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**APRIL 28, 2023**
Kuttner on TAP
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**** The Economy Is Still Doing Well
But a weakened banking system, coupled with a Fed that is hawkish on
rates but kind and gentle on financial regulation, could be the
economy's undoing.
The economy continues to display stubborn strength, according to the
Commerce Department's latest report
<[link removed]>,
which tallied economic growth in the January-March quarter. Despite
the Fed's best efforts to throttle the economy, growth stayed
positive.
GDP grew at an inflation-adjusted 1.1 percent-less than in 2022, but
still not bad, especially taking into account the fact that consumption
rose by 3.2 percent.
Unfortunately, this basically solid report will give the Fed more
ammunition to keep raising interest rates when the Federal Open Market
Committee meets again next Tuesday and Wednesday. And the fact that the
quarterly inflation rate, at 4.2 percent, was still way above the
Fed's (wildly unrealistic) target of 2 percent only helps the hawks.
One imponderable not included in the latest Commerce Department data is
the condition of the banking system. The immediate damage from the
collapse of Silicon Valley Bank looks as if it has been contained for
now. But one other regional bank active on both coasts, First Republic,
has suffered a massive outflow of deposits
<[link removed]>
and looks as if it could collapse anytime. The bank's stock is now
trading at about $6 a share, down from around $150 a year ago.
A more systemic problem is the fact that businesses are borrowing less
and banks are lending less-due to a combination of high interest costs
and worries about a recession that could then become a self-fulfilling
prophecy. In the last two weeks in March, commercial bank lending
declined by about $105 billion
<[link removed]>,
the fastest rate of decline since 1973.
When the histories are written about this economy and Fed policy, they
should observe that the Fed's priorities of loose regulation and tight
money were exactly backwards. It remains to be seen whether the result
will be a crash landing and a mild recession or a deeper slump. Either
will be the needless result of bad policy.
~ ROBERT KUTTNER
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Pre-Farewell to First Republic
<[link removed]>
The zombie bank is now in a staring match with potential purchasers and
regulators. Ultimately, a failure of oversight caused this mess. BY
DAVID DAYEN
America's Workplace Safety Crisis
<[link removed]>
Conditions have improved from the days of the Triangle Shirtwaist
Factory fire. But not by nearly enough. BY TERRI GERSTEIN
Clean-Power Group Supports Dirty Energy
<[link removed]>
The American Clean Power Association has endorsed fossil fuel
initiatives and their allies in Washington. BY DOROTHY SLATER
Mo'Nique's Moment
<[link removed]>
Finally getting Netflix to air her special on her terms, the actress and
comedian has become a beacon for people, like her, who've had to
struggle against social norms. BY RAMENDA CYRUS
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