Receiving Wide Coverage ...
No European Vacation: As The Scan was being prepared, German lawmakers approved a bill to expand the euro zone's bailout fund, the Times reported. Finland's parliament did so a day earlier. But talk has already begun on "a more radical increase in the scope of bailouts" and possible debt restructuring for Greece, the Journal said. Debate on that subject is expected to gain more momentum in October, and it could get dicier. German Chancellor Angela Merkel is taking heavy political flak in pushing the current bailout, and a revolt among lawmakers "underscores a broader shift among Germans about their nation's role in Europe since the crisis erupted nearly two years ago." Meanwhile, the European Union detailed its plan for a tax on financial transactions. It would cover all transactions among financial institutions when at least one party is located in the EU, the Journal reported. Financial and business groups are already mounting an attack, the FT reported.
Some sought a broader view on the swirl of events. Drawing on an interview with a money manager-turned-historian, David Wessel warned in the Journal's "Capital" column that policymakers should study closely the mistakes central bankers made in the 1920s that fed the Great Depression. If not, the possible risks include Europe becoming "the epicenter of a financial earthquake on the scale of the crash of 1929 or Lehman Brothers 2008," or a so-so European recovery combined with a U.S. economic stagnation that persists "another five years." The Times' "Economix" column explored just how much money it might take to save Europe. The answer? "A lot of money," perhaps 1 trillion to 4 trillion euros, depending on whom you ask. (Note: Germany's GDP is about 2.5 trillion euros, the column said. No wonder some of the Germans are second-guessing the European unity mantra.)
If you are still in a gambling mood after all this, check out this report about the investors who are lured by the high risk, high reward of Greek bonds. For each euro of face value, pay only 36 cents: such a deal!
Thursday-Morning QBs: The Journal and Times each had stories about the disappointing performance of the Emergency Homeowners' Loan Program, a $1 billion program designed to help borrowers avoid losing their homes to foreclosure. It is being shut down after helping fewer than 15,000 households. Between $500 million and $670 million of the program's funds will be returned to the U.S. Treasury, and some blamed Congress for establishing overly restrictive qualification requirements for homeowners. Rep. Barney Frank, D-Mass., blamed the program's administrators, saying it was not one of their priorities. Wall Street Journal, New York Times
Wall Street Journal
Real estate developer Stephen Ross shouldn't expect to get many invitations to holiday parties from banks this year. The Related Cos., the New York firm which he heads, was supposed to spend $1.1 billion buying or investing in lenders. Instead, months of due diligence and being outbid on a few occasions (including by Capital One for ING Direct), it has returned the money. Ross explains why he believes it could take U.S. banks another three years to recover.
Citigroup CEO Vikram Pandit, in an interview that took place in the presidential suite of the Raffles Hotel in Singapore, sought to reassure investors that his investment in overseas expansion will pay off and that they will see start seeing capital returned to them next year and in 2013. The company's investment in retail operations in Asia, in particular, will start to show returns this year and vindicate the bank in the face of critics who say Citi needs to cut more expenses. He said to look for more details on the company's cost structure in its third-quarter report.
An opinion piece by Russ Roberts, an economics professor at George Mason University, seeks to tear apart recent comments by bank nemesis Elizabeth Warren that the rich have to pay their fair share of taxes in return for things that helped make them wealthy such as government spending on roads, education and security. He said such arguments would be stronger if, among other things, the government did not waste money on things that hurt the economy like propping up banks and paying export and crop subsidies.
A letter writer says the Durbin rule is "government price fixing" but said banks' defense of the old system as beneficial to consumer rings hollow. Instead, he prescribes more competition by requiring banks to pass along the swipe fee at the point of sale "so the customer knows exactly what he is being charged for the transaction."
Now this should be a more lucrative business line … Hewlett-Packard has hired Goldman Sachs to help the company defend itself against possible activist investors who could push for change at H-P, people familiar with the matter were quoted as saying.
Eric Rosengren, president of the Federal Reserve Bank of Boston, was expected in a speech Thursday in Stockholm to urge stricter regulation of the money-market mutual-fund industry, arguing that its vulnerabilities remain a threat to financial stability.
Speaking of mutual funds, their assets rose in the latest week, according to the Investment Company Institute.
A federal judge's ruling Tuesday has vastly undercut the power of a court-appointed trustee to recover billions of dollars for victims of Bernard Madoff.
New York Times
A draft of the Volcker Rule contains the tough language needed to help prevent things like the $2.3 billion UBS rogue-trader scandal from happening, a columnist writes.
Hedge funds have appealed a federal bankruptcy judge's ruling that allows Washington Mutual shareholders to sue the hedge funds for insider trading on Wamu's debt securities.
The interim CEO of UBS said the Swiss bank has no plans to dump its investment banking operations, in spite of the litany of problems that have plagued the business unit.
The Securities and Exchange Commission is investigating whether Royal Bank of Scotland, Credit Suisse and other financial institutions misled shareholders about the number of mortgage loans they might be forced to buy back because of early defaults, sources told the FT.
A comparison between how the International Monetary Fund treats Europe versus the rest of the world points to criticism from Asian leaders that the IMF is stepping up to rescue Greece but countries such as Indonesia and Uruguay have had to tough it out in the past.