Fed, ECB Head to Summit; European Bank Woes Grow; More Libor

Receiving Wide Coverage ...

Eye on Central Banks: The European Central Bank and the Federal Reserve are set to meet this week in an effort to bolster the flagging global economy. According to the Journal, Fed Chairman Ben Bernanke will focus on how to spur enough economic growth in the U.S. to drive down unemployment, while ECB head Mario Draghi needs to address growing concerns that countries will abandon the euro. The Journal says there's a chance the Fed could unveil a new program for buying mortgage or government securities to bring down long-term interest rates, but it also may simply wait until economic forecasts are updated in September to take significant action. Reuters similarly suggests the eurozone debt crisis won't see palpable changes until key policymakers return in September from their summer holidays.

Global stocks were on the rise preceding the policy summit, but analysts doubt the meetings will have a positive impact on global markets since "the Fed will choose to wait for more decisive data" and "ECB measures will be watered down versus market expectations," according to the FT.

According to the Times, the stagnant growth in the U.S. is causing some fed officials to call for preemptive stimulus measures a la Alan Greenspan as the Fed's existing tools continue to be called into question.

Maintaining the Fed shouldn't use old tricks to try to stimulate growth, economist Bruce Bartlett suggests it charge banks interest on the excess reserves they store at the Fed as a penalty for not lending to consumers. At the very least, he writes on the Times' "Economix" blog, the 0.25% interest that the Fed currently pays banks on these reserves should be lowered to bolster the economy.

Liborama: Here's a version of the Libor scandal you've (yet) to hear a million times. In an FT op-ed, former Morgan Stanley trader Douglas Keenan says he told the London International Financial Futures Exchange that Libor rates were inaccurate, after noticing discrepancies while negotiating futures contracts back in 1991. Keenan says he shared this story with the House of Commons Treasury committee in July, but was told his testimony would not be needed as it "contradicts the narrative."

In other Libor news, a review from the U.K. government suggests Libor "could be scrapped altogether and replaced with an interest rate that is set using actual trades."

European Bank Woes: UBS is planning to start legal proceedings against the Nasdaq after problems executing trades on ultimately-beleaguered Facebook shares hurt the Swiss bank's results. According to the Journal, UBS lost the equivalent of $356 million following Facebook's initial public offering, which was doubly problematic since its income statement was already a bit of a mess. UBS ultimately reported a 58% drop in net profit during the second quarter, a decline the bank admits is likely to continue unless some headway is made stabilizing the eurozone crisis.