Washington Insider -Wednesday

By DTN's Washington Insider

Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.

E-Verify, Visa Programs to Expire Sept. 30 Unless Congress Acts

E-Verify, the voluntary Web-based system used by more than 600,000 employers to check the legal status of workers, is set to expire Sept. 30 unless Congress acts after the August recess when lawmakers return Tuesday, Sept. 8.

With only 10 legislative days before the deadline, lawmakers and supporters of the federal program are confident it will be reauthorized along with part of the EB-5 visa program for foreign investors and visa programs for doctors and religious workers.

The program is administered by US Citizenship and Immigration Services (USCIS). It was created as the Basic Pilot program back in 1996. Over time it has changed names from the Basic Pilot program to E-Verify. Over the years it has been reauthorized by Congress for a set amount of time, usually at the last minute. E-Verify was last reauthorized in 2012 with a three-year extension until Sept. 30, 2015.

All four immigration programs were last extended in 2012 through an amendment attached to a continuing resolution pushed by Sen. Patrick Leahy, D-Vt., then chairman of the Senate Judiciary Committee. The current chairman, Sen. Chuck Grassley, R-Iowa, hopes to extend the four programs together.

“Chairman Grassley is working on a bicameral and bipartisan agreement to move on the programs that expire at the end of the fiscal year,” said spokeswoman Beth Levine. “He expects major reforms to the EB-5 program reauthorization similar to the legislation that he and Senator Leahy have introduced. Other small fixes or improvements may be considered for the three other programs.” Levine said E-Verify’s reauthorization and the other immigration programs needing extensions could be included in a measure by Leahy and Grassley (S 1501) that covers the EB-5 visa program.

In the House, Judiciary Committee Chairman Robert Goodlatte, R-Va., plans to have all programs extended by the end of September, according to a committee aide.

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Mature El Nino In Place; Peak Likely Late in 2015

Sea surface temperatures across the central tropical Pacific Ocean are likely to persist above El Niño thresholds through until at least early 2016, according to the Australian Bureau of Meteorology, and models indicate the event should peak later this year.

The ocean and atmosphere are reinforcing each other, the agency noted, with tropical Pacific Ocean temperatures well above El Niño thresholds, consistently weakened trade winds, and a strongly negative Southern Oscillation Index. "Strong coupling of the tropical Pacific Ocean and atmosphere is typical of a mature El Niño, and suggests only a small chance of the event finishing before the end of the year," the agency detailed.

The forecasting by Australia matches with what typically happens in an El Niño – the event typically peaks late in the calendar year or early the following calendar year. US weather forecasters are eyeing the event as one to potentially bring substantial precipitation to areas of California where drought has been in place for several years. The linkages to impacts on US weather from El Niño are greatest in the winter, typically equating to more precipitation along the US West Coast.

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Washington Insider: China Not Yet Out of the Economic Woods

Once upon a time, analysts thought Japan had found the secret of perpetual prosperity but that vision clouded long ago. More recently, China’s mixed economic approach was seen as the key—until its recent economic struggle led to major anxieties and “realignments.”

Now the question is whether the recent economic tensions are past. Recent press reports suggest that they are not and have highlighted yet another sign of weakness. A recent internal meeting in China last week noted a 35.7% rise in the level of bad loans, according Shang Fulin, chairman of the China Banking Regulatory Commission. Shang said non-performing loans at banks rose 322.2 billion yuan in the first six months of the year to 1.8 trillion yuan, about $290 billion.

At the same time, bank profit growth fell 13.03 percentage points with total net profits of 1.1 trillion yuan in the first half of the year. "In the bigger context of (China’s) economic slowdown, the whole truth of the banking sector's credit risks is beginning to emerge," Shang said, according to the transcript.

Shang said that the reduced profit growth will "reduce shareholder return, weaken banks' capability to supplement capital and prevent risks." But he asserted that relative to other less than favorable economic data, this was a "new normal." Experts pointed out that at less than 2% of all loans at the end of the year, still a relatively low level.

However, the report also raises other, potential issues. The level of "bad" loans at Chinese banks has always been a question mark since there are doubts about the accuracy of Chinese data. But this does indicate that more areas of China are struggling and the economic headwinds that the country is trying to overcome with various stimulus actions are continuing to build.

In addition, the new reports raise policy issues regarding how many of these nonperforming loans and the businesses will be allowed to fail? Data of that nature rarely emerge from China so details likely will not be available until well after the fact.

The jump in bad loans also comes as the PBOC said it was seeking to improve lending conditions for Chinese businesses. In a policy statement issued after a meeting of central bank officials this week, the PBOC said it would "fine tune the market, keep moderate liquidity and achieve reasonable credit and private financing growth."

Experts argue that China’s uncertain policies highlight a reason China's banking sector needs to be brought more in line with the global system. For example, a recent IMF report called for a delay in adding the Chinese yuan to the Special Drawing Rights fund and the current uptick in bad loans should be taken as a clear sign to China their system needs to become more market oriented, observers contend.

Until that happens, there will be uncertainty about Chinese data, especially as their economic performance is continuing to struggle even though there are broad expectations that they will still be able to meet their growth target for 2015 of "around" 7%--in spite of potential warning signs on the horizon that could make meeting that target even more of a challenge. Many expect the economy to register only about 2.5% real growth in spite of dramatic drops in crude oil and energy costs, a strong dollar and historically low interest rates. Clearly, there will be an abundance of top drawer issues to discuss during the US-Chinese summit next month, Washington Insider believes.

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(GH/CZ)

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