The Scan for Tuesday, August 2

Breaking News This Morning ...

Barclays to Cut Jobs, Too: Following yesterday's announcement by fellow Londoner HSBC that it would fire as many as 30,000 people, Barclays said it intends to shed 3,000 jobs this year above and beyond the 1,400 the British bank eliminated in the first half. Barclays' first-half profit dropped by a third as it set aside money to compensate customers who bought dodgy payment protection insurance. Investment banking revenue declined as well. Wall Street Journal, New York Times, Financial Times

Receiving Wide Coverage ...

Debt Deal, Day Two: On the eve of today's deadline to raise the debt ceiling, the House passed the eleventh-hour compromise budget agreement, which now heads to the Senate. Neither party seems happy, with Democrats disappointed in the spending cuts and some Republicans angry they didn't go further. The Times reports that administration officials, faced with fellow party members' concern that the White House gave in to extremists, met with congressional Democrats to pitch their rationale — the deal's structure, the Obama team argues, gives Democrats leverage to push for higher tax revenue, rather than rely solely on spending cuts. Wall Street Journal, New York Times, Washington Post

Another Times story notes that spending cuts in the debt deal will effectively take fiscal stimulus out of the government's toolkit. This suggests the Fed may have to intervene yet again if unemployment persists at high levels — despite chairman Ben Bernanke's pronouncement this spring that it was time to see if the economy could stand on its own.

Journal columnist Francesco Guerrera surveys the damage done to the financial system this summer by the threat of a U.S. default. Money market funds dumped short-term instruments, the commercial paper and repo markets hardened, and companies stuffed cash into "the corporate equivalent of mattresses — bank accounts that yield no interest but are insured by the federal government (a paradoxical vote of confidence given the shenanigans that were taking place in Washington)." This influx brought a familiar mixed blessing for banks: lots of cheap funding, but bigger liabilities and hence the prospect of having to raise more capital to sate regulators. "One executive even suggested that if this 'run to the bank' continues, lenders might consider introducing negative interest rates on deposits (savers would have to pay a fee to park the money in the bank) to keep money out," Gurrera writes. He doubts that all this cash will be "enough to increase [banks'] appetite to ramp up the loans the U.S. economy so badly craves." In the online comments, however, oneJournal reader suggests that the figurative mattress-stuffing might have happened regardless of the drama on Capitol Hill: "Perhaps a better explanation for the 'run to the bank' is just the new normal. Rising productivity means big profits, and there isn't enough demand to use the money...."

HSBC, Day Two: The Journal's "Heard on the Street" considers the challenges facing HSBC chief Stuart Gulliver as he slashes the workforce, retrenches from some markets (including ones in the U.S.) and tries to remake the culture. "Gulliver can't afford to let up on the radicalism if HSBC is to hit his return-on-equity target of 12% to 15% on a Basel III basis by 2013," the column says. Despite better-than-expected first-half earnings, costs are "still some way above the 2013 target of 48%-52%" of profits. "That partly reflects the lag effect as HSBC runs down its U.S. consumer business, but worryingly also reflects rising staff costs amid a bidding war for talent in emerging markets." Speaking of which, the FT reports that HSBC plans a hiring spree in Asia and Latin America, where it will add 15,000 jobs. Wall Street Journal, Financial Times

Wall Street Journal

An April Supreme Court ruling has emboldened banks to make greater use of mandatory arbitration clauses in their consumer contracts — particularly small and midsize banks that haven't used them as much in the past. Regions, for example, already had an arbitration clause for deposit accounts, but last month it "eliminated a provision that permitted some court actions even while a case was going through arbitration. The bank also extended the mandatory arbitration provision to heirs of a deceased customer." To be fair, the bank's also simplified the language and put the clause in a more prominent spot in its agreements.

New York Times

In a vivid illustration of the "revolving door" phenomenon, Dealbook's Andrew Ross Sorkin reveals that the SEC lawyer in charge of writing rules for derivatives is a former outside counsel to hedge fund luminary John Paulson. In that role, the lawyer signed off on Abacus, the infamous Goldman Sachs-engineered deal that helped make Paulson wealthy (and other Goldman clients considerably poorer) and led to the SEC's suit against the investment bank. "While clearly there are questions about whether the public wants someone in government who just came from industry, the opposite argument can be made, too: It may be better to have the fox in the henhouse," Sorkin writes. "After all, the best way for the government to stay ahead of financial innovations — or at least not fall too far behind — is to employ people who know them best."

The financial industry has spent more than $100 million to lobby for changes to Dodd-Frank, including $50.3 million in the second quarter. The American Bankers Association has spent $4.6 million, and in-house lobbyists at JPMorgan Chase spent $3.3 million.