Office of Intelligence and Analysis (Treasury Department)

• J.P. Morgan announced today that it has been designated by the United States Treasury Department under a financial agency agreement to provide account validation services for federal government agencies.
• The agreement with J.P. Morgan reflects the important role that account validation plays in Treasury’s commitment to payment integrity and the reduction of improper payments.
• The federal government reported an estimated $247 billion in improper payments during the 2022 fiscal year, according to the U.S. Government Accountability Office.
• “It is an honor to be selected to provide account validation services to the U.S. federal government agencies,” said Takis Georgakopoulos, J.P. Morgan’s Global Head of Payments.

• After a recent meeting between U.S. Treasury Secretary Janet Yellen and officials in Beijing, China released a statement demanding “practical action” over the issue of sanctions.
• Clearly, the economic measures are hurting China – prompting not only tough words but also countermeasures to limit their impact.
• As a professor of law and an expert on international trade, I study both how the U.S. sanctions China and how China attempts to counter these sanctions.

How sanctions work

• Economic sanctions are considered an important foreign policy tool that can be used to influence and change the behavior of countries.
• Some sanctions are intended to restrict China’s technological capabilities by limiting access to key tech suppliers.
• In the case of China, sanctions have harmed producers and consumers in both countries.
• With primary sanctions, the U.S., for example, forbids imports of any product from the country being sanctioned.
• Primary sanctions also bar all U.S. companies from doing any business with the country or entities within it.

Targeting individuals and businesses

• In recent years, U.S. sanctions against China have become more targeted against specific individuals, products and companies.
• Individuals and businesses on the list have their assets blocked, and U.S. citizens are prohibited from dealing with them.
• There are hundreds of Chinese individuals and businesses on the list, including officials in China’s Hong Kong liaison office and major corporations such as China National Electronic Import-Export Company.
• Blocking statutes typically allow an individual or business to not comply with U.S. laws and require individuals and businesses to notify authorities about any U.S. sanction enforcement measures.

China’s countermeasures

• The Chinese government has taken several countermeasures to retaliate against U.S. sanctions in recent years.
• In addition, censured individuals or businesses can be slapped with a freezing of assets and prevented from doing business in China.
• Unfortunately, the effectiveness of these countermeasures is unclear.
• There are no available statistics to determine whether they have mitigated the impact of U.S. sanctions.

Caught in the middle

• Imposing sanctions and countersanctions can make it difficult for any foreign country or company that wants to do business in both countries.
• Both the U.S. and China are likely to not push sanctions too hard, so as not to engage in a full-blown trade war.
• In the meantime, Huawei has seen a decline in revenue and shifted money toward more research and development.
• The experience of Huawei underscores why Beijing is eager to find a way to counter U.S. sanctions.
• It seems that at least for now China has settled on a policy of blocking tactics at home while upping rhetoric on the international stage.

• Science Applications International Corp. (NYSE: SAIC ) has been awarded a $1.3 billion single source seven-year contract by the Department of the Treasury to provide T-Cloud, a complete range of cloud and professional services.
• In addition to full suites of AWS, Microsoft, Google, IBM and Oracle cloud services, there is additional opportunity to onboard new cloud service providers.
• SAIC is responsible for delivering a shared service cloud infrastructure model that provides enterprise-wide efficiencies in access, contracting and security.
• SAIC will also provide services for business operations, technical, security, network, service desk, subject matter expert support and transition services.

• These two kinds of crises can sometimes play out at the same time.
• A federal budget was not adopted in time, for example, and there were threats of not increasing the debt ceiling.
• The debt ceiling has been raised 78 times since 1917 and currently stands at US$31.4 trillion.
• Here are three debt-limit crises I watched play out - which not only had economic consequences, but political ones as well.

1995: A GOP revolution – and blunder

• In the 1994 midterm election, during President Bill Clinton’s first term, the Republicans gained eight Senate seats and 54 seats in the House, flipping both chambers.
• The election was seen as a Republican revolution.
• Bob Dole became the majority leader in the Senate, and Newt Gingrich became the speaker of the House.
• GOP lawmakers pledged to pass a balanced budget as part of what they named their “Contract with America.” House Republicans sent Clinton a budget that cut spending on domestic programs, which he vetoed.

2011: Budget reductions and reforms, with a side of financial chaos

• The House then demanded that Obama negotiate a deficit reduction package in exchange for raising the debt ceiling.
• As the deadline for increasing the debt limit approached, both the U.S. domestic and even international financial markets became chaotic.
• It reduced spending over the following 10 years by US$917 billion and authorized raising the debt ceiling to $2.1 trillion.
• It also included an automatic provision to cut the budget should Congress fail to act.

2013: ‘We got nothing’

• This included not paying into retirement funds of federal workers and borrowing from trust funds such as Social Security.
• At the same time, Republicans, who controlled the House, had demanded budget cuts as well as policy changes.
• They wanted Obama to eliminate the funding for his Affordable Care Act, which was considered his major legislative achievement.

Risks to both sides

• History indicates there are substantial risks to both parties as well as their respective leaders as the nation heads for the early June showdown.
• The 1995 crisis did not benefit Republicans, and some even argue it contributed to Clinton winning reelection.
• With only a four-seat majority, the risks to the Republican leadership are high.