Largest US Banks Assure Gov't of Having Enough Liquidity for Lending - Mnuchin

US Treasury Secretary Steven Mnuchin speaks during his interview with Reuters in Jerusalem

US Treasury Secretary Steven Mnuchin speaks during his interview with Reuters in Jerusalem

Holding what seemed like an emergency discussion with financial regulators one day before markets close for the Christmas holiday also risked triggering anxieties, just as much as mitigating them.

Analysts see the shutdown as a temporary drag on the economy if it were short-lived but they said other developments in Washington have eroded investor confidence to own stocks and other risky assets.

"Yes, markets have been anxious about recession, [but] until this weekend, however, markets were not that concerned about liquidity or clearance issues".

U.S. Treasury Secretary Steven Mnuchin confirmed that he called the heads of the six largest U.S. banks following a tumultuous week that saw a dive in the stock market and partial government shutdown.

"He's calling bank CEOs asking about their liquidity".

"It was totally out of left field and an odd thing to do", the person said, describing the timing of the call - on a Sunday before markets opened - as unusual.

"I don't know anybody who thought before last night that banks were suffering from lack of liquidity", Cornerstone Macro researchers including Roberto Perli said in a note to clients on Monday. The Treasury Department on Sunday said the Working Group will discuss "coordination efforts to assure normal market operations".

Last week's turmoil in Washington which included a government shutdown that appears likely to last until at least Thursday and the abrupt resignation of Defense Secretary Jim Mattis has spooked markets worldwide.

Mnuchin is vacationing in Mexico and has not issued a further comment or clarification on his statement, or the reasons for it.

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Financial markets were volatile Monday morning. Also, the executives were bewildered by the public Tweets made by Mnuchin. Nor did he consult the president on a separate decision to ask the nation's biggest banks about their ability to lend to consumers and other financial companies, the person said.

US regulators assured Treasury Secretary Steven Mnuchin that nothing is out of the ordinary in the financial markets, Bloomberg reported on Monday citing a source familiar with the matter.

The major bank CEOs who spoke by phone with Mnuchin were "totally baffled" by the session, according to a person familiar with the call.

President Trump's Treasury secretary called six top USA bankers on Sunday amid concerns over falling stocks, and has revealed he plans to convene a group of officials known as the 'Plunge Protection Team'.

"It raises the question of why Treasury needs to reassure if everything is okay", Seiberg wrote.

It was the second time over the weekend Trump's top finance chief tried to send a reassuring message to investors over alleged plans to oust Powell.

Both moves added to a sense of alarm among investors already rattled by the report the president had considered dismissing Powell. Markets plunged after the Trump administration sent out confusing signals about markets and the economy.

Shares, which has been beaten down in recent weeks by United States trade tensions with China and concerns over slowing growth, slid around the world after Wednesday's rate rise as the market had been looking for a stronger sign of a pause to rate hikes.

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