TOP NEWS: Economy: July 11, 2012
- Shares Fall on Concerns About Profit Growth
- States Face Tough Choices as Downturn Ends
- The Spreading Scourge of Corporate Corruption
- After Libor – the search for a new benchmark
- Here Are the Facts About Offshoring
Excerpts and more top stories
Associated Press, NY Times - Stocks fell Tuesday for a fourth consecutive day after a weak start to the earnings season and a sharp decline in oil prices, which sent energy shares sharply lower.
Kaitlyn Kiernan, WSJ – Individual investors, facing triple-digit prices for shares of Apple and Google, increasingly are turning to options as a cheaper way to trade. For many small investors and traders, buying and selling those stocks means paying huge sums. Options, which give the holder the right to buy or sell a stock at a predetermined price, often trade at pennies.
Michael Cooper, NY Times – As state governments begin to emerge from the long downturn, many are grappling with a difficult choice: should they restore some of the services and jobs they were forced to eliminate in the recession or cut taxes in the hopes of bolstering their local economies?
CORPORATE REFORM: The Spreading Scourge of Corporate Corruption
Edwardo Porter, NY Times – The misconduct of the financial industry no longer surprises most Americans. Only about one in five has much trust in banks, according to Gallup polls, about half the level in 2007. And it’s not just banks that are frowned upon. Trust in big business overall is declining.
CORPORATE REFORM: Corporate values are not just a calculation
John Kay, Financial Times, Opinion - If companies abandon values integral to their identity, their literal or figurative licences to operate will be in jeopardy.
LIBOR: After Libor – the search for a new benchmark
Michael Mackenzie, Financial Times – Search for a replacement is dogged by the fact that there is simply not enough trading to ensure the rate genuinely reflects the market.
David Malpass, WSJ, Opinion - The Libor scandal may by bad enough to slow a global economy already weighed down by troubles in Europe, the U.S. and China. This is not because this key interest rate is more important than other prices in the economy. That’s probably not the case. The problem is that the litigation potential is enormous and could infect a broad range of markets for years.
Terence Corcoran, Financial Post - The scandal is rapidly turning into The Big Liebor. By exaggerating, misstating and even fabricating what may or may not have taken place in the setting of the international Libor rate over the past five years, political activists and opponents of market-driven financial markets are having a field day. But Libor may be a failure not because of the activities of global banks, but because it was essentially flawed from the start.
Mark Scott, NY Times - But now Mr. Diamond, who stepped down last week, faces criticism about his leadership as Barclays deals with fallout from a scandal involving interest rate manipulation.
OUTSOURCING: Here Are the Facts About Offshoring
Robert Samuelson, RealClearMarkets – Between now and the election, we’re going to argue a lot about jobs – who can or can’t create them. It’s going to be mighty confusing. For proof, witness the latest installment: the debate over outsourcing and offshoring.
FINANCIAL REFORM: We still have that sinking feeling
Martin Wolf, Financial Times, Opinion - Far too much policy making and advice neither recognises the post-crisis challenges nor crafts effective answers.
DEFICIT REDUCTION: Stop painful, arbitrary and abrupt cuts!
Pete Domenici, Jim Jones and Dan Glickman, Financial Times, Opinion – Managers at the Pentagon and other agencies are delaying signing contracts and slowing procurement.
THE FED: A New Way to Recharge the Economy
William Greider, The Nation, Opinion – Miles Kimball, an imaginative economics professor at the University of Michigan, has stepped forward to propose an ingenious solution for the Fed’s dilemma. The government should create a “federal credit card” and send one to every adult in the nation, enabling each person to borrow $2,000 at a very low interest rate and not pay back any of the money until after the economy has fully recovered. The provocative kicker in Kimball’s proposal is that the Federal Reserve would itself provide the financing, not Congress or the president through the federal budget. And he argues that the central bank can do this with its unique power to create money.
Neil King Jr. and Peter Nicholas, WSJ – Republicans opened a counteroffensive against Democratic claims that Mitt Romney outsourced jobs, highlighting how President Barack Obama’s economic-stimulus program ended up sending some U.S. taxpayer money to foreign firms and workers.
TRADING SCANDAL: Scandal Shakes Trading Firm
Jacob Bunge, Jerry A. Dicolo and Josh Dawsey, WSJ – A deepening scandal in the futures-trading business has left an elder statesman of the industry hospitalized after a suicide attempt and regulators seeking to find out what happened to about $215 million of customer money allegedly missing from his firm. The firm, Peregrine Financial Group Inc., filed Tuesday evening in Chicago to liquidate under Chapter 7 of the bankruptcy code.
J.P. Morgan: Claw Is Out for ‘Whale’ Officials
Monica Langley and Dan Fitzpatrick, WSJ – The nation’s biggest bank is expected to claw back compensation from individuals including Ina Drew, who ran the company’s Chief Investment Office. J.P. Morgan’s plan is the most prominent instance of a major U.S. bank seeking to recover pay from a high-ranking executive since the financial crisis.
Bob Davis and Tom Orlik, WSJ – The U.S. trade deficit with China continues to grow even as the rest of the world runs a trade surplus with Beijing, potentially exacerbating a political problem for President Barack Obama as this year’s campaign debate unfolds.
Mark Buchanan, Bloomberg – Over the past three decades, the global financial system has become more dynamic and interconnected, more concentrated and complicated than ever before. Financial engineering seems to know no limits to creating new instruments that link institutions in new ways.
Alexander Eichler, Huffington Post – It’s true that a strong banking industry can help a society expand economically, but the researchers say that only remains true up to a point. Eventually, they claim, you reach a threshold of diminishing returns. Once a country’s financial sector swells above a certain size, it becomes associated with “a negative effect on economic growth.”