US abandons ‘war on drugs’

This is an audio transcript of the FT press briefing podcast episode: US abandons ‘war on drugs’

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

[MUSIC PLAYING]

The Federal Reserve’s second in command has resigned. Companies started the new year with a frenzy of bond issuance. And US banks are about to report, yes, more record profits. Plus, the United States has fought a war on drugs for five decades, now it’s shifting to a softer approach.

Jamie smyth
I think what has driven this shift, this pivot of US state-level and federal-level policy toward harm reduction, is really the extent of the crisis here.

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

[MUSIC PLAYING]

Fed Vice Chairman Richard Clarida is stepping down as his boss Jay Powell is due to appear before U.S. lawmakers. Clarida’s departure comes after recent disclosures show he was more active in financial markets at the start of the pandemic than he previously disclosed. Clarida is the third senior Fed official to resign in recent months. They have all come under scrutiny for the personal transactions they made as the central bank actively eased monetary policy in 2020. Clarida will leave the Fed on Friday, weeks away from the official end of her term. four years. Jay Powell is scheduled to appear before Congress today for his appointment as head of the US central bank.

[MUSIC PLAYING]

Businesses are eager to raise funds before central banks raise interest rates. In the first week of this year, they raised over $ 100 billion in global bond markets. It’s not a record though, it’s still lagging behind last year’s successful start-up, but US deals have reached an all-time high. Most have been foreign banks and financial institutions issuing in the United States, but bonds are also issued by blue chip names like MetLife and heavy machinery maker Caterpillar. In the lower-rated junk bond market, cruise line Royal Caribbean launched one of the first deals this year with a $ 1 billion bond.

[MUSIC PLAYING]

US banks are starting to report profits, and we’ll likely see more of the stellar performance we’ve seen throughout the pandemic. Profits for 2021 are expected to reach record highs thanks to higher investment banking fees. Banks have also released the financial cushions they set aside at the start of the pandemic in the event of massive default. This money also boosted profits. Our US banking editor, Josh Franklin, said earnings should slow down a bit this year, but Wall Street remains bullish.

Joshua Franklin
And the main reason for that is the rising interest rate environment that we anticipate for 2022. So that really means that banks will be able to lend at higher rates than they have been able to. And it is certainly something that banks are eagerly awaiting. During the pandemic, because there was all this kind of stimulus rush from the Fed and the government, bank deposits really swelled during the pandemic. I think over the past two years JPMorgan, which is America’s largest bank, has seen its deposit count increase by over 50% to almost $ 2.5 billion by the end of 2021. So banks really like, you know, using those deposits to make loans, but they haven’t been able to do it almost to the extent and at the rates that they would have liked. They are therefore really geared towards the possibility of granting loans in an environment of rising interest rates.

Marc Filippino
So Josh, what else are you looking for as US banks start reporting this week?

Joshua Franklin
Two areas I would point out, one is just on loan application. So, because companies were able to borrow and raise so much money during the pandemic, because the markets were so accommodating, they didn’t need to take so much loans from banks in 2021. But we expect until it improves in 2022, so business lending will pick up. So what the banks saw in Q4 and what they expect to see in 2022 is going to be interesting there. And then also just on the offsetting, you know, it was really a banner year for investment banking fees, and a lot of that money is going to go into the pockets of investment bankers, so they’ll expect to receive big bonuses this year. So it would be interesting to see how the increase in compensation tracks the overall increase in investment banking fees.

Marc Filippino
Josh Franklin is the US banking editor of the FT.

[MUSIC PLAYING]

The US government has waged a war on drugs for five decades. Meanwhile, overdose deaths have skyrocketed. Last year they hit a record 100,000. The war was about enforcement and imprisonment. But the United States is moving away from that. We are seeing states legalize marijuana and adopt other strategies. A new effort has become particularly controversial. FT US Pharmaceutical Correspondent Jamie Smyth joins me now in speaking more. Hi, Jamie. Welcome to the show.

Jamie smyth
Salvation.

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 a key part of this harm reduction strategy. And what they do is they provide a safe place for drug addicts to go, they can bring their stash of a generally illegal drug, they can get it tested to see what’s in it. , and they can use these drugs in a supervised environment often with medical professionals or people present who are able to step in and reverse the overdoses if they, you know, do occur. In Canada, for example, they say since they started introducing these sites several years ago, they’ve stepped in and saved thousands of lives, you know, by reversing those overdoses. So this is a very important new policy that the United States is seeking to introduce.

Marc Filippino
Jamie, what’s the economics of harm reduction strategies versus something like law enforcement, you know, police arrests, incarceration and things like that.

Jamie smyth
I think what the last 50 years have proven is that huge sums of money that are spent on policing and especially in terms of incarcerating people in prisons don’t have it all. just didn’t work. So I think what we are seeing is that state and federal authorities are starting to see that a high level of prevention, education, and harm reduction can reduce costs. And there have been studies that show that for every dollar spent at supervised injection sites, it’s more than two dollars in return. As far as the fact that you don’t have to spend that much money on health, you know, these interventions, the emergency interventions to save people from overdoses, the chronic health problems they have. develop if they have an episode or overdose. So I think it’s kinda obvious 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. What has happened is that some Republican politicians have targeted these sites and said they are in fact promoting drug use. This 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 set up the first legally sanctioned supervised injection site in the states. -United. This trial was successful. So that really delayed any prospect of introducing these supervised injection sites into the United States. However, what we saw is that in New York, they opened two supervised injection sites, which city officials supported. They work, and they say they’ve already reversed over 50 overdoses. These sites are therefore currently functioning. However, they operate in a gray area as they are in fact against federal law to prohibit it. It is therefore a great battle that is brewing.

Marc Filippino
What about the White House, Jamie? Where is all this?

Jamie smyth
This puts the Biden administration in a bit of a sticky situation as the Biden administration has truly embraced harm reduction strategies, and it has begun to consider whether supervised injection sites should be funded and introduced nationwide. , but that hasn’t made a decision about it yet. And really, what we’re looking to see is will the Biden administration adopt these supervised injection sites or is it too much of a political risk to do so, as he’s likely to face a very strong reaction from the conservative Republican elements.

Marc Filippino
Jamie Smyth is the US pharmaceutical correspondent for the FT. Thanks, Jamie.

Jamie smyth
Thank you.

[MUSIC PLAYING]

Marc Filippino
You can read more about all of these stories at FT.com. This has been your daily FT News briefing. Make sure to come back tomorrow for the latest business news.

This transcript was generated automatically. If by any chance there is an error, please send the details for correction to: [email protected]. We will do our best to make the change as soon as possible.

Comments are closed.