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Investors on Wednesday were so spooked about cracks opening in the global financial system, including at 166-year-old Credit Suisse, that Switzerland’s central bank threw a liquidity lifeline to the systemically important institution, which last year reported $569 billion in assets and is now able to borrow up to 50 billion francs ($53.7 billion) (Bloomberg News).

The bank’s shares soared as markets opened today on news of the Swiss National Bank’s lending decision. Fears after a rough 24-hour period appeared to be allayed. 

The U.S. Treasury Department spent Wednesday in contact with global counterparts and monitored evolving developments, which also served to compound U.S. investor anxieties and helped send the Dow Jones Industrial Average down 280 points by the end of the trading day (The Washington Post and The New York Times).

Asked about the impact of Credit Suisse’s problems on the U.S. banking system, Sen. Bernie Sanders (I-Vt.) told Reuters, “Everybody is concerned.”

Credit Suisse’s challenges are not the same as those that sent Silicon Valley Bank, nearly 6,000 miles away in California, into insolvency last week. But the Zurich bank’s higher costs of overnight funding, based on the price of its credit-default swaps, meant it needed to move quickly. It has been battered by years of financial missteps, including huge trading losses and scandals that have cost it two chief executives over three years, the Times reported.

In an international financial system in which Credit Suisse’s tentacles spread in many directions, its vulnerabilities sparked new investor fears and responses that began to feed on themselves. Switzerland’s central bank and FINMA, the country’s financial regulator, vouched for the bank’s overall financial health in a Wednesday statement, but Credit Suisse on Tuesday had conceded problems in its financial reporting controls discovered after queries by the Securities and Exchange Commission.

▪ Bloomberg News: Credit Suisse fueled a broader rout in European bank stocks.

▪ MarketWatch: Economist Nouriel Roubini, nicknamed “Dr. Doom,” said if Credit Suisse collapsed, it would be like a Lehman Brothers moment.

▪ The Guardian: Blackrock CEO Larry Fink, in a letter on Wednesday, said Silicon Valley Bank’s collapse could be the start of a “slow rolling crisis” in the U.S. financial system. Fink sees inflation persisting and interest rates continuing to rise, trends that contributed to SVB’s failure.

Wednesday’s global financial jitters sent analysts back to their crystal balls to forecast whether the Federal Reserve next week will decide to pause rate hikes to help the banking turmoil settle or continue tightening to slay inflation (CNBC). Analysts also want federal regulators to clarify whether backstops provided to SVB and Signature Bank depositors by the government above the $250,000 insurance cap under the Federal Deposit Insurance Corp. extend to account holders elsewhere and into the future.

Sens. Elizabeth Warren (D-Mass.) and Rep. Katie Porter, a Democrat seeking a California Senate seat next year, have crafted a bill along with cosponsors from their party in the House and Senate, that would repeal 2018 changes signed by former President Trump easing restrictions on midsize banks under the Dodd-Frank banking reform law (NBC News). Chances of the legislation attracting GOP support in the absence of a full-blown financial crisis are slim.

The legislative effort also reignites rifts within the Democratic Party. At the time, Warren opposed the GOP-led deregulatory measure that benefited banks such as SVB, but 17 Democrats voted with Republicans in 2018, ensuring passage. Under heavy lobbying by small and midsize banks, lawmakers said financial institutions that did not pose systemic risks akin to the biggest banks were unnecessarily disadvantaged by the Dodd-Frank requirements enacted after the 2008 financial meltdown.

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“In 2018, I rang the alarm bell about what would happen if Congress rolled back critical Dodd-Frank protections: Banks would load up on risk to boost their profits and collapse, threatening our entire economy — and that is precisely what happened,” said Warren, a former law professor first elected to the Senate in 2012. “President Biden called on Congress to strengthen the rules for banks, and I’m proposing legislation to do just that by repealing the core of Trump’s bank law.”

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Treasury Secretary Janet Yellen will field plenty of questions about global financial developments and bank regulation when she testifies before the Senate Finance Committee at 10 a.m.   

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Related Articles

▪ The Hill: Regional banks continued a market decline on Wednesday. 

▪ CNN: Concerned about possible deposit outflows, Fitch Ratings and Standard & Poor’s Global Ratings downgraded First Republic Bank’s credit to “junk” on Wednesday and placed another regional bank, PacWest Bancorp, on watch for a potential downgrade.  

▪ Bloomberg News: Before Signature Bank’s collapse on Sunday, it faced a Justice Department criminal probe.

▪ Reuters: SVB Financial explores bankruptcy as option for asset sales.

▪ The Hill: With China in mind, Sen. Marco Rubio (R-Fla.) urges the Treasury Department to prevent foreign adversaries and “companies subject to their jurisdiction” from acquiring failed banks’ assets.

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LEADING THE DAY

➤ ADMINISTRATION

The highest levels of the Kremlin approved the aggressive actions of Russian military fighter jets against a U.S. military drone over the Black Sea on Tuesday, U.S. officials told NBC News. In an unprecedented move, the Russian jets dropped jet fuel on the MQ-9 Reaper drone, and two of the officials told NBC News that the intent seemed to be to throw the drone off course or disable its surveillance capabilities. It was “Russian leadership’s intention to be aggressive in the intercept,” one of the officials said.

Defense Secretary Lloyd Austin had a rare phone call with his Russian counterpart, Defense Minister Sergei Shoigu, on Wednesday in the aftermath of the collision. The call comes as senior Pentagon leaders tried to quickly prevent the incident from leading to an escalation in tensions between the two countries. Austin said he called to clear the air, but declined to say whether Shoigu repeated Moscow’s denials that their warplane swiped the American MQ-9 Reaper, causing it to crash into the sea (The New York Times).

“I just got off the phone with my Russian counterpart, Minister Shoigu,” Austin said at a Pentagon press briefing. “As I’ve said repeatedly, it’s important that great powers be models of transparency and communication, and the United States will continue to fly and to operate wherever international law allows.”

Asked about the drone incident while traveling in Ethiopia, Secretary of State Antony Blinken described the collision as “reckless” and “unsafe” (Yahoo Finance).

Reuters: U.S. general says drone crash part of Moscow’s increasing aggression.

Moscow said Wednesday that it will try to retrieve the wreckage of the drone, while White House national security spokesman John Kirby said the drone might never be recovered (The Washington Post and The Hill). 

The search is complicated by the fact the unmanned aerial aircraft plunged into deep water near Crimea, write The Hill’s Brad Dress and Ellen Mitchell. The U.S. will also face serious limitations of what American crews could achieve in a search area close to Russian territory. Chairman of the Joint Chiefs of Staff Gen. Mark Milley said at a press briefing Wednesday that the drone is in waters as deep as 5,000 feet.

“Any recovery operation is very difficult at that depth by anyone,” he told reporters.

Charles Kupchan, a senior fellow with the Council on Foreign Relations, called the situation an “extraordinary” and worrying clash between Russia and the Western security alliance NATO. 

“Whatever the intent of the Russians, this is a very dangerous situation,” he told The Hill. “On a daily basis we have Russian weapons and aircraft and personnel in close proximity to NATO territory, NATO personnel, NATO platforms. And so the risk of escalation is significant.”

The Hill’s Brad Dress has rounded up five key takeaways from the downed drone.

▪ The New Republic: Sen. Lindsey Graham (R-S.C.) suggests shooting down Russian fighter jets as a response after a U.S. drone was downed. “What would Ronald Reagan do right now?” the Republican senator asked on Fox News.

▪ Politico: The Senate confirmed former Los Angeles Mayor Eric Garcetti (D) as U.S. ambassador to India despite conflicting accounts of alleged misdeeds by a former top staff member.

▪ The Hill: Biden administration threatens to ban TikTok if Chinese parent company doesn’t sell stakes.

➤ POLITICS 

Senate Republicans on Wednesday signaled growing concerns about Florida Gov. Ron DeSantis’s (R) stance on Ukraine after he likened Russia’s invasion of the country to a “territorial dispute” and argued becoming further involved is not a “vital” national interest for the U.S., The Hill’s Al Weaver reports. Multiple Republicans took aim at the remarks, indicating they believe DeSantis is basing his stance on politics, not national security interests.

“It does seem consistent with many of the things we’re hearing on television and certain friends in the Republican Party,” Sen. Todd Young (R-Ind.) told The Hill. “But I don’t think that this is a long-game political strategy and it’s certainly not a long-game national security strategy.”

Sen. John Thune (R-S.D.) told reporters on Wednesday that most Senate Republicans disagree with DeSantis on continued support for Ukraine (The Hill). DeSantis’s comments align him more closely with former President Trump, but put him at odds with other potential 2024 candidates who have shown ardent support for Ukraine — leading some to question if the comments are intended mainly as political strategy (CBS News). 

▪ The Hill: In surprise, Trump goes after DeSantis on policy.

▪ Tampa Bay Times: Has DeSantis changed his stance on Ukraine?

▪ The Atlantic: Is DeSantis flaming out already? The Florida governor has a plan to win the Fox News primary — and lose everything else.

Meanwhile, some Republicans are wincing over Trump’s early barrage of attacks against DeSantis, fearing it’s a preview of a brutal primary to come that could leave both candidates weakened heading into the general election. The Hill’s Alexander Bolton writes that GOP lawmakers and strategists acknowledge that DeSantis needs to show he can take a punch but they worry that getting into a yearlong mudslinging battle with Trump isn’t a good look heading into 2024.

▪ The Hill: Trump campaign complains to Federal Election Commission about DeSantis “shadow campaign.” 

▪ The Hill and Politico: DeSantis hasn’t announced he is running for president in 2024 yet. That didn’t stop Rep. Chip Roy (R-Texas) from endorsing him Wednesday. 

Former New Jersey Gov. Chris Christie, the moderate Republican who ran in 2016 for the party’s presidential nomination, will speak at an event in New Hampshire later this month as rumors swirl that he is considering another White House bid in 2024. Christie stumped for Trump after dropping from the race in 2016, but has drifted further and further away from the former president ever since (The Hill).

Congressional Republicans effectively named energy policy as their top priority when they introduced an energy package as H.R.1 on Tuesday. While the bill is unlikely to make it past the Democratically controlled Senate or Biden, it does lay out the party’s vision for how to improve the country’s energy policies, writes The Hill’s Rachel Frazin, as it would bolster fossil fuels and mining, as well as permitting reform, while repealing programs introduced under the Inflation Reduction Act.

Senate Majority Leader Chuck Schumer (D-N.Y.), speaking on the Senate floor on Wednesday, asked federal regulators to expand the government Norfolk Southern safety investigation to all major rail companies (The Hill).

▪ The Hill: Tensions have eased between Vice President Kamala Harris and Warren. “No one was benefitting from this,” said one source familiar with the tiff. “They had to get rid of it.”

▪ The Hill: Stormy Daniels meets with New York prosecutors in Trump hush-money probe.

▪ Politico: In the mob’s eyeline: A senior Republican’s close brush revealed in new Jan. 6 footage.

▪ The New York Times: Sold: Yacht with a waterfall. Price: $19 million. Broker: Rep. George Santos (R-N.Y.). Just before his House election, Santos helped two of his largest donors reach a private deal on a $19 million boat, mixing his political and personal interests.

Meanwhile in Texas, control of the Houston Public School system on Wednesday was seized by the Texas Education Agency, which announced Wednesday that it plans to install state-appointed managers in place of the Houston Independent School District’s elected school board.

“This action places a board of Houstonians — who have a firm belief that all children can learn and can achieve at high levels when properly supported — this action places that kind of board in charge of the district,” Education Commissioner Mike Morath told Houston Public Media. 

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IN FOCUS/SHARP TAKES

➤ INTERNATIONAL 

In Ukraine, more Russian troops, weapons and aggressive tactics that Moscow hopes will produce a badly needed breakthrough aren’t just hitting the long-embattled city of Bakhmut, but are also playing out to the north in the Luhansk region. Medics described heavy casualties in recent weeks, further evidence that the grinding warfare along the front that runs across eastern and southern Ukraine is coming at a high cost to both sides (Reuters).

▪ Financial Times: International Monetary Fund poised to announce $15.6 billion lending program for Ukraine.

▪ Politico: “Ukraine doesn’t have any time to waste”: The U.S. races to prepare Kyiv for a spring offensive.

▪ The Washington Post: The daring front-line mission to evacuate reluctant Ukrainians.

▪ The Wall Street Journal: Russia strikes Kharkiv as Ukraine’s allies discuss military support.

▪ Politico: Former NATO chief: Trump could sabotage the war in Ukraine.

Blinken on Wednesday pressed Ethiopian Prime Minister Abiy Ahmed on accountability for atrocities committed by all parties throughout the yearslong conflict in the northern part of the country. Blinken’s visit to Addis Ababa comes months after the two major parties to the conflict — the Abiy government and the Tigray People’s Liberation Front — reached a “permanent cessation of hostilities agreement” aimed at ending the bloody dispute that caused a humanitarian catastrophe and led to a significant rift in the relations between the Ethiopian and U.S. governments (CNN).

▪ The Hill: Blinken says Ethiopia must do more on Tigray peace deal.

▪ The Wall Street Journal: French protesters pour into the streets ahead of a parliament vote on pension overhauls.

▪ The Washington Post: City of … Garbage? Paris, amid strikes, is drowning in trash.

▪ Reuters: China coast guard enters disputed waters in East China Sea.

▪ CNN: South Korean leader lands in Japan for first visit in 12 years seeking help with region’s “polycrisis.”

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OPINION

■ Let’s retire the word “woke,” by Matthew Cooper, digital editor, Washington Monthly. https://bit.ly/3Lsyf1n 

■ Filling the hole Silicon Valley Bank left in the climate tech ecosystem, by Brad Handler and Morgan Bazilian, opinion contributors, The Hill. https://bit.ly/3mPVU1v

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WHERE AND WHEN

📲 Ask The Hill: Share a news query tied to an expert journalist’s insights: The Hill launched something new and (we hope) engaging via text with Editor-in-Chief Bob Cusack. Learn more and sign up HERE.

The House will convene on Friday at 11 a.m. for a pro forma session.

The Senate meets at 10 a.m. to resume consideration of the nomination of Jessica Clarke to be a U.S. district judge for the Southern District of New York.

The president will receive the President’s Daily Brief at 10 a.m.

Vice President Harris will travel to Des Moines for a roundtable with local leaders to discuss reproductive rights. 

Secretary of State Antony Blinken today is the first U.S. secretary to visit Niger. He will meet President Mohamed Bazoum and Foreign Minister Hassoumi Massaoudou in Niamey. Blinken will talk about peace with those from Niger’s conflict zones who completed the Disarmament, Demobilization, Reintegration and Reconciliation program.

Treasury’s Yellen at 10 a.m. will unpack the president’s fiscal 2024 budget and global developments during testimony before the Senate Finance Committee. 

Economic indicator: The Labor Department will report at 8:30 a.m. on claims for unemployment benefits filed in the week ending March 11.

The White House daily press briefing is scheduled at 2 p.m.

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ELSEWHERE

➤ HEALTH & PANDEMIC 

A federal judge in Texas on Wednesday pledged to issue an order and opinion “as soon as possible” (CNN) in a consequential case that could upend access to a widely used abortion pill known as mifepristone, which has been on the market in the U.S. for more than two decades. U.S. District Judge Matthew Kacsmaryk, who was appointed by Trump, seemed open to the argument that the pill had not been properly vetted, despite rebuttals from the Food and Drug Administration and leading health organizations.

The judge pressed government lawyers during a Wednesday hearing in Amarillo, Texas, about the safety and approval process for the drug. An anti-abortion group behind the lawsuit said there is no precedent for a court to order the suspension of a long-approved medication (The Washington Post). 

▪ The Washington Post: Abortion pill fight may have broader implications for FDA drug approval.

▪ Vox: The sole US supplier of a major abortion pill said it would not distribute the drug in 31 states. A list circulated in January by the distributor to Walgreens and CVS underscores the uncertainty surrounding abortion pills in the post-Roe era.

Separately on Wednesday, the FDA said Pfizer’s antiviral COVID-19 treatment known as Paxlovid is safe and effective at treating adults with mild to moderate COVID-19 who are at high risk of progressing to severe disease, including hospitalization or death. The agency also said the drug doesn’t cause patients to “rebound” with infections after taking it, which has been an anecdotal complaint. Some physicians have speculated that some infected patients might need to take the drug for longer than the recommended five days.

The report was released in briefing documents ahead of an agency advisory committee meeting on Thursday, where outside advisers will discuss whether to recommend Paxlovid — which is currently on the market through an emergency use authorization granted in 2021 — for full approval (The Hill).

▪ Science: Do COVID-19 vaccine mandates still make sense? Ineffective or outdated requirements could undermine trust, some vaccine researchers warn.

▪ CBS News: How to improve your gut health, according to experts. 

Information about the availability of COVID-19 vaccine and booster shots can be found at Vaccines.gov. 

Current U.S. COVID-19 deaths are 1,862 for the most recent week, according to the Centers for Disease Control and Prevention. (Data is reported on Fridays.)

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THE CLOSER

Take Our Morning Report Quiz

And finally … 🍀 It’s Thursday, which means it’s time for this week’s Morning Report Quiz! Inspired by St. Patrick’s Day on Friday, we’re eager for some smart guesses about a few things Irish. 

Be sure to email your responses to [email protected] and [email protected] — please add “Quiz” to your subject line. Winners who submit correct answers will enjoy some richly deserved newsletter fame on Friday.

During Biden’s April visit to Northern Ireland, he plans to mark what event?

1. His birthday
2. Good Friday Agreement
3. Group of 20 summit
4. Unveiling of commemorative “Biden Ale” in Dublin

An 83-year-old Irish widow is a celebrity because she contributed what handcrafted expertise to this year’s Oscar-nominated film “The Banshees of Inisherin”?

1. Neo Celtic manuscripts
2. Megalithic tomb carvings
3. Lace wedding dress
4. Knitted sweaters

A U.S. national newspaper on Wednesday published an Irish-themed recipe for what dish that likely started its historic life as cál ceannann in Gaelic?

1. Mutton stew
2. Mashed potatoes with kale or cabbage
3. Soda bread
4. Fruitcake

St. Patrick’s Day blarney includes ______ ?

1. Patrick was not canonized a saint
2. He did not drive all snakes out of Ireland
3. He didn’t rid Ireland of pagans
4. His given name was not Patrick
5. All of the above

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