Wednesday, August 3

Receiving Wide Coverage ...

So, What Now? President Obama signed into law the compromise deal allowing the government to raise the federal debt ceiling, but economic fears persist. The U.S. stock market tanked for an eighth consecutive day, the longest down stretch since that scary period in '08. "Foreign investors and economic analysts see further action as crucial to restoring the United States' financial reputation," the Washington Post reports. "Critics in China and elsewhere warned that the initial debt-reduction package, which would cut about $1 trillion from agency budgets over the next decade, is too modest." ("China and elsewhere" - there's just something about that phrase …) The FT notes prominently that the price of gold, a classic hedge against bad times, hit another record high. And the Journal reports that central banks around the world (South Korea being the latest) are "ramping up their gold buying as they seek to diversify their reserves away from the dollar and other beleaguered currencies." (There's another one: "the dollar and other beleaguered …") Wall Street Journal, Washington Post, Financial Times

In another Journal article, this one a roundup of layoffs and other defensive moves by European banks, Barclays CEO Bob Diamond sums up the mood well: "There's a loss of confidence that's pretty deep about a lack of growth, contagion in Europe and the U.S. debt situation. It's going to be 2012 at the earliest before we have any pickup in confidence."

In the Times, Binyamin Appelbaum writes that debt-ceiling deal will not prevent the country's debt from being larger in 10 years than it is today. That's because the deal does not address federal spending on health care. Another Times story notes, against the backdrop of consternation over the U.S. government potentially losing its triple-A status, that only four corporations today maintain the "money-good" credit rating: Microsoft, Exxon Mobil, Automatic Data Processing and Johnson & Johnson. (So the rating agencies consider the four basic needs to be shampoo, gas, paychecks, and Windows 7? Sure, makes sense.)

Wall Street Journal

As the negotiations between mortgage servicers and state and federal officials plod along, Bank of America's been holding separate one-on-one talks with the regulators. In exchange for "a broad release from legal claims against the lender," B of A might agree to principal reductions for some troubled borrowers, anonymous sources tell the Journal.

New York Times

The experience of former directors of Enron shows that former board members at Bear Stearns and Lehman Brothers needn't fear about their careers being cut short. While Enron executives are serving time in prison, its old directors are serving on other corporate boards.

A Senate committee approved Mark Wetjen as a member of the Commodity Futures Trading Commission, but his chances in the full chamber are uncertain. Republican lawmakers are not eager to give the CFTC a win while it is carrying out Dodd-Frank's mandate to write new rules for the derivatives market.

Washington Post

A Brown University sociologist found segregation in housing and income patterns. The analysis of census data showed high-income blacks and Hispanics were, in most regions, living in areas that were poorer than those populated by low-income whites. The Washington, D.C., and Atlanta areas were exceptions. "In the Washington region, for example, affluent Hispanics lived in places where the median income was $90,000 — about the same as middle-income whites. And well-off blacks had neighbors whose median income was $83,000 — less than the comparable figure for poor white households."

Elsewhere ...

Slate: Columnist Bethany McLean analyzes the resilience of the much-discredited credit rating agencies. Dodd-Frank mandates that references to the Big Three raters' opinions be stripped from federal regulations. But the banks, the agencies that supervise them and even investors are clinging to these shorthand assessments of creditworthiness. On reason is that the new Basel III international capital standards retain the use of ratings, but habit is also a factor. "If investors no longer have ratings to rely on, then they'll have to do the credit analysis themselves. If they're wrong, they won't be able to blame those accursed rating agencies!"