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Explainer – What’s the latest on Biden’s student loan forgiveness in the US? By Reuters

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© Reuters. FILE PHOTO: US President Joe Biden speaks about the administration’s plans for forgiveness of federal student loan debt during remarks in the Roosevelt Room of the White House in Washington, US, August 24, 2022. REUTERS/Lea Melis/File Photo

WASHINGTON (Reuters) – U.S. President Joe Biden’s plan to waive federal student loans, first announced in August, has been hampered by two legal challenges, blighting the financial futures of millions of American students and alumni.

Biden said on Tuesday he was confident the plan was legal, and announced a new temporary relief for borrowers that could mean their next loan payment isn’t due until August 2023.

What are the Latest News?

On November 22, Biden said he would extend the COVID-19-era pause in student loan payments until June 30, 2023. The pause would allow the US Supreme Court to review his administration’s requests to lift lower court orders blocking the plan affecting loans held by the Education Department.

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Biden said payments will resume 60 days after the pause ends.

What happens after court cases?

The Biden administration has asked the Supreme Court to delay a November 14 decision by the Eighth Circuit Court of Appeals in St. Louis, Missouri, that granted an injunction request from the Republican-led states of Arkansas, Iowa, Kansas and Missouri. Nebraska and South Carolina. The states are due to respond to the request on Wednesday.

A federal appeals court in New Orleans is also asking for the suspension of a separate November 10 ruling by a Texas judge appointed by former Republican President Donald Trump that declared the debt relief plan illegal. If the US Court of Appeals’ Fifth Circuit does not grant this request, the administration said, it will ask the Supreme Court to intervene.

Who is eligible for loan forgiveness?

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The program forgives $10,000 in debt held by the federal government for individuals making less than $125,000, couples making less than $250,000 and $20,000 in debt held by Pell Grant holders, most of whom are low-income borrowers.

What is the status of applications?

About 26 million Americans have applied for student loan forgiveness since August, and the US Department of Education has already approved 16 million applications. The government stopped accepting new applications on November 11, after a Texas judge blocked Biden’s order.

Borrowers who have not yet applied can sign up to a federal website for updates.

What do the voters say?

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American voters support debt forgiveness by a narrow margin. About 15% of voters said they could be affected by the plan, according to an Economist/YouGuv poll.

The six Republican-run states that have sued to block Biden’s executive order argue that it avoided congressional power and that the plan threatens future tax revenues and money earned by state entities that invest in or service student loans.

Deep Southern states will receive the most benefits per borrower from a Biden order, according to New York Fed research, including South Carolina, one of six states behind the suit:

Financial advisors warn that a handful of states may consider student loan debt that is exempt from taxable income.

Why is US student debt so high?

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The cost of higher education in the United States has risen in the past three decades, doubling at private four-year colleges and universities and rising more than at public four-year schools, according to research from the nonprofit College Board. The outstanding balance of student loans nearly quadrupled from 2006 to 2019.

American borrowers hold about $1.77 trillion in student debt, according to the most recent Federal Reserve figures. The vast majority of that is in the hands of the federal government.

Economists estimate that Biden’s plan for student loan forgiveness could add $300 billion to $600 billion to the federal debt.

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Economic

New York Federal Reserve Securities Link Reverse Repo to Bank Regulatory Change by Reuters

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© Reuters. FILE PHOTO: The Federal Reserve building is seen in front of the Federal Reserve Board and is expected to signal plans to raise interest rates in March as it focuses on fighting inflation in Washington, US, January 26, 2022. REUTERS/Joshua Roberts

Written by Michael S Derby

(Reuters) – Continued massive cash flows at a key Fed facility are largely driven by a change in bank liquidity regulations from last year, a New York Federal Reserve report said on Friday.

The Fed offers what’s called a reverse repo, which allows eligible businesses to store cash at the central bank for a risk-free return. The rule that plays into the inflows is a regulation called the supplementary leverage ratio, which determines how much liquidity banks need on hand.

The SLR standard was relaxed during the most severe phase of the coronavirus pandemic in 2020, when concerns about market performance prevailed, and it was restored at the end of March 2021, to return to a more stringent level.

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Banking economists Jara Afonso, Marco Cipriani, and Gabriel La Spada write: “After the end of the SLR exemption period, banks had less flexibility to expand their balance sheets by increasing their holdings of reserves and Treasuries.” This had a knock-on effect on money market funds, the main users of reverse repo, which drove liquidity into the reverse repo facility.

After the regulations changed, the newspaper said, banks were less inclined to take deposits, and instead the money flowed into financial funds, which had to invest that money somewhere. Meanwhile, banks have cut back on short-term debt offerings, restricting where money can be invested. Moreover, the federal interest rate increases pushed cash into money market funds as financial markets experienced a shift in the cost of short-term borrowing, according to the authors.

The Federal Reserve’s esteemed buyback facility is an essential part of the toolkit it uses to manage its federal funds rate target setting, which it uses to influence the economy’s trajectory to achieve its inflation and employment targets. A reverse repo tool provides money market funds and other companies a place to deposit cash into the Federal Reserve overnight and earn a return. It is currently at 3.8% and is an investment with a better return than many private securities that come with greater risks.

The Fed’s reverse repo facility was largely unused in the spring of 2021, and then flows increased steadily. Inflows peaked at $2.426 trillion at the end of September before easing slightly to Friday’s inflow of $2.05 trillion.

Fed officials were optimistic about the huge levels of inflows. Some have argued that as the Fed raises interest rates and reduces the size of its balance sheet to combat high inflation, inflows into the reverse repo facility should decrease over time. But so far it hasn’t really happened.

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Meanwhile, issues related to the correct setup of the SLR are under consideration by the financial authorities, who are treading cautiously on the issue. “History shows the massive costs incurred by society when bank capital is inadequate, and therefore the urgency that the Fed properly adjusts capital regulation,” Michael Barr, the Fed’s official on bank supervision, said in comments Thursday.

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US Federal Reserve proposes plan for banks to manage climate-related financial risks By Reuters

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© Reuters. FILE PHOTO: An eagle graces the facade of the US Federal Reserve Building in Washington, July 31, 2013. REUTERS/Jonathan Ernst

Written by Chris Prentice

WASHINGTON (Reuters) – The U.S. Federal Reserve on Friday joined other major bank regulators in proposing a plan for how big banks can manage climate-related financial risks, drawing immediate opposition from one member and reservations from another.

The proposed principles detail the expectations for banks with more than $100 billion in assets to incorporate climate-related financial risks into their strategic planning. The proposal was approved for public comment in a 6-1 vote of the Fed’s Board of Governors.

The proposal marks the latest effort by US policymakers to prepare for potential financial risks from climate change, bringing the Fed into line with the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC), which have separately proposed their own plans.

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The potential impacts of climate change — rising sea levels, worsening floods and fires, and government policies moving away from carbon-heavy industries — could destroy trillions of dollars in assets worldwide.

The Fed said these financial implications “constitute an emerging risk to the integrity and integrity of financial institutions and to the financial stability of the United States.”

The Fed’s plan requires banks to consider climate-related financial risks in their audits, manage other risks, and add climate-related scenario analysis to the traditional stress test. The report suggested that banks should also assess and consider whether they should include climate-related risks in their liquidity reserves.

The debate over the extent of financial system risks posed by climate change has been politically charged. Federal Reserve Governor Christopher Waller opposed Friday’s proposal, raising the question of whether it represented a serious risk to the safety of large banks or financial stability in the United States.

“Climate change is real, but I do not agree with the premise that it poses a serious risk to the safety and integrity of major banks and the financial stability of the United States,” Waller said in a statement released alongside the proposal. “The Fed conducts regular stress tests on large banks that deliver very severe macroeconomic shocks and show that banks are resilient.”

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Gov. Michele Bowman endorsed the plan for public input with reservations, noting that the board should consider the “costs and benefits of any new projections.”

The proposal will be open to public comment for 60 days.

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More than 1,000 New York Times union employees plan to quit over payroll, reports Reuters

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© Reuters. FILE PHOTO: The New York Times Building in Manhattan, New York, US, August 3, 2020. REUTERS/Shannon Stapleton/File Photo

(Reuters) – More than 1,000 unionized employees of The New York Times Company have pledged to quit if the news publisher does not agree to a “full and fair contract” by Dec. 8, according to a union tweet on Friday.

The New York Times NewsGuild sought “inflationary” wages as well as preserving and enhancing health insurance and retirement benefits promised during employment, according to a letter signed by 1,036 members.

“We will be out and about for 24 hours, Thursday, December 8th, if we do not have a full and fair contract agreement in place by then,” the letter said.

Union members are also asking for flexibility to work remotely, among other demands.

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A spokesperson for The New York Times said “While we are disappointed that NewsGuild is threatening to strike, we stand ready to ensure The Times continues to serve our readers without interruption,” adding that the company’s current pay offer offered “significant increases.”

Earlier in March, a group of nearly 600 tech employees at The New York Times voted to unionize as the company faced allegations that it illegally interfered with organizing work.

In August, approximately 300 Thomson Reuters (NYSE: Corp) journalists in the US, represented by the same NewsGuild, also staged a 24-hour strike while the union negotiated a new three-year contract with the company.

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