predicted the Fed would downshift to a 25-basis-point hike at its Jan. 31-Feb 1 meeting. If realized, that would take the policy rate – the federal funds rate – to the 4.50%-4.75% range.

The remaining 15 see a 50-basis-point hike coming in two weeks, but only one of those was from a U.S. primary dealer bank that deals directly with the Fed.

The fed funds rate was expected to peak at 4.75%-5.00% in March, according to 61 of 90 economists. That matched interest rate futures pricing, but was 25 basis points lower than the median point for 2023 in the “dot plot” projections issued by Fed policymakers at the end of the Dec. 13-14 meeting.

“U.S. inflation shows price pressures are easing, yet in an environment of a strong jobs market, the Federal Reserve will be wary of calling the top in interest rates,” noted James Knightley, chief international economist at ING.

The expected terminal rate would be more than double the peak of the last tightening cycle and the highest since mid-2007, just before the global financial crisis. There was no clear consensus on where the Fed’s policy rate would be at the end of 2023, but around two-thirds of respondents had a forecast for 4.75%-5.00% or higher.

The interest rate view in the survey was slightly behind the Fed’s recent projections, but the poll medians for growth, inflation and unemployment were largely in line.

Inflation was predicted to drop further, but remain above the Fed’s 2% target for years to come, leaving a relatively slim chance of rate cuts anytime soon.

In response to an additional question, more than 60% of respondents, 55 of 89, said the Fed was more likely to hold rates steady for at least the rest of the year than cut. That view lined up with the survey’s median projection for the first cut to come in early 2024.

However, a significant minority, 34, said rate cuts this year were more likely than not, with 16 citing a plunge in inflation as the biggest reason. Twelve said a deeper economic downturn and four said a sharp rise in unemployment.

“The Fed has prioritized inflation over employment, therefore only a sharp decline in core inflation can convince the FOMC (Federal Open Market Committee) to cut rates this year,” said Philip Marey, senior U.S. strategist at Rabobank.

“While the peak in inflation is behind us, the underlying trend remains persistent … we do not think inflation will be close to 2% before the end of the year.”

Reuters Poll- U.S. Federal Reserve outlook

In the meantime, the Fed is more likely to help push the economy into a recession than not. The poll showed a nearly 60% probability of a U.S. recession within two years.

While that was down from the previous poll, several contributors had not assigned recession probabilities to their forecasts as a slump was now their base case, albeit a short and shallow one as predicted in several previous Reuters surveys.

The world’s biggest economy was expected to grow at a mere 0.5% this year before rebounding to 1.3% growth in 2024, still below its long-term average of around 2%.

With mass layoffs underway, especially in financial and technology companies, the unemployment rate was expected to rise to average 4.3% next year, from the current 3.5%, and then climb again to 4.8% next year.

While still historically low compared to previous recessions, the forecasts were about 1 percentage point higher than a year ago.

(For other stories from the Reuters global economic poll:)

Reporting by Prerana Bhat; Polling by Milounee Purohit; Editing by Ross Finley and Paul Simao

Our Standards: The Thomson Reuters Trust Principles.

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Business

Wall St stumbles after weak data, hawkish Fed comments

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  • Fed’s Bullard, Mester back rate increases
  • U.S. retail sales drop in December
  • Indexes down: Dow 1.28%, S&P 1.07%, Nasdaq 0.78%

Jan 18 (Reuters) – Wall Street’s main indexes fell on Wednesday after weak economic data and hawkish comments from Federal Reserve officials sparked worries that the central bank may not pause interest rate hikes any time soon.

Before the market opened, U.S. economic data showed retail sales and producer prices declined more than expected in December. Also production at U.S. factories fell more than expected in December and output in the prior month was weaker than previously thought.

With Wall Street’s major averages showing gains so far for 2023, Sam Stovall, chief investment strategist at CFRA research, said some investors saw the week data as an opportunity to take profits while others worried about the prospects for a recession.

“The market was overbought. Today’s economic data served as a trigger to initiate a profit taking spell and the groups with most profits to take have been the ones that have done best last year,” said Stovall.

By 2:14PM ET, the Dow Jones Industrial Average (.DJI) fell 434.27 points, or 1.28%, to 33,476.58, the S&P 500 (.SPX) lost 42.57 points, or 1.07%, to 3,948.4 and the Nasdaq Composite (.IXIC) dropped 87.02 points, or 0.78%, to 11,008.10.

The weakest sectors on the day are the defensive consumer staples (.SPLRCD), down more than 2%, and utilities (.SPLRCU), which was last down 1.8%.

The benchmark S&P and the blue-chip Dow were both on track for their second straight day of losses, while the Nasdaq, if it ends lower, would snap a seven-day winning streak.

U.S. stocks had started 2023 on a strong footing, with the S&P having closed up almost 4% year-to-date on Tuesday, on hopes that a moderation in inflationary pressures could give the Fed cover to dial down the size of its interest rate hikes.

Roughly halfway through January, the S&P was up 2.7% for the month so far while the Nasdaq was up more than 5% and the Dow, the best performer of the three for 2022, was up 0.9%.

Earlier, St. Louis Fed President James Bullard and Cleveland Fed President Loretta Mester stressed on the need to raise rates beyond 5% to bring inflation to heel.

The Fed commentary also highlighted the disparity between the U.S. central bank’s estimate of its terminal rate and market expectations, which were of the rate peaking at 4.88% by June. Traders are now betting on a 25-basis point rate hike in February.

“This market is very hopeful that we’re going to get a soft landing and every time you have hawkish comments from the Fed, it feels you’re not going to get that,” Dennis Dick, trader at Triple D Trading.

Investors are also focused on the fourth-quarter earnings season as a window into how corporate America is doing against the backdrop of higher interest rates.

Analysts now expect year-over-year earnings from S&P 500 companies to decline 2.6% for the quarter, according to Refinitiv data, compared with a 1.6% decline in the beginning of the year.

IBM Corp (IBM.N) was down 2.6% after Morgan Stanley downgraded the company’s shares to “equal weight” from “overweight”.

Early gainers Microsoft Corp (MSFT.O) and Tesla Inc (TSLA.O) erased gains by late afternoon trading with Microsoft down 1.2% and Tesla off 2.7%.

Moderna Inc (MRNA.O) rose 3.6% after reporting data which demonstrated the effectiveness of its respiratory syncytial virus (RSV) vaccine.

PNC Financial Services Group Inc (PNC.N) was down 5.4% after the company missed estimates for fourth-quarter profit.

Declining issues outnumbered advancing ones on the NYSE by a 1.38-to-1 ratio; on Nasdaq, a 1.66-to-1 ratio favored decliners.

The S&P 500 posted 9 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 71 new highs and 14 new lows.

Reporting by Sinéad Carew in New York, Shreyashi Sanyal and Amruta Khandekar in Bengaluru; Additional reporting by Shubham Batra; Editing by Shounak Dasgupta and David Gregorio

Our Standards: The Thomson Reuters Trust Principles.

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US

U.S. airports rumble back to life after FAA computer outage

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WASHINGTON, Jan 11 (Reuters) – U.S. flights were slowly beginning to resume departures and a ground stop was lifted after the Federal Aviation Administration (FAA) scrambled to fix a system outage overnight that had forced a halt to all U.S. departing flights.

The cause of the problem, which delayed thousands of flights in the United States, was unclear, but U.S. officials said they had so far found no evidence of a cyberattack.

“Normal air traffic operations are resuming gradually across the U.S. following an overnight outage to the Notice to Air Missions system that provides safety info to flight crews. The ground stop has been lifted. We continue to look into the cause of the initial problem” the FAA said in a Tweet.

More than 4,300 flights had been delayed and 700 canceled as officials said it will take hours to recover from the halt to flights.

The FAA had earlier ordered airlines to pause all domestic departures after its pilot alerting system crashed and the agency had to perform a hard reset around 2 a.m., officials said.

The FAA said shortly before 8:30 a.m. departures were resuming at Newark and Atlanta airports.

The FAA is expected to implement a ground delay program in order to address the backlog of flights halted for hours. Flights already in the air had been allowed to continue to their destinations during the ground stop.

U.S. President Joe Biden ordered the Transportation Department to investigate the outage and said the cause of the failure was unknown at this time. Asked if a cyber attack was behind the outage, Biden told reporters at the White House, “We don’t know.”

Transportation Secretary Pete Buttigieg pledged “an after-action process to determine root causes and recommend next steps.”

The FAA said it was working to restore the Notice to Air Missions system that alerts pilots to hazards and changes to airport facilities and procedures that had stopped processing updated information.

A total of 4,314 U.S. flights were delayed as of 9:04 a.m. ET, flight tracking website FlightAware showed. Another 737 were canceled.

MODERNIZATION NEEDED

United said it has resumed operations. The Chicago-based carrier, however, warned that customers might continue to see some delays and cancellations.

Shares of U.S. carriers fell in Wednesday’s premarket trading. Southwest Airlines (LUV.N) was down 2.4%, while Delta Air Lines Inc (DAL.N), United Airlines (UAL.O) and American Airlines (AAL.O) were down about 1%.

“America’s transportation network desperately needs significant upgrades … We call on federal policymakers to modernize our vital air travel infrastructure.” said Geoff Freeman, President and CEO of the U.S. Travel Association, a group representing U.S. airlines, hotels, car rental companies, and theme parks.

FAA’s system outage comes weeks after an operational meltdown at Southwest at the end of last year left thousands of passengers stranded.

A severe winter storm right before Christmas coupled with the Texas-based carrier’s dated technology led to over 16,000 flight cancellations last month.

The DOT, FAA’s parent agency, heavily criticized Southwest’s failures and pressured the airline to compensate passengers for missed flights and other related costs. There is no legal requirement that the FAA must compensate passengers for flight delays caused by agency computer issues.

ESSENTIAL INFORMATION

A NOTAM is a notice containing information essential to personnel concerned with flight operations, but not known far enough in advance to be publicized by other means.

Information can go up to 200 pages for long-haul international flights and may include items such as runway closures, bird hazard warnings and construction obstacles.

United Airlines (UAL.O) said it had temporarily delayed all domestic flights and would issue an update when it learned more from the FAA.

Germany’s Lufthansa and Air France both said they were continuing to operate flights to and from the United States, while the French airline said it was monitoring the situation.

The operator of Paris international airports – Paris Charles de Gaulle airport and Orly airport – said it expects delays to flights.

Austin-Bergstrom International Airport said on Twitter that ground stops across the country were causing delays. A ground stop is an air traffic control measure that slows or halts aircraft at a given airport.

In an earlier advisory on its website, the FAA said its NOTAM system had “failed”, although NOTAMs issued before the outage were still viewable. Earlier this month, a problem with a different airline computer control system delayed dozens of flights in Florida.

A total of 21,464 flights are scheduled to depart airports in the United States on Wednesday with a carrying capacity of nearly 2.9 million passengers, data from Cirium shows.

American Airlines has the most departures from U.S. airports with 4,819 flights scheduled, followed by Delta and Southwest, Cirium data showed.

Reporting by Doina Chiacu and David Shepardson in Washington, Abhijith Ganapavaram in Bengaluru, Jamie Freed in Sydney and Rajesh Kumar Singh in Chicago; Additional reporting by Nathan Gomes and Steve Holland in Washington
Writing by Shailesh Kuber and Alexander Smith Editing by Edmund Blair and Nick Zieminski

Our Standards: The Thomson Reuters Trust Principles.

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US

Kevin McCarthy elected Republican U.S. House speaker, but at a cost

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WASHINGTON, Jan 7 (Reuters) – Republican Kevin McCarthy was elected speaker of the U.S. House of Representatives early on Saturday, after making extensive concessions to right-wing hardliners that raised questions about the party’s ability to govern.

The 57-year-old Californian suffered one final humiliation when Representative Matt Gaetz withheld his vote on the 14th ballot as midnight approached, prompting a scuffle in which fellow Republican Mike Rogers had to be physically pulled away.

McCarthy’s victory in the 15th ballot ended the deepest congressional dysfunction in over 160 years. But it sharply illustrated the difficulties he will face in leading a narrow and deeply polarized majority.

He won at last on a margin of 216-212. He was able to be elected with the votes of fewer than half the House members only because six in his own party withheld their votes – not backing McCarthy as leader, but also not voting for another contender.

As he took the gavel for the first time, McCarthy represented the end of President Joe Biden’s Democrats’ hold on both chambers of Congress.

“Our system is built on checks and balances. It’s time for us to be a check and provide some balance to the president’s policies,” McCarthy said in his inaugural speech, which laid out a wide range of priorities from cutting spending to immigration, to fighting culture war battles.

McCarthy was elected only after agreeing to a demand by hardliners that any lawmaker be able call for his removal at any time. That will sharply cut the power he will hold when trying to pass legislation on critical issues including funding the government, addressing the nation’s looming debt ceiling and other crises that may arise.

Republicans’ weaker-than-expected performance in November’s midterm elections left them with a narrow 222-212 majority, which has given outsized power to the right-wingers who opposed McCarthy’s leadership.

Those concessions, including sharp spending cuts and other curbs on McCarthy’s powers, could point to further turbulence in the months ahead, especially when Congress will need to sign off on a further increase of the United States’ $31.4 trillion borrowing authority.

Over the past decade, Republicans have repeatedly shut down much of the government and pushed the world’s largest borrower to the brink of default in efforts to extract steep spending cuts, usually without success.

Several of the hardliners have questioned McCarthy’s willingness to engage in such brinkmanship when negotiating with Biden, whose Democrats control the Senate. They have raged in the past when Senate Republicans led by Mitch McConnell agreed to compromise deals.

The hardliners, also including Freedom Caucus Chairman Scott Perry of Pennsylvania and Chip Roy of Texas, said concessions they extracted from McCarthy will make it easier to pursue such tactics – or force another vote on McCarthy’s leadership if he does not live up to their expectations.

“You have changes in how we’re going to spend and allocate money that are going to be historic,” said Perry.

“We don’t want clean debt ceilings to just go through and just keep paying the bill without some counteracting effort to control spending when the Democrats control the White House and control the Senate.”

One of those Democrats, Senate Majority Leader Chuck Schumer, warned that the concessions McCarthy made to “the extremists” in his party may come back to haunt him, and made it more likely that the Republican-controlled House will cause a government shutdown or default with “devastating consequences.”

In a sharp contrast to the battles among House Republicans, Biden and McConnell appeared together in Kentucky on Wednesday to highlight investments in infrastructure.

McCarthy’s belated victory came the day after the two-year anniversary of a Jan. 6, 2021, attack on the U.S. Capitol, when a violent mob stormed Congress in an attempt to overturn then-President Donald Trump’s election loss.

This week’s 14 failed votes marked the highest number of ballots for the speakership since 1859, in the turbulent years before the Civil war.

McCarthy’s last bid for speaker, in 2015, crumbled in the face of right-wing opposition. The two previous Republican speakers, John Boehner and Paul Ryan, left the job after conflict with right-wing colleagues.

McCarthy now holds the authority to block Biden’s legislative agenda, force votes for Republican priorities on the economy, energy and immigration and move forward with investigations of Biden, his administration and his family.

CONCESSIONS

But the concessions he agreed to mean McCarthy will hold considerably less power than his predecessor, Democrat Nancy Pelosi. That will make it hard for him to agree to deals with Democrats in a divided Washington.

Allowing a single member to call for a vote to remove the speaker will give hardliners extraordinary leverage.

The agreement would cap spending for the next fiscal year at last year’s levels – amounting to a significant cut when inflation and population growth are taken into account.

That could meet resistance from more centrist Republicans or those who have pushed for greater military funding, particularly as the United States is spending billions of dollars to help Ukraine fend off a Russian assault.

Moderate Republican Brian Fitzpatrick said he was not worried that the House would effectively be run by hardliners.

“It’s aspirational,” he told reporters. “We still have our voting cards.”

Reporting by David Morgan, Moira Warburton and Andy Sullivan; Additional reporting by Gram Slattery, Jason Lange and Makini Brice, writing by Andy Sullivan; Editing by Scott Malone, Cynthia Osterman, William Mallard and Daniel Wallis

Our Standards: The Thomson Reuters Trust Principles.

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US

Hardline Republicans dig in against McCarthy’s House speaker bid

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WASHINGTON, Jan 5 (Reuters) – Hardline Republicans in the U.S. House of Representatives rejected Kevin McCarthy’s speakership bid for an 11th time on Thursday, while his supporters worked behind closed doors in hopes of cementing a deal that could bring success.

The voting propelled the House to a level of dysfunction not seen since the turbulent era just before the Civil War, even after McCarthy offered to curb his own clout, raising questions about the party’s ability to wield power.

After the 11th ballot, the House adjourned for the third time this week without electing a speaker. Lawmakers will reconvene at noon (1700 GMT) on Friday.

McCarthy’s opponents say they do not trust him to fight for the deep spending cuts and other restrictions they want to impose on President Joe Biden and the Democratic-controlled Senate.

But some Republicans held out hope of an agreement between the California Republican and at least some of the 20 hardline conservatives who have opposed his candidacy in ballot after ballot.

“Things are coming together in a very healthy way,” said Representative Patrick McHenry, a McCarthy supporter who is poised to lead a top congressional committee.

“We don’t know the timeframe. But the engagement is there and that’s why I’m optimistic,” he said.

Among other things, a possible agreement would allow for a vote on term limits for members of Congress, according to Republican Representative Brian Fitzpatrick.

But McCarthy’s supporters stopped short of predicting a resolution to the stalemate anytime soon.

Because of its inability to choose a leader, the 435-seat House has been rendered impotent – unable even to formally swear in newly elected members let alone hold hearings, consider legislation or scrutinize Biden and his administration.

Republicans won a slim 222-212 House majority in the November midterm elections, meaning McCarthy cannot afford to lose the support of more than four Republicans as Democrats united around their own candidate.

McCarthy, who was backed by former President Donald Trump for the post, offered the holdouts a range of concessions that would weaken the speaker’s role, which political allies warned would make the job even harder if he got it.

At least 200 Republicans have backed McCarthy in each of the votes this week. Fewer than 10% of Republican lawmakers have voted against him but they are enough to deny him the 218 votes needed to succeed Democrat Nancy Pelosi as speaker.

“What you’re seeing on this floor does not mean we are dysfunctional,” said Republican Representative Anna Paulina Luna as she nominated a McCarthy rival, Byron Donalds, for the 10th vote.

‘CONSTRUCT A STRAITJACKET’

“I can tell you there’s some good things happening,” said Representative Marjorie Taylor Greene, a McCarthy supporter who is among the most outspoken conservatives in the House. “I think we’re going to see some movement.”

But some of McCarthy’s opponents showed no sign of yielding.

“This ends in one of two ways: either Kevin McCarthy withdraws from the race or we construct a straitjacket that he is unwilling to evade,” said Republican Representative Matt Gaetz, who voted for Trump for speaker.

As speaker, McCarthy would hold a post that normally shapes the chamber’s agenda and is second in the line of succession to the presidency behind Vice President Kamala Harris. He would be empowered to frustrate Biden’s legislative agenda and launch investigations into the president’s family and administration in the run-up to the 2024 presidential election.

In a late-night bargaining session, McCarthy offered the holdouts greater influence over what legislation comes up for a vote, according to a source familiar with the talks.

He also offered the ability for any single member to call a vote that could potentially remove him from the post – a step that helped drive at least one prior Republican speaker, John Boehner, into retirement.

Those concessions could potentially help McCarthy win over some of the holdouts but would leave him more vulnerable to the hardliners through the rest of the next two years if he ultimately wins the speakership.

That has even alarmed some Democrats, who have largely served as bystanders in the drama of the past three days.

“With every concession, he has to wake up every day wondering if he’s still going to have his job,” Democratic Representative Richard Neal told reporters.

The inability to agree on a leader also raises questions about whether Republicans will force a government shutdown or risk default later this year in a bid to extract steep spending cuts. Some of the holdouts say they expect McCarthy or any other Republican leader to take that approach.

If McCarthy ultimately fails to unite Republicans, they would have to search for an alternative. Possibilities include No. 2 House Republican Steve Scalise and Representative Jim Jordan, who have both backed McCarthy. Jordan received 20 votes when nominated by the holdouts on Tuesday.

Reporting by Moira Warburton, Doina Chiacu, David Morgan, Kanishka Singh and Gram Slattery; Writing by Andy Sullivan; Editing by Will Dunham, Howard Goller and Christian Schmollinger

Our Standards: The Thomson Reuters Trust Principles.

Gram Slattery

Thomson Reuters

Washington-based correspondent covering campaigns and Congress. Previously posted in Rio de Janeiro, Sao Paulo and Santiago, Chile, and has reported extensively throughout Latin America. Co-winner of the 2021 Reuters Journalist of the Year Award in the business coverage category for a series on corruption and fraud in the oil industry. He was born in Massachusetts and graduated from Harvard College.

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US

Kevin McCarthy vows to remain in race for U.S. House speaker amid hardline opposition

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WASHINGTON, Jan 3 (Reuters) – Republican Kevin McCarthy vowed on Tuesday to remain in the race to be the powerful U.S. House of Representatives speaker, hours after hardline members of his party repeatedly blocked his bid to lead their brand-new majority.

In the first day of what could prove to be a brutal showdown between about 20 hardliners and the other 202 members of the Republican caucus, McCarthy failed in three ballots to achieve the 218 votes needed to become speaker, a role second in line to the Oval Office after the vice president.

It was a disconcerting start for the new Republican majority and highlights the challenges the party could face over the next two years, heading into the 2024 presidential election. Their slim 222-212 majority gives greater clout to a small group of hardliners, who want rule changes that would give them greater control over the speaker and more influence over the party’s approach to spending and the debt.

Late on Tuesday, McCarthy told reporters that former President Donald Trump had called him and reiterated his support. Trump has backed McCarthy in the race and remains a powerful figure in the Republican Party.

McCarthy, 57, from California, knew he faced an uphill climb heading into Tuesday’s vote and had vowed to continue to force votes. But the chamber voted on Tuesday evening to adjourn until noon ET (1700 GMT) on Wednesday, a move that would give Republicans time to discuss other candidates.

Conservative Representative Jim Jordan, 58, from Ohio, won 20 votes in the last ballot of the day, far from the threshold of 218 to become speaker but enough to stop McCarthy.

“I think that Kevin knows that this is his last shot,” said Representative Kenneth Buck, who had voted to support McCarthy. He noted that McCarthy previously tried in 2015 to become speaker and failed in the face of conservative opposition, adding, “He’s not gonna have this chance again.”

A protracted speaker election could undermine House Republicans’ hopes of moving forward quickly on investigations of Democratic President Joe Biden and his administration, and legislative priorities that include the economy, U.S. energy independence and border security.

The chamber’s top Democrat, House Minority Leader Hakeem Jeffries, bested McCarthy in all three votes. In the day’s final tally, Jeffries led McCarthy 212 to 202 votes. A majority of those voting, not a plurality, is needed to determine a speaker.

A standoff would leave the House largely paralyzed and could force lawmakers to consider another Republican candidate. In addition to Jordan, incoming Majority Leader Steve Scalise, 57, from Louisiana, was seen as a possibility.

The last time the House failed to elect a speaker on the first ballot was 1923.

‘RALLY AROUND HIM’

[1/10] U.S. House Republican leader Kevin McCarthy (R-CA) is surrounded by reporters after a House Republican caucus meeting on the first day of the 118th Congress at the U.S. Capitol in Washington, U.S., January 3, 2023. REUTERS/Evelyn Hockstein

Jordan himself had spoken in support of McCarthy before he was nominated, and all three times voted for him.

“We need to rally around him,” Jordan had said in an impassioned speech on the House floor. “I think Kevin McCarthy’s the right guy to lead us.”

Jordan is a staunch ally of Trump and a co-founder of the conservative House Freedom Caucus.

A former college wrestler, Jordan is preparing to oversee the House Judiciary Committee’s investigation of the Justice Department and FBI under Biden.

McCarthy’s hardline opponents are concerned that he is not deeply invested enough in the culture wars and partisan rivalries that have dominated the House – and even more so since Trump’s White House years.

Before the vote, McCarthy tried to persuade the holdouts during a closed-door party meeting, vowing to stay in the race until he gets the necessary votes, but many participants emerged from the gathering undaunted.

McCarthy suggested to reporters later on Tuesday that the path to him becoming speaker lay in members voting “present” – neither for nor against him – which would lower the threshold needed to secure the job.

McCarthy has spent his adult life in politics – as a congressional staffer then state legislator before being elected to the House in 2006. As speaker, McCarthy would be well placed to frustrate Biden’s legislative ambitions.

But any Republican speaker will have the tough task of managing a House Republican caucus moving ever rightward, with uncompromising tendencies and – at least among some lawmakers – close allegiances to Trump.

Struggles with the party’s right flank cut short the careers of the last two Republican speakers, with John Boehner resigning the post in 2015 and Paul Ryan opting not to run for re-election in 2018.

The record number of voting rounds to elect a House speaker is 133 over a two-month period in the 1850s.

The Democrats picked Jeffries to serve as minority leader after Nancy Pelosi, the first woman to serve as speaker, announced that she would step down from her leadership role. She will remain in office as a representative.

Reporting by David Morgan, Moira Warburton and Gram Slattery; additional reporting by Richard Cowan and Makini Brice; Editing by Scott Malone, Alistair Bell, Will Dunham and Howard Goller

Our Standards: The Thomson Reuters Trust Principles.

Gram Slattery

Thomson Reuters

Washington-based correspondent covering campaigns and Congress. Previously posted in Rio de Janeiro, Sao Paulo and Santiago, Chile, and has reported extensively throughout Latin America. Co-winner of the 2021 Reuters Journalist of the Year Award in the business coverage category for a series on corruption and fraud in the oil industry. He was born in Massachusetts and graduated from Harvard College.

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US

U.S. Senate plans initial vote on $1.66 trillion government funding bill

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WASHINGTON, Dec 20 (Reuters) – The U.S. Senate planned to take its first vote on a $1.66 trillion government funding bill on Tuesday, as lawmakers scrambled to pass the measure and avert a possible partial government shutdown beginning on Saturday.

The total funding proposed by the sweeping bill, is up from the approximately $1.5 trillion the previous year.

It includes other measures agreed on by negotiators from both parties, including a ban on the use of TikTok on government-owned devices and clarification of Congress’s role in certifying elections, an attempt to avoid a repeat of the violence of Jan. 6, 2021.

Senate and House of Representatives leaders aim to pass the 4,155-page bill and send it to Democratic President Joe Biden by the end of the week to ensure no interruptions to the government’s activities.

“We’re going to get going on this process today,” Senate Majority Leader Chuck Schumer said, referring to a planned Tuesday vote that would be the first in a series of steps clearing the way for passage by Friday.

While some conservative Senate Republicans have raised objections to the bill, as have House Republicans who would prefer to delay a deal until they take the majority on Jan. 3, top Senate Republican Mitch McConnell said most of his caucus supports it.

“We’re moving toward completing the business for the year,” McConnell told reporters. “And I think in a highly productive way from the point of view of the vast majority of Senate Republicans.”

Failure could bring a partial government shutdown beginning Saturday, just before Christmas, and possibly lead into a months-long standoff after Republicans take control of the House on Jan. 3, breaking the grip of Biden’s Democrats on both chambers of Congress.

Budget experts found fault with the bill’s size.

“This budget is too late and too big,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget. She noted that much of the spending increases are to keep pace with inflation, but added, “a lower number would help bring inflation down.”

Included in the bill is $44.9 billion in emergency assistance to Ukraine and NATO allies and $40.6 billion to assist communities across the United States recovering from natural disasters and other matters.

The Ukraine funds would be used for military training, equipment, logistics and intelligence support, as well as for replenishing U.S. equipment sent to Kyiv. It also includes funding to prepare for and respond to potential nuclear and radiological incidents in Ukraine. Russian President Vladimir Putin has not ruled out the use of nuclear weapons in the conflict with Ukraine.

Included in the Ukraine package is $13.4 billion in economic aide and $2.4 billion to help resettle Ukrainians in the United States.

The military aid would be on top of the record $858 billion in U.S. defense spending for the year, which is up from last year’s $740 billion and also exceeds Biden’s request.

On the non-defense side of the ledger, the bill’s negotiators have set funding at $800 billion, a $68 billion increase over the previous year. This includes increased healthcare funding for poor children.

WISH LIST

Democrats and Republicans alike had aimed to tuck as many legislative wish-list items as possible into the “omnibus” bill funding the government through the end of this fiscal year on Sept. 30, 2023, without derailing the whole package.

This was the second year in a row Congress included funding for hundreds of largely unrelated projects requested by individual lawmakers. Congress had abandoned such “earmarks” a decade ago after a series of corruption scandals, but have brought them back in recent years as a way to build legislative buy-in for spending bills.

Among the most significant add-ons is the bipartisan Electoral Count Act, which overhauls and clarifies Congress’ certification process for presidential elections.

Democrats and many Republicans see the measure as crucial to avoiding a repeat of the chaos that occurred almost two years ago when a mob of Donald Trump supporters attacked the Capitol building in an attempt to overturn Biden’s victory.

U.S. lawmakers also included a proposal to bar federal employees from using Chinese app TikTok on government-owned devices. And they backed a proposal to lift a looming deadline imposing a new safety standard for modern cockpit alerts for two new versions of Boeing Co’s (BA.N) 737 MAX aircraft.

Measures left out include legislation that would have provided citizenship to “Dreamer” immigrants, who illegally entered the United States as children.

Criminal justice reform advocates also came away largely empty-handed, after a compromise measure that would have dramatically lessened the sentencing disparity between crack cocaine and powder cocaine collapsed.

The cannabis industry also suffered a defeat after a closely watched measure that would have shored up banking regulations for legal marijuana companies was excluded.

Reporting by Richard Cowan and Gram Slattery in Washington, additional reporting by Doina Chiacu and Andy Sullivan in Washington and Jahnavi Nidumolu in Bengaluru; Editing by Scott Malone and Jonathan Oatis

Our Standards: The Thomson Reuters Trust Principles.

Gram Slattery

Thomson Reuters

Washington-based correspondent covering campaigns and Congress. Previously posted in Rio de Janeiro, Sao Paulo and Santiago, Chile, and has reported extensively throughout Latin America. Co-winner of the 2021 Reuters Journalist of the Year Award in the business coverage category for a series on corruption and fraud in the oil industry. He was born in Massachusetts and graduated from Harvard College.

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Business

FTX founder Sam Bankman-Fried charged with fraud, denied bail

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NASSAU, Bahamas/NEW YORK, Dec 13 (Reuters) – U.S. prosecutors on Tuesday accused Sam Bankman-Fried, the founder of crypto currency exchange FTX, of fraud and violating campaign finance laws and a judge in the Bahamas denied him bail, sending him to a local correctional facility instead.

The former FTX CEO, who was arrested in the Bahamas on Monday, lowered his head and hugged his parents after the magistrate judge refused bail citing a “great” risk of flight.

He was ordered remanded to a correctional facility in the island nation until Feb. 8, where he will initially held in the medical department, according to a local official.

The day’s events capped a stunning fall from grace in recent weeks for the 30-year-old, who amassed a fortune valued over $20 billion as he rode a cryptocurrency boom to build FTX into one of the world’s largest exchanges before it abruptly collapsed this year.

Bankman-Fried has previously apologized to customers and acknowledged oversight failings at FTX, but said he does not personally think he has any criminal liability.

Earlier on Tuesday, U.S. Attorney Damian Williams in New York said Bankman-Fried made illegal campaign contributions to Democrats and Republicans with “stolen customer money,” saying it was part of one of the “biggest financial frauds in American history.”

“While this is our first public announcement, it will not be our last,” he said, adding Bankman-Fried “made tens of millions of dollars in campaign contributions.”

Bankman-Fried faces a maximum sentence of 115 years in prison if convicted on all eight counts, prosecutors said, though any sentence would depend on a range of factors.

Williams declined to say whether prosecutors would bring charges against other FTX executives and whether any FTX insiders were cooperating with the investigation.

In his first in-person public appearance since the cryptocurrency exchange’s collapse, Bankman-Fried appeared in court on Tuesday in the Bahamas, where FTX is based and where he was arrested at his gated community in the capital, Nassau.

He appeared relaxed when he arrived at the heavily guarded Bahamas court and told the court he could fight extradition to the United States.

Bahamian prosecutors had asked that Bankman-Fried be denied bail if he fights extradition.

“Mr. Bankman-Fried is reviewing the charges with his legal team and considering all of his legal options,” his lawyer, Mark S. Cohen, said in an earlier statement.

‘BRAZEN’ SCHEME

[1/12] Sam Bankman-Fried, who founded and led FTX until a liquidity crunch forced the cryptocurrency exchange to declare bankruptcy, is escorted out of the Magistrate Court building, last month he was arrested after being criminally charged by U.S. prosecutors, in Nassau, Bahamas December 13, 2022. REUTERS/Dante Carrer

FTX’s current CEO, John Ray, told congressional lawmakers on Tuesday that FTX lost $8 billion of client money, saying the company showed “absolute concentration of control in the hands of a small group of grossly inexperienced, nonsophisticated individuals.”

In the indictment unsealed on Tuesday morning, U.S. prosecutors said Bankman-Fried had engaged in a scheme to defraud FTX’s customers by misappropriating their deposits to pay for expenses and debts and to make investments on behalf of his crypto hedge fund, Alameda Research LLC.

He also defrauded lenders to Alameda by providing false and misleading information about the hedge fund’s condition, and sought to disguise the money he had earned from committing wire fraud, prosecutors said.

Both the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) alleged Bankman-Fried committed fraud in lawsuits filed on Tuesday.

The CFTC sued Bankman-Fried, Alameda and FTX on Tuesday, alleging fraud involving digital commodity assets.

Since at least May 2019, FTX raised more than $1.8 billion from equity investors in a years-long “brazen, multi-year scheme” in which Bankman-Fried concealed FTX was diverting customer funds to Alameda Research, the SEC alleged.

CRYPTO INVESTORS LOST BILLIONS

Bankman-Fried, who founded FTX in 2019, was an unconventional figure who sported wild hair, t-shirts and shorts on panel appearances with statesmen like former U.S. President Bill Clinton. He became one of the largest Democratic donors, contributing $5.2 million to President Joe Biden’s 2020 campaign. Forbes pegged his net worth a year ago at $26.5 billion.

FTX filed for bankruptcy on Nov. 11, leaving an estimated 1 million customers and other investors facing losses in the billions of dollars. The collapse reverberated across the crypto world and sent bitcoin and other digital assets plummeting.

The collapse was one of a series of bankruptcies in the crypto industry this year as digital asset markets tumbled from 2021 peaks. A crypto exchange is a platform on which investors can trade digital tokens such as bitcoin.

As legal challenges mount, the U.S. Congress is also looking at crafting legislation to rein in a loosely-regulated industry.

FTX has shared findings with the SEC and U.S. prosecutors, and is investigating whether Bankman-Fried’s parents were involved in the operation.

The attorney general’s office of the Bahamas said it expected Bankman-Fried to be extradited to the United States.

Bankman-Fried resigned as FTX’s CEO the same day as the bankruptcy filing. FTX’s liquidity crunch came after he secretly used $10 billion in customer funds to support his proprietary trading firm Alameda, Reuters has reported. At least $1 billion in customer funds had vanished.

Additional reporting by Luc Cohen and Jack Queen in New York and Hannah Lang, Chris Prentice and Susan Heavey in Washington
Writing by Nick Zieminski and Deepa Babington
Editing by Noeleen Walder, Megan Davies, Anna Driver and Matthew Lewis

Our Standards: The Thomson Reuters Trust Principles.

Luc Cohen

Thomson Reuters

Reports on the New York federal courts. Previously worked as a correspondent in Venezuela and Argentina.

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