Fri. Jan 21st, 2022


This is an audio transcript of the FT News Information Session podcast episode: US shifts from ‘war on drugs’

Marc Filippino
Good morning from the Financial Times. Today is Tuesday, January 11th, and this is your FT News Briefing.

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The Federal Reserve’s second-in-command resigned. Companies kicked off the new year with a frenzy of bond issues. And US banks are ready to report, yes, more record profits. On top of that, the U.S. has been waging a war on drugs for five decades, now moving to a softer approach.

Jamie Smyth
I think what drove this shift, this pivot in U.S. policy at the state and federal level toward harm reduction, is really the scale of the crisis here.

Marc Filippino
I’m Marc Filippino, and here’s the news you need to start your day.

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Fed Chairman Richard Clarida is stepping down just as his boss, Jay Powell, will appear before U.S. lawmakers. Clarida’s departure comes after recent revelations show that he was more active in financial markets at the start of the pandemic than he had previously announced. Clarida is the third senior Fed official to resign in recent months. They have all come under scrutiny for personal transactions they have made since the central bank was actively relaxing monetary policy in 2020. Clarida will leave the Fed on Friday, just weeks from the formal end of his four-year term. Jay Powell is scheduled to appear before Congress today on his reappointment as head of the US Federal Reserve.

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Companies are eager to raise money before central banks raise interest rates. In the first week of this year, they raised more than $ 100 billion in global bond markets. However, this is not a record, it is still behind last year’s box office start, but US transactions have reached a record pace. Most were banks and foreign financial institutions issuing in the US, but bonds are also issued by blue-collar companies such as MetLife and the manufacturer of heavy machinery Caterpillar. In the lower-rated junk bond market, cruise operator Royal Caribbean launched one of the first deals this year with a $ 1 billion mortgage.

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U.S. banks are starting to report earnings, and we’ll probably see more of the excellent performance we saw during the pandemic. Profits for 2021 will reach record highs thanks to an increase in investment bank fees. Banks also released the financial cushions they set aside at the start of the pandemic in case of massive defaults. That money also increased profits. Our US bank editor Josh Franklin says earnings are expected to slow slightly this year, but Wall Street remains bullish.

Joshua Franklin
And the biggest reason for that is because of the rising interest rate environment that we expect for 2022. It will therefore really mean that banks will be able to make loans at higher rates than they could do. And this is something that banks certainly look forward to. During the pandemic, because there was all this kind of stimulus from the Fed and the government, bank deposits really swelled during the pandemic. I think in the last two years, JPMorgan, which is America’s largest bank, has seen its number of deposits increase by more than 50 percent to almost $ 2.5tn by the end of 2021. So banks really like to, you know, use these deposits to make loans, but they could not do so nearly to the extent and at the rates they would like. So they are really focused on making loans in an environment with rising interest rates.

Marc Filippino
So Josh, what are you looking at more than US banks are starting to report this week?

Joshua Franklin
Two areas I want to flag, one is just on loan application. So because companies were able to borrow and raise so much money during the pandemic, because markets were so accommodating, they did not need to take out so many loans from banks in 2021. But there is an expectation that it will improve in 2022, so corporate lending will increase. So what banks saw in the fourth quarter and what they expect to see in 2022 is going to be interesting there. And then also just on compensation, you know, it really was a banner year for investment banking fees, and a lot of that money is going to go into the pockets of the investment bankers, so they will expect to get big bonuses this. year. It will therefore be interesting to see how the increase in remuneration follows the overall increase in investment bank fees.

Marc Filippino
Josh Franklin is the FT’s American bank editor.

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The US government has been waging a war on drugs for five decades. By that time, overdose deaths had skyrocketed. Last year, they achieved a record of 100,000. The war was about enforcement and incarceration. But the US is moving away from that. We see states adopting marijuana legally and other strategies. One new attempt has become particularly controversial. The FT’s American pharmaceutical correspondent Jamie Smyth is now joining me to talk more about this. Hi, Jamie. Welcome to the show.

Jamie Smyth
Hi.

Marc Filippino
So Jamie, you wrote about something called supervised injection sites. Can you tell us a little more about this?

Jamie Smyth
Yes. Supervised injection sites are therefore really an important part of this damage reduction strategy. And what they do is they provide a safe place where drug users can attend, they can bring their stock of typically an illegal drug, they can have it tested to see what’s in it, and they can put these drugs in a monitored environment consumes health workers or people present who are able to intervene and reverse overdose if they, you know, if it happens. In Canada, for example, they say that since they started launching these sites a few years ago, they have intervened and saved thousands of lives, you know, by reversing this overdose. So this is a very important kind of new policy that the US wants to introduce.

Marc Filippino
Jamie, what is the economy of harm reduction strategies versus something like enforcement, you know, police arrests, incarceration and stuff like that.

Jamie Smyth
I think what has proven over the last 50 years is that large sums of money spent on policing and especially in terms of locking people up in prisons just have not worked. So I think what we are seeing is that state and federal authorities are starting to look at high prevention, education and harm reduction can cut costs. And there have been a few studies done that show that for every dollar spent on supervised injection sites, it’s more than two dollars back. In terms of the fact that you do not have to spend so much money on health, you know, these interventions, emergency interventions to save people from overdose, the chronic health problems they develop when they have an episode or an overdose. So I think it’s a bit of a no brainer in terms of education and prevention and even harm reduction that it’s actually going to save money.

Marc Filippino
So why is this strategy politically controversial?

Jamie Smyth
Yes. So what has happened is that some Republican politicians have targeted these sites and said that they actually encourage drug use. It came to a head a few years ago when, under the Trump administration, the Pennsylvania Attorney General filed a lawsuit against a Safe House Philadelphia project, which planned to become the first legally approved injection site. under supervision in the US. This lawsuit was successful. It therefore restored the whole prospect of introducing these supervised injection sites in the US. What we saw, however, was that in New York, they opened two supervised injection sites, which the city authorities supported. They work, and they say they have already reversed more than 50 overdoses. So these sites are currently up and running. However, they work under a gray area because they are actually in violation of federal law to ban it. So it breeds in a big fight.

Marc Filippino
What about the White House, Jamie? Where does it stand on all this?

Jamie Smyth
This puts the Biden administration in a bit of a difficult position because the Biden administration really adopted harm reduction strategies, and it started looking at whether injection sites should be funded and set up under supervision on a national scale, but it did not take. another decision on this. And what we really want to see is that the Biden administration will embrace these injection sites under supervision or is it too much of a political risk to do so, as it is likely to experience a very strong setback from conservative Republican elements.

Marc Filippino
Jamie Smyth is the FT’s American pharmaceutical correspondent. Thanks, Jamie.

Jamie Smyth
Thank you.

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Marc Filippino
You can read more about all these stories at FT.com. This was your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

This transcript was generated automatically. If there is an error, please send the details for a correction to: tikfout@ft.com. We will do our best to make the amendment as soon as possible.



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