Morning Scan
Monday, August 30, 2010
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Receiving Wide Coverage ...
Down in the Hole: Federal Reserve Chairman Ben Bernanke outlined further steps the central bank would take if the economy weakened further. The Times noted that Bernanke "announced no specific steps" the central bank would take immediately. The paper said stock prices fell following his remarks, "indicating that investors were looking for a more concrete plan." The Post said Bernanke "sought to clarify the actions the Fed might take and what would trigger them — and to dispel the confusion that has resulted during his recent public silence, as other top Fed policymakers have aired dissonant views amid conflicting economic signs." It said his remarks were received well by both investors and economists. The Journal's coverage focused on the likelihood that additional stimulus would be needed, noting that Bernanke's remarks came "amid fresh signs that growth has fizzled in the past few months." Wall Street Journal, New York Times, Washington Post
A story on the front page of Monday's Journal said global monetary policymakers predicted "an uneven global economic recovery was likely to stay on track despite worries about the vitality of the U.S. economy" and commented on the somber mood. "Angst, not panic, was the order of the day … several foreign central bankers said they were struck by the unusual degree of pessimism they had witnessed in the U.S., a contrast to typical American optimism."
A Journal article profiled Peter J. Boettke, a professor of economics at George Mason University who is "emerging as the intellectual standard-bearer for the Austrian school of economics that opposes government intervention in markets and decries federal spending to prop up demand during times of crisis." "Heard on the Street" said "even in a revived economy, the unemployment rate could stay stubbornly high. That could stoke political pressure for the Fed to make strong use of QE [quantitative easing] to reduce joblessness." An editorial said "if prosperity were a function of government stimulus, our economy should be booming."
A Times article looked at a new paper from University of Maryland economist Carmen M. Reinhart that predicts a slow recovery for the U.S. economy. A Week in Review article said, "it increasingly seems as if the policy makers attending like physicians to the American economy are peering into their medical kits and coming up empty." An Op-Ed by University of California professor Laura Tyson suggested a new approach to the recession: a second stimulus. Another article suggested the problem with the economy is "partisan gridlock." It contrasted Bernanke's failure to advise on specific proposals from either major party favorably with the approach taken by his predecessor, Alan Greenspan.
An editorial in the Post said Fed "policy is no substitute for reshaping of the economy." Rather, "the challenge is to identify and invest in new opportunities and equip the American people — through education, tax reform and entitlement reform — to take advantage of them." A column said the boost in consumer savings has been "the crux" of the economic recovery faltering. In a letter to the editor, one reader said the reason consumers are not spending is because companies are not hiring. "There are many of us out there who did not act foolishly during the so-called credit boom but now find ourselves assisting family members who lost their jobs."
The Devil You Know … The Journal's "Overheard" column said there is a "whisper" that some Republicans are warming to Elizabeth Warren as the first consumer financial-affairs regulator. "The thinking: Ms. Warren isn't shy about speaking her mind, so banks would know what was coming." In "Getting Going," columnist Karen Blumenthal provided a to-do list for the new consumer finance protection bureau: address credit reporting errors, extend protections to all prepaid cards, keep students informed of their loan balances, answer complaints and maintain momentum. An article in "Weekend Investor" said credit card companies, including Capital One and Citigroup, are pitching professional credit cards at consumers, who may not be aware that these cards aren't covered under the Card Act. Rep. Carolyn B. Maloney, a sponsor of the CARD act, wrote a letter to the editor defending the legislation, which an Aug. 24 editorial said was raising interest rates and reducing options for consumers. "My reforms help consumers and allow lenders to compete and earn a profit fairly."
Proxy Reform? New SEC rules designed to make it easier for shareholders to nominate board members came under attack from both sides of the fence. A Times editorial said the three-year phase-in exception for companies worth less than $75 million is "too long for shareholders in smaller companies to wait to have a say," and runs the risk of becoming a permanent exemption rather than a temporary one. A Journal editorial said, "Sold in the name of 'shareholder democracy' … this new rule will mainly be used not by mom and pop investors, but by union funds and other politically motivated organizations seeking to force mom and pop to support causes they otherwise would not." Wall Street Journal, New York Times
Wall Street Journal
A preview of next month's meeting of the Basel committee on banking supervision said "the stakes are so high that the leaders of the U.S., France, Germany and Japan have become involved, elevating what might otherwise be dismissed as a technocratic exercise."
A story on the front page of the Money & Investing section said executives at some financial services companies are considering paying out year-end bonuses early to avoid a possible rise in taxes.
Another C1 story said nearly a third of U.S. households have no life-insurance coverage, the highest fraction in more than four decades, according to research firm Limra. Limra cited tighter household budgets, loss of employer-provided coverage as a result of layoffs, and cutbacks by some employers in their benefits packages. The paper added another reason: the hardball tactics of commission-paid sales agents.
A federal judge ruled that two investor lawsuits over Bank of America's disclosures before its acquisition of Merrill Lynch can proceed.
S&P said the worst appears to be over for the U.S. banking industry, though a sluggish economy and continuing real-estate issues — combined with regulatory uncertainty — mean the sector isn't likely to see a quick rebound. (Weekend)
New York Times
"Breakingviews" contrasted the approaches of Spain's two biggest banks to expanding in the U.S. BBVA has focused on the South to link to its business in Mexico, whereas Santander has focused on the Northeast. Both have faced setbacks with their strategies, but the article says "the worst seems to be behind" them. Of the two, it says Santander's current approach has clearer benefits than BBVA's.
Lakeside Bank in Lake Charles, La., has a rare distinction: in a year when numerous banks continue to fail, it is the only one that has been born (though the article notes some failed banks have been reopened). The uniqueness of Lakeside's situation highlights a new regulatory attitude that has made it harder for new banks to get started. Though Lakeside had some factors, such as an experienced management team, in its favor, it also had a good location: Louisiana is in much better economic shape than most states, and only one of its banks has failed during the crisis. (Sunday)
A column examined how much of the Dodd-Frank Act's effectiveness will rest in how it is handled by regulators — and particularly with derivatives regulation, there are many stakeholders who want the law to be implemented in vastly different ways. (Sunday)
The paper ran an obituary for banker Daniel P. Davison, who died Wednesday at 85. Davison became the head of United States Trust Co. in 1979, cutting costs such as up to $20,000 a year once spent on flowers, and vowing to walk the dogs of clients with assets of more than $2 million. This new focus on personal services worked well for the company, the obit said, boosting its value from a $40 million market capitalization in 1979 to a price of $2.7 billion when Charles Schwab bought it in 2000. (Saturday)
Washington Post
An article recommended refinancing car loans, providing a break-out of how much consumers can save, particularly if their current loans were provided by dealerships. (Sunday)
An article from Kiplinger's Personal Finance looked at non-traditional ways of investing in an "era of high unemployment, flat home prices and do-it-yourself retirement savings." One suggestion was to rent rather than buy while home prices are down or flat. Another way was find satisfaction with single-digit returns. (Sunday)
A report by the President's Economic Advisory Board called for a change in the nation's tax laws, which it said have dramatically increased in complexity. "The board also found that the profusion of credits, deductions, phaseouts and conflicting eligibility requirements frays the sanity of ordinary taxpayers just as surely as it complicates the calculations of wealthy families and business owners." (Saturday)
, with contributions from Rachel Witkowski and Daniel Wolfe.
