The Scan for Thursday, July 28

Receiving Wide Coverage ...

To Downgrade or Not to Downgrade… At a hearing on Capitol Hill the president of Standard & Poor's, Deven Sharma said that some newspapers have misreported his company's position on the U.S. debt crisis as having set a $4 trillion deficit reduction target in order for the country to preserve its triple-A credit rating. He said that some of the plans being considered that would reduce the U.S deficit by less than $4 trillion, actually would allow the United States to preserve its rating, the Post reported. The Journal, however, said Sharma said the rating agency was taking a wait-and-see attitude. The Times' take? The U.S. is unlikely to default on its debt but the credit rating depends on cutting spending and reducing the deficit. Wall Street Journal, New York Times, Washington Post

UBS Sued Over Subprime Mortgages: The Federal Housing Finance Agency has sued the Swiss bank UBS AG to recover more than $900 million in losses, alleging that the Swiss Bank misled Fannie Mae and Freddie Mac into buying $4.5 billion of risky mortgage debt, the Post reported. The UBS lawsuit is part of a push by Washington to hold banks responsible for the housing crisis. The Journal says, "FHFA's lawsuit focuses on so-called private-label securities based on subprime and other risky loans that were originated by mortgage companies, packaged by Wall Street firms, and then sold to investors." Wall Street Journal, Washington Post

Wall Street Journal

The Federal Reserve has issued a cease-and-desist order to Royal Bank of Scotland in an effort to end money laundering and preventing movement of funds to countries sanctioned by the U.S. The order was not related to any specific incident and echoes similar moves targeting HSBC and Barclays.

It's lean times at Banco Santander as net profit fell 38% in the second quarter. Banks dealing in the U.K. were forced to reimburse borrowers who were forced to take out credit insurance. Many banks took the charge in the first quarter, but Banco Santander took it in the second.

A federal judge will allow a lawsuit that claims Lehman Brothers Holdings former officials, underwriters and auditors are responsible for investor losses.

New York Times

Credit Suisse had a bad second quarter and its employees will suffer as the bank announced plans to slash 2,000 positions by the end of next year.

In DealBook, a case is made for breaking up big banks. "Investors don't care about size, they care about performance. It's undeniable that smaller banks are easier to manage. And they are easier for regulators to unwind — and therefore less terrifying to trading partners — when they fail." The article concludes that while breaking up banks is "not a perfect solution ... But it's a good start."

Washington Post

President Obama's new nominee to head the Consumer Financial Protection Bureau Richard Cordray is facing a major challenge to his confirmation in the U.S. Senate where Republicans have vowed to block his appointment.