Tag Archives: Debt

As Inflation looms Americans fall deeper in debt

Revelations 18:23 ‘For the merchants were the great men of the earth; for by thy sorceries were all nations deceived.’

Important Takeaways:

  • Nearly half of all Americans are falling deeper in debt as inflation continues to boost costs
  • With inflation hitting a 40-year high in June, Americans are struggling to keep up with rising prices and putting less money aside for emergencies or long-term financial goals, several studies show.
  • Americans’ overall satisfaction with their financial condition now stands at a 12-month low, and 43% of consumers expect to add to their debt in the second half of the year.
  • 23% have no Emergency savings at all
  • 28% say they have some savings but not enough for 3 months

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Flooding woes add to trade war stress in ‘Trump country’ farm belt

A farm which was damaged by heavy flooding is pictured outside Winslow, Nebraska, U.S., March 20, 2019. Picture taken on March 20, 2019. REUTERS/Humeyra Pamuk

By Humeyra Pamuk and P.J. Huffstutter

COLUMBUS, Neb./CHICAGO (Reuters) – Nebraska grain farmer Ryan Ueberrhein was barely breaking even after the U.S.-China trade war pushed prices for his soybean crop to a decade low. Then the nearby Elkhorn River burst its banks as flooding swept across the U.S. farm belt.

Uberrhein’s farm was left covered in debris after the roiling water receded. He has mounting debts. And he is worried that President Donald Trump may not be able to strike a trade deal with China that would end tariffs on U.S. soybean exports – and allow him to sell whatever grain is left intact at a better price.

Frustration is building across farm country at what feels like a never-ending season of bad news.

The trade war “keeps damaging us,” said Ueberrhein, 34, of Valley, Nebraska, who voted for Trump. “What the president is doing, we stand by him, but … we can’t keep getting hit just because a deal can’t be made quickly.”

U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin are set to arrive in China this week for another round of trade talks with their Chinese counterparts. The two sides have yet to agree on many core issues.

Farmers who spoke to Reuters remained supportive of Trump.

Soybean exports to China hit a four-year low in February because of the trade war. China is the biggest buyer of U.S. soybeans, which are the largest single U.S. agricultural export. A near halt in exports has hit a rural economy already struggling after years of oversupply cut farm incomes by 50 percent in the past five years.

Debt in the agrarian economy has hit levels last seen during the U.S. farm collapse of the 1980s. (Graphic: https://tmsnrt.rs/2TkUDjk)

The Nebraska Rural Response Hotline, which provides support to farmers and ranchers, has received a record number of calls about financial distress, said John Hansen, president of the Nebraska Farmers Union. Calls about suicide and depression were up, too, he said.

The latest piece of bad news came on March 11, when the Trump administration released its 2020 budget and proposed a 15 percent cut for the U.S. Department of Agriculture, calling its subsidies to farmers “overly generous.”

It did not matter to farmers, who helped vote Trump into office, that the budget will not pass muster with Democrats who control the House of Representatives, Hansen said. Some farmers took the proposed cut to subsidies for crop insurance as an insult.

“How many times do you have to kick us when we’re down?” he said.

That insurance is crucial to Richard Oswald, who farms near Phelps City, Missouri. The flood has already swallowed his childhood home, many of his fields and more than 20,000 bushels of corn. His four grain bins have burst after water-logged corn expanded and split open.

“If our government and leaders can’t step up and start to lead, we’re done for,” he said.

For years, Oswald paid extra for flood insurance. He hoped that government talk of investing in improving U.S. infrastructure would come through – and bolster the levees and dams throughout the Midwest.

But this year, as the trade war dragged on, he dropped the policy to reduce expenses. So he will get no insurance money for the lost corn, Oswald said.

A few days ago, one of his lenders called. Oswald didn’t have to pay the loan right away, the lender said, but he would have to repay it sooner or later.

“Help needs to come from Congress, but Congress is so divided, I don’t know what’s going to happen,” Oswald said.

DISASTER DECLARATION

Trump approved a disaster declaration for Nebraska on Thursday, making federal funding available in nine counties that bore the brunt of the recent floods. On Saturday, he approved one for flood-affected counties in Iowa.

Greg Ibach, a USDA undersecretary, is touring the damage in Nebraska, and Bill Northey, another undersecretary, will head to Iowa, agency officials told Reuters.

U.S. Senator Chuck Grassley of Iowa said the farm belt states would need more aid, suggesting a separate relief bill to offer compensation to farmers for livestock killed in the floods and grains in storage that will have to be destroyed.

“The United States government has always been the insurance of last resort,” Grassley said in a phone interview on Friday.

Nebraska Governor Pete Ricketts put agricultural flood damage for the state at nearly $1 billion. Iowa officials are projecting losses of at least $1.6 billion, with at least $214 million in damage to the agriculture sector. Iowa Governor Kim Reynolds said her state would need assistance beyond what is granted through disaster declarations.

Farmers, meanwhile, are staring at waterlogged fields and expecting more floods. The U.S. National Oceanic and Atmospheric Administration said last week that the flooding would worsen in coming weeks as snow on the ground melts and water flows downstream.

Iowa farmer Dave Newby said the standing water in his fields was already threatening his planned start to corn in mid-to-late April. Newby, like many farmers, had been looking to boost his corn plantings this year because such a large volume of soybeans had been left unsold because of the trade war.

The same was the case in nearby Nebraska. Parts of flooded farmland remained under water and farmers had yet to assess the damage the piled-up sand, silt and debris caused to the soil. Almost all said planting will likely be delayed, which could lead to lower yields.

“Normal planting would take place around May 1, but I doubt we will make it,” said Kendal Sock, a cattle and corn farmer in Genoa. “I wish they’d get this trade deal done, like now.”

(Reporting by Humeyra Pamuk and P.J. Huffstutter; Additional reporting by Mark Weinraub and Tom Polansek in Chicago and Jarrett Renshaw in New York; Editing by Caroline Stauffer, David Gaffen, Simon Webb and Leslie Adler)

Your Money: What another U.S. interest rate rise means for you

A woman shows U.S. dollar bills at her home in Buenos Aires, Argentina August 28, 2018. REUTERS/Marcos Brindicci

By Beth Pinsker

NEW YORK (Reuters) – If you have credit card debt, take the next U.S. Federal Reserve move to raise interest rates as a big, flashing warning sign.

Short-term rates are the most affected when the government nudges up the federal funds rate, which the Fed is expected to do on Wednesday, likely raising it a quarter point. That will be the third move in 2018 and the eighth since the Fed started inching rates up from effectively zero in December 2015. One more hike is expected before the end of the year.

“That means your 15 percent interest rate on a credit card is now a 17 percent rate,” said Greg McBride, chief economist for Bankrate.com. “If you haven’t already, it’s important to take steps to insulate yourself.”

The message to get out of debt is a hard sell to the American households holding nearly a trillion dollars in credit card debt, according to Nerdwallet.com’s 2017 survey.

Many pay only the monthly minimum payments, incurring interest charges that balloon their balances.

It is a “treadmill to nowhere,” McBride said.

On a card with a $10,000 balance, paying the minimum (interest plus 1 percent of the balance) will cost you $12,000 in interest and take 27 years to pay off at a 15 percent rate. Bump that up to a 17 percent interest rate, and you pay $13,600 in interest – plus, it would take an extra year to be out of debt, according to Bankrate.com’s calculator (https://bit.ly/2v4vaMm).

Experts say you should push your credit card debt to a zero-percent balance transfer card. You can still get offers for as long as 21 months, with fees, according to Nick Clements, co-founder of the money advice site MagnifyMoney.com. Then pay down as much money as you can to reduce the debt in that time period.

It is also a good idea to explore the personal loan market, where rates are rising but not as fast because of competition, Clements said. These loans have short repayment periods, typically under five years.

AVOID HOME EQUITY LOANS

If you are in debt and own a home, now is not necessarily the best time to be tempted with a home equity loan to pay off debt, said Tendayi Kapfidze, chief economist of housing site LendingTree.com.

The variable interest rates of a home equity loan are also affected by the Fed raising interest rates, although not as highly correlated.

The biggest risk? Cashing out home equity to pay down debt, but then as soon as you are even, digging another financial hole and not having anything left to tap.

“You need a broader plan to control your spending,” said Kapfidze.

For those looking to buy a house or refinance, the latest Fed move will have a slower impact. Other things influence mortgage rates along with the Fed funds rate, but those factors are heading in the same direction.

Kapfidze does not expect any large mortgage rate moves in the near term, but that, he said, is because there had already been a runup in recent weeks.

Savings rates are the last to move because of Fed actions. Banks raise rates on what they are selling before they raise rates on what they are buying, Kapfidze said.

But if savers turn into shoppers, they will find some better deals in the coming months. Online banks are being particularly aggressive about rates for certificates of deposit, with new players like Goldman Sachs’ Marcus, Clements said.

Investors should look at the yield on their fixed income investments, which might be around 3 percent and compare it to a 12-month CD for 2.5 percent.

“If you think about it, low rates mean people take more risk. As rates are rising, people should be able to take less risk,” Clements said.

(Editing by Lauren Young and Bernadette Baum)

U.S. gunmaker Remington files for bankruptcy

FILE PHOTO: A man walks with his Remington 870 Express 12 gauge shotgun during a pro-gun and Second Amendment protest outside the Arizona State Capitol in Phoenix, Arizona, U.S., January 19, 2013. REUTERS/Joshua Lott/File Photo

By Tom Hals and Jessica DiNapoli

(Reuters) – Remington Outdoor Co Inc, one of the largest U.S. makers of firearms, filed for bankruptcy protection on Sunday to carry out a debt-cutting deal with creditors amid mounting public pressure for greater gun control.

The company’s chief financial officer, Stephen Jackson, said in court papers that Remington’s sales fell significantly in the year before its bankruptcy, and that the company was having difficulty meeting requirements from its lenders.

Remington, America’s oldest gunmaker, announced in February it would reduce its $950 million debtload in a deal that will transfer control of the company to creditors. The company plans to wrap up its bankruptcy as soon as May 3, according to court papers.

The filing comes after a Feb. 14 shooting at a Parkland, Florida high school that killed 17 and spurred an intense campaign for gun control by activists.

The massacre led to huge U.S. anti-gun rallies by hundreds of thousands of young Americans on Saturday.

In some of the biggest U.S. youth demonstrations for decades, protesters called on lawmakers and President Donald Trump to confront the issue. Voter registration activists fanned out in the crowds, signing up thousands of the nation’s newest voters.

Major U.S. companies and retailers have taken some steps to restrict firearm sales.

Citigroup Inc <C.N> said last week it will require new retail-sector clients to sell firearms only to customers who passed background checks and to bar sales of high-capacity magazines.

Citi also said it was restricting sales for buyers under 21, a move adopted by other large retailers, while Kroger Co’s <KR.N> superstore chain Fred Meyer said it will stop selling firearms entirely.

CERBERUS TO LOSE OWNERSHIP

Cerberus Capital Management LP, the private equity firm that controls Remington, will lose ownership in the bankruptcy.

Remington’s creditors, which sources told Reuters include Franklin Templeton Investments and JPMorgan Asset Management, will exchange their debt holdings for Remington equity.

The creditors inked the debt-cutting deal prior to the Parkland shooting, and it is unclear if any have exited. The restructuring support agreement allows creditors to sell their holdings, but the buyer is bound by the deal.

One investor told IFR, a Thomson Reuters news provider, that his firm had contemplated buying the Remington loans that will be exchanged into equity, which were offered at as low as 25 cents on the dollar.

“We bowed out because we were uncomfortable,” he said.

After a Remington Bushmaster rifle was used in the Sandy Hook elementary school shooting in Connecticut in 2012 that killed 20 children and six adults, Cerberus tried unsuccessfully to sell Remington, then known as Freedom Group.

Katie-Mesner Hage, an attorney representing Sandy Hook families in a lawsuit against Remington, said in a prepared statement that she did not expect the gunmaker’s bankruptcy would affect their case.

Remington and other gunmakers have suffered from slumping sales in the past year as fears of stricter gun laws have faded.

The chief executive of American Outdoor Brands Corp, maker of the Smith & Wesson gun used in the Parkland shooting, said on March 1 that some gun retailers reported increased sales after the Florida school shooting.

Remington filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the District of Delaware.

(Reporting by Tom Hals in Wilmington, Delaware, Jessica DiNapoli in New York and Ismail Shakil in Bengaluru; Editing by Lisa Shumaker and Gopakumar Warrier)

China confident Venezuela can handle debt issue

China confident Venezuela can handle debt issue

BEIJING (Reuters) – China’s Foreign Ministry reiterated on Thursday that it believes Venezuela has the ability to handle its debt issue, after the oil-rich country started making interest payments on bonds following a delay that had threatened to trigger a default.

Venezuela has borrowed billions of dollars from Russia and China, primarily through oil-for-loan deals that have crimped the country’s hard currency revenue by requiring oil shipments to be used to service those loans.

On Wednesday, Venezuela won easier debt terms from Russia, as well as a vote of confidence from China – two countries that could provide a lifeline as Caracas seeks to keep its deeply depressed economy solvent.

Asked whether China was concerned that the debt would not be repaid, Chinese Foreign Ministry spokesman Geng Shuang told a regular news briefing that China-Venezuela financial cooperation was proceeding as normal.

“We believe that Venezuela’s government and people have the ability to properly handle their debt issue,” Geng said.

Venezuelan bond prices have been on a roller-coaster over the past 10 days, as President Nicolas Maduro called investors to debt restructuring talks, while pledging to keep honoring the country’s obligations.

But S&P Global Ratings declared it in selective default on two of its sovereign bonds early this week after it failed to make the coupons within a 30-day grace period.

On Wednesday, the country’s Economy Ministry said it had started transferring $200 million in interest payments on those bonds, which mature in 2019 and 2024.

(Reporting by Ben Blanchard, Writing by Michael Martina; Editing by Richard Borsuk)

Unversed in debt details, Venezuelans desperate for any relief

People line up to pay for their fruits and vegetables at a street market in Caracas, Venezuela November 3, 2017.

By Alexandra Ulmer and Andrew Cawthorne

CARACAS (Reuters) – Venezuelans heaving under an unprecedented economic meltdown know little about the finer points of foreign debt negotiations, but long for anything that would put more food on their plate and slow the world’s highest inflation.

Few on the streets of capital Caracas really understood unpopular leftist President Nicolas Maduro’s announcement this week that he would seek to refinance the oil-rich nation’s heavy bond burden of $60 billion – or about $2,000 per person.

But those interviewed by Reuters said they were hoping any deals between the government and its multiple foreign creditors would free up foreign currency to increase imports of scarce food, medicine, and basic products.

“Maybe it will work, and improve the country,” said Johny Vargas, 53, a construction worker who says he often only eats twice a day because his salary is gobbled up by price increases.

“Everything is so expensive. There’s no food, nothing. Maduro’s useless. Look at the bad state we’re in.”

Up to now, Venezuela’s ruling Socialist Party has prioritized debt payments by slashing imports, compounding four years of recession and shortages on the shelves.

Should a debt renegotiation be reached, it could free more money in the short-term for the government to bring in basic foods and medicines.

But Wall Street is skeptical, and so are many Venezuelans.

“We can’t have strong negotiations. We don’t have the credibility to sit down and make requests,” said 35 year-old accountant Mayerling Delgado, referring to Venezuela’s increasingly fraught relations with many other countries.

“So we have to pay,” she added in a resigned tone, in a busy Caracas plaza.

Experts have long warned that debt accrued under late leader Hugo Chavez was unsustainable, and urged Maduro’s government to refinance its debt load.

But pursuing such an operation now is near impossible given Venezuela’s economic mess, a dearth of technocrats in the government, and, especially, sanctions that bar U.S. banks from participating in or negotiating new Venezuelan debt deals.

 

NOT PAYING IS WORSE?

Most Venezuelans balk at the idea of a default, which would trigger lawsuits by creditors seeking to seize assets such as refineries in the United States. That could plunge the OPEC nation of 30 million people into even worse hardship.

“The majority of the population has consistently perceived a default as a negative move that could hurt the country’s economy,” said economist Luis Vicente Leon of pollster Datanalisis.

But with many analysts viewing a default as ultimately unavoidable given the parlous state of Venezuela’s coffers, some said it might be better to bite the bullet.

“What’s the science behind paying when you’ve already lost? It’s not what we as Venezuelans want … but there’s no other way out, unfortunately,” said beautician Harlee Tovitto, 42. She plans to emigrate to neighboring Colombia soon because she can no longer afford clothes or insurance for her three children.

Amid a deepening spat with U.S. President Donald Trump’s administration, some Venezuelans think Caracas would find a way out of its bond mess if it weren’t for the U.S. sanctions.

“If Venezuela has always paid its debt … why can’t they refinance?,” said Rafael Moreno, 30, a lawyer and former Chavez supporter who now says he does not back either the government or opposition.

 

(Reporting by Alexandra Ulmer and Andrew Cawthorne, Editing by Rosalba O’Brien)

 

Trump, siding with Democrats, agrees to three-month debt-limit rise: lawmakers

U.S. President Donald Trump meets with Senate Majority Leader Mitch McConnell (L), U.S. Senate Democratic Leader Chuck Schumer (2nd R), House Minority Leader Nancy Pelosi (R) and other congressional leaders in the Oval Office of the White House in Washington, U.S., September 6, 2017. REUTERS/Kevin Lamarque

By Richard Cowan and Susan Cornwell

WASHINGTON (Reuters) – President Donald Trump, siding with Democrats over his fellow Republicans, agreed on Wednesday that Congress should pass an extension of the U.S. debt limit until Dec. 15, a government funding bill covering the same period and disaster aid for Hurricane Harvey victims, Democratic leaders said.

Top Senate Democrat Chuck Schumer and top House of Representatives Democrat Nancy Pelosi made the announcement after a meeting with Trump at the White House, along with the Republican leaders of Congress.

“Both sides have every intention of avoiding default in December and look forward to working together on the many issues before us,” Schumer and Pelosi said in a statement.

A source briefed on the meeting with Trump said Treasury Secretary Steve Mnuchin and all Republicans at the White House meeting argued for a debt limit increase for a longer period. But by the end of the meeting, Trump sided with Democrats who wanted a three-month increase.

The U.S. dollar got a boost on news of agreement on the debt ceiling, which caps how much money the U.S. government can borrow. Many conservatives in Congress are loath to raise it without spending cuts.

The Treasury Department has said the ceiling must be raised in the next few weeks. If not, the government would be unable to borrow more money or pay its bills, including its debt payments. That could hurt the United States’ credit rating, cause financial turmoil, harm the U.S. economy and possibly trigger a recession.

Trump is heading into the toughest legislative stretch of his presidency, with lawmakers facing several pressing legislative priorities.

Those include Harvey disaster relief, raising the debt ceiling by early October to prevent an unprecedented default on U.S. government debt, and passing legislation for federal spending in the fiscal year that begins on Oct. 1 to avoid a government shutdown.

“We have many, many things that are on the plate,” Trump told reporters at the beginning of a White House meeting with the congressional leaders.

“Hopefully we can solve them in a rational way. And maybe we won’t be able to. We’ll probably know pretty much at the end of this meeting or the meetings that we’ll be having over a short period of time,” Trump added.

Trump on Tuesday also gave a Congress six months to pass legislation to decide the fate of the 800,000 so-called Dreamers after rescinding a five-year-old program that had protected them from deportation.

Earlier, House Speaker Paul Ryan said any legislation to address the Dreamers would also need to address border security, a position sure to antagonize Democrats. Ryan also said any immigration legislation the House would consider would have to have the support of Trump.

Schumer urged Republicans to put forward legislation protecting the Dreamers without other issues attached.

The House on Wednesday approved roughly $8 billion in initial emergency aid for relief and rebuilding after Hurricane Harvey, which tore into Texas on Aug. 25. The measure, which provides $7.4 billion for the Federal Emergency Management Agency and $450 million for the Small Business Administration, will now go to the Senate and, barring unexpected setbacks, could be on Trump’s desk to sign by the end of the week.

(Additional reporting by Jeff Mason, Amanda Becker, Doina Chiacu, Richard Cowan, James Oliphant and David Morgan; Writing by Will Dunham; Editing by Alistair Bell)

Trump says U.S. debt ceiling ‘mess’ could have been avoided

U.S. President Donald Trump waves as he steps out from Air Force One in Reno, Nevada, U.S., August 23, 2017. REUTERS/Joshua Roberts

WASHINGTON (Reuters) – President Donald Trump said on Thursday congressional leaders could have avoided a legislative “mess” if they had heeded his advice on raising the U.S. debt ceiling, renewing criticism of fellow Republicans whose support he needs to advance his policy agenda.

Trump said he had advised Senate Majority Leader Mitch McConnell and House of Representatives Speaker Paul Ryan to link passage of legislation raising the debt ceiling to a measure on veterans affairs that he signed on Aug. 12.

“I requested that Mitch M & Paul R tie the Debt Ceiling legislation into the popular V.A. Bill (which just passed) for easy approval,” Trump said a in Twitter post.

“They … didn’t do it so now we have a big deal with Dems holding them up (as usual) on Debt Ceiling approval. Could have been so easy-now a mess!” he added, referring to Democrats.

The Treasury Department, already using “extraordinary measures” to remain current on its obligations, has said the limit on the amount the federal government may borrow must be raised by Sept. 29.

The issue is one of the must-pass measures Congress will take up when it returns on Sept. 5 from its August recess. Another is a spending bill: Congress will have about 12 working days from when it returns from the break to approve spending measures to keep the government open.

Trump threatened on Tuesday to shut down the government if Congress failed to secure funding for his long-promised wall along the U.S. border with Mexico. His threat, which added a new complication to Republicans’ months-long struggle to reach a budget deal, rattled markets and drew rebukes from some Republicans.

Democrats have slammed Trump over his comments.

On the debt ceiling issue, House Democratic leader Nancy Pelosi said on Thursday that with Republicans controlling the White House and both chambers in Congress, “the American people expect and deserve a plan from Republicans to avert a catastrophic default and ensure the full faith and credit of the United States.”

On Thursday, investors were more broadly waiting for speeches on Friday by central bank governors at a conference in Jackson Hole, Wyoming, for any new indications on monetary policy. U.S. stocks opened higher but then turned negative, and U.S. Treasury yields edged higher.

Yields on Treasury bills due in early October rose on concerns that payments on the debt could be delayed if lawmakers fail to raise the debt ceiling before the government runs out of funds.

“There’s disjointedness because of the debt ceiling,” said Lou Brien, a market strategist at DRW Trading in Chicago.

RELATIONS WITH MCCONNELL

Trump’s renewed criticism of the Republican leaders came just a day after the White House and McConnell issued separate statements saying they were continuing to work together on shared priorities, seeking to counter news reports that their relationship is disintegrating.

Trump and McConnell “remain united on many shared priorities, including middle class tax relief, strengthening the military, constructing a southern border wall, and other important issues,” the White House said in its statement.

Trump also reiterated his criticism of McConnell on Thursday over the Senate’s failure in July to pass a bill to replace Democratic former President Barack Obama’s healthcare law, legislation opposed by Republicans since it was enacted in 2010.

“The only problem I have with Mitch McConnell is that, after hearing Repeal & Replace for 7 years, he failed!That should NEVER have happened!,” Trump said in a tweet.

McConnell offered muted criticism of Trump on Thursday, saying he was “a little concerned about some of the trade rhetoric” by the president and others.

Trump has repeatedly condemned trade deals he believes are bad for American workers and for the U.S. economy. On Tuesday he cast doubt on any deal emerging to improve the North America Free Trade Agreement with Mexico and Canada. “We’ll end up probably terminating NAFTA at some point,” he said.

“Trade is a winner for America,” McConnell told a gathering of Kentucky farmers and lawmakers. “You may or may not know this, but of all the current free trade agreements that we have with the various countries all around the world, if you add them all up, we actually have a trade surplus.”

“The assumption that every free trade agreement is a loser for America is largely untrue,” McConnell said.

The New York Times reported on Tuesday that McConnell and Trump were locked in a political “cold war,” especially after an Aug. 9 phone call it said devolved into a shouting match. On that day and the next, Trump assailed McConnell via Twitter, angered by a speech McConnell had given saying Trump had “excessive expectations” of Congress.

(Story refiles to delete duplicated phrase ‘which added’ in seventh paragraph.)

(Reporting by David Alexander, Makini Brice and Ayesha Rascoe in Washington; Karen Brettell and Megan Davies in New York; Writing by David Alexander; Editing by Frances Kerry)

U.S. weighs ban on trade in Venezuela debt: U.S. official

President Donald Trump waves to Marines as he departs Marine Corps Air Station Yuma in Yuma, Arizona. REUTERS/Joshua Roberts

WASHINGTON (Reuters) – The Trump administration is considering additional sanctions against Venezuela’s government, including a ban on trading the country’s debt, a U.S. administration official with knowledge of discussions said on Wednesday.

“It is just one option that is being talked about,” the official told Reuters, speaking on condition of anonymity.

The Wall Street Journal, which first reported on Tuesday the possibility that the United States could prohibit trading of some Venezuelan bonds, said one option would be a ban on trading of new debt issued by Venezuela or its state-owned entities, with an exemption for debt issued under the authority of the National Assembly that Maduro has stripped of power.

Venezuela bonds fell on Wednesday.

The Trump administration has imposed sanctions against Maduro and senior officials in his administration to punish them for what the United States sees as their role in undermining democracy in the oil-producing country.

On Aug. 9, Washington imposed sanctions against eight more individuals, including the brother of late socialist leader Hugo Chavez.

U.S. Vice President Mike Pence, speaking in Miami on Wednesday, said the Trump administration was ready to do more.

“You may be assured that under the leadership of President Donald Trump, the United States will continue to bring the full measure of American economic and diplomatic power to bear until democracy is restored in Venezuela,” Pence said, urging Latin America to also do more to pressure Maduro’s government.

“The United States has already issued three rounds of targeted sanctions against Maduro and his inner circle, and there is more to come,” Pence said.

Venezuela’s government has around $2 billion in available cash to make $1.3 billion in bond payments by the end of the year and to cover imports of food and medicine, Reuters reported in August.

The funds that could be used for debt payment include $1.3 billion in cash and IMF Special Drawing Rights held in central bank reserves, and $700 million in separate accounts that the central bank lists as “other financial assets,” according to a report by local firm Financial Synthesis.

(Reporting by Tim Ahmann and Lesley Wroughton; editing by Mohammad Zargham)

Drowning in debt, Connecticut faces budget crunch

FILE PHOTO: The Connecticut State Capitol pictured here in Bushnell Park, Hartford, Connecticut, U.S., August 17, 2017. REUTERS/Hilary Russ

By Hilary Russ

HARTFORD (Reuters) – Connecticut, home to hedge fund billionaires alongside cities mired in poverty, is racing against the clock to pass a budget or face further spending cuts to education and municipal aid across the state.

Nearly two months without a budget, Connecticut is getting crushed by a burdensome debt load that has squeezed spending and amplified legislative discord.

State lawmakers must agree on a biennial budget soon or else Governor Dannel Malloy’s executive order to slash state aid to municipalities and eliminate school funding for some districts will go into effect in October. The state faces a $3.5 billion deficit over the next two years.

Among the wealthiest in the United States, Connecticut has been strained by already high taxes, outmigration, falling revenues and $50 billion of unfunded pension liabilities.

Some $23 billion of outstanding municipal debt has also constrained spending. Bondholders must be paid ahead of most other expenses like non-essential services and payments to vendors.

The $2.85 billion of principal and interest the state paid on its bonds in fiscal 2017 was the highest in six years, according to preliminary unaudited information from State Treasurer Denise Nappier’s office that has not yet been published.

“The state invested in the wrong things for a period of time. It allowed its higher educational institutions to suffer while it sought to placate communities with respect to other forms of local reimbursement,” Malloy told Reuters during an interview in his office on Thursday.

“We built too many prisons, which we’re still paying off even while we’re closing them,” he said. The Democrat took office in 2011 and is not seeking a third term.

Further, the state’s budget crunch is threatening its cities including the state capital of Hartford, which is considering bankruptcy due, in part, to its dependence on state aid.

Connecticut has borrowed for decades to fund school construction, whereas nearly all other states typically borrow at the local level for those projects.

Lack of county governments means some other local costs are picked up by the state, including for all of its detention facilities.

Connecticut has piled on debt to bolster its public pensions, selling $2.3 billion of bonds in April 2008.

And again in December 2009, the state sold $916 million of economic recovery notes to close a budget deficit after depleting its rainy day fund during the Great Recession.

By many measures, Connecticut’s debt levels are the worst of the 50 U.S. states.

It has the most net tax-supported state debt per capita in the nation at $6,505, versus a median of $1,006, according to Moody’s Investors Service.

It has the highest debt service costs as a portion of state revenues, as well as debt relative to gross domestic product, Moody’s said.

Connecticut was downgraded by all three major Wall Street credit rating agencies in May.

Both Republicans and Democrats in the state legislature have proposed solutions, including a hard cap on annual bond sales.

Democratic legislators met with Millstein & Co., the same restructuring firm that advised Puerto Rico over its suffocating debt burden, according to The Connecticut Mirror newspaper.

Nappier proposed a new tax-secured revenue bond program in lieu of general obligation debt, which she says will lower borrowing costs and boost reserves.

But until lawmakers craft a budget, the state’s fiscal uncertainty is causing havoc among municipalities. Some are considering whether to delay the start of school or dip into reserves.

And for Hartford, the longer the state goes without a budget, the closer the city comes to a possible bankruptcy filing, said Hartford Mayor Luke Bronin, a 38-year-old former U.S. Treasury official.

“The lack of a state budget… makes a liquidity challenge come that much faster,” he said.

(Reporting by Hilary Russ in Hartford; Editing by Daniel Bases and Diane Craft)