TOP NEWS: Economy: August 10, 2012
- Economy might be gaining traction, new data suggest
- U.S. Bucks Export Slowdown
- Osborne lobbies Geithner on StanChart
- Knight Capital CEO: ‘Close to 100%’
- A Bipartisan Proposal for More Equity in Big Banks
Excerpts and More Top Stories
ECONOMIC GROWTH: Economy might be gaining traction, new data suggest
Zachary A. Goldfarb and Michael A. Fletcher, Washington Post – After a spring and summer of weak economic indicators, a flurry of fresh data suggest key sectors of the economy might be gaining traction, just as the battle for the White House enters the final round.
TRADE/EXPORTS: U.S. Bucks Export Slowdown
Conor Dougherty and Alex Frangos, WSJ – U.S. exports bucked a world-wide trade slowdown in June but face serious headwinds from the recession throughout much of Europe and softening growth in Asia.The U.S. trade deficit with other countries narrowed to $42.9 billion in June from $48 billion a month earlier, the Commerce Department said Thursday, as imports fell and exports grew. Exports, which have been a pivotal contributor to the economic recovery, were strong almost everywhere except to Europe, where a recession and a protracted sovereign-debt crisis have sapped demand.
STANDARD CHARTER: Osborne lobbies Geithner on StanChart
Jim Pickard and Richard McGregor, FT – George Osborne has spoken to Tim Geithner, the US Treasury secretary, three times in the space of two days over the New York regulatory probe into Standard Chartered in a sign of the British government’s mounting concern.
STANDARD CHARTER: StanChart is a reminder of banking’s insatiable greed
John Plender, FT, Opinion -Until now Standard Chartered, whose strength has been built on the growth of emerging markets, has been regarded as having a culture untainted by the excesses that have tarnished other global institutions. Yet the picture that emerges with brutal clarity from emails and other internal documents uncovered by Mr Lawsky’s investigators is of an organisation that cynically manipulated business to avoid the reach of US sanctions in the interests of maximising profit.
STANDARD CHARTER: Regulators Seek Unity in U.K. Bank Talks
Liz Rappaport, Max Colchester, and Damian Paletta, WSJ – In the past six weeks, the U.K.’s banking sector has been hit by scandal, further undermining its reputation and undercutting efforts to fend off tougher regulations. U.S. authorities are forming a group with New York’s top financial regulator to negotiate a settlement with Standard Chartered PLC over allegations it illegally hid financial dealings with Iran.
STANDARD CHARTER: Regulator Shines a Spotlight on a Bank, and on Himself
Jessica Silver-Greenberg, NY Times – Aggressive action by Benjamin M. Lawsky, New York’s top banking regulator, against a British bank has some wondering about his tactics and his ultimate goals.
STANDARD CHARTER: American regulators threaten an emerging-markets bank
Economist – In recent years Standard Chartered’s shares have traded at a premium to its peers in large part because its businesses are focused on Africa, Asia and the Middle East. The bank has been able to sell itself as a play on the bounciest parts of the world economy, and the ones least exposed to the Western regulatory minefield. No longer. The bank’s shares swooned this week after the New York State Department of Financial Services (DFS) issued an inflammatory 27-page order, labelling Standard Chartered a “rogue” institution and accusing it of “grave violations of law” for allegedly hiding 60,000 transactions, totalling $250 billion, to enable Iran to evade American sanctions.
KNIGHT CAPITAL: Knight Capital CEO: ‘Close to 100%’
Jacob Bunge, WSJ – Knight Capital Group Inc.’s chief executive said the brokerage firm expects to reclaim nearly all lost business by the end of next week, a swift rebound from the Aug. 1 trading glitches that threatened its survival.
Larry Harris, Forbes, Opinion – The best approach will be to throttle the electronic traders, not the markets. Each electronic trader should install a computerized system to watch its outgoing order flow to ensure that it is consistent with its business model. If the character of the order flow changes, the outgoing order monitoring device should immediately cut off the orders. These circuit breakers should be placed on the orders coming into the markets from each electronic trader, not on the markets themselves.
Simon Johnson, NY Times, Opinion – It’s precisely the prospect of unlimited and typically unconditional support from central banks that encourages moral hazard — meaning that bank management is not sufficiently careful. If we increase the government backing and implicit subsidies for megabanks, will they take bigger or smaller reckless risks? What would you do? A much better approach would be to force large financial institutions to increase their equity funding relative to how much they borrow.
BANKING: Whale’s Tail Hits Bank on Buyback
Dan Fitzpatrick and Matthias Rieker, WSJ – J.P. Morgan Chase & Co. can’t outrun the ripples from its multibillion-dollar “London Whale” trading blunder. The largest U.S. bank admitted Thursday in a federal filing that it pushed back a plan to resume share buybacks, scaled back several key measures of capital at the request of regulators and lost money on 28 trading days in the second quarter.
FISCAL CLIFF: Debate Over ‘Fiscal Cliff’ Weighs on Growth
Phil Izzo, WSJ - Dithering in Washington over the “fiscal cliff” of automatic tax increases and spending cuts set for year-end is already hindering economic growth, according to economists surveyed by The Wall Street Journal.
Ben Protess and Azam Ahmed, NY Times – Federal authorities ended two investigations into the actions of Goldman Sachs during the financial crisis, handing a quiet victory to the bank after years of public scrutiny.
MOODY’S RATINGS: US municipal downgrades most in a decade
Vivianne Rodrigues and Nicole Bullock, FT – Moody’s downgraded nearly 300 US municipal issuers in the second quarter, the most for any quarter in more than a decade and the latest sign of the potential pressure building in the market where states and local governments raise money.
MORTGAGES: Watchdog Offers Mortgage Rules
Alan Zibel, NY Times – A federal consumer regulator is expected to propose Friday the first set of national standards for the mortgage-servicing industry, which has been riddled with problems in the wake of the housing bust.
MORTGAGES: Eminent Soundness
WSJ – Edward DeMarco has done yeoman work for taxpayers as the chief regulator for Fannie Mae and Freddie Mac, and this week he did another good deed by sounding an alarm against cities that want to use eminent domain to seize underwater mortgages.
Robin Harding , FT – Construction has been deeply troubled for the past five years, continuing to lose jobs even in 2012, but the rise in apartment building offers hope. It shows how the fundamentals of the US economy have improved even though it is mired in another slowdown.
COMMODITIES: Corn prices surge to record high
Jack Farchy in London and Gregory Meyer, FT – Corn futures surged to a new record high after the US government said that the drought ravaging the US farmbelt had destroyed a sixth of the country’s corn crop in just one month.
COMMODITIES: Corn and oil among top assets in crisis
Robin Wigglesworth, FT – The best-performing investments in the five years since the financial crisis began in earnest have been precious metals, oil, the bonds of the world’s most creditworthy governments and – most of all – corn.
A rash of bad weather–from a drought in the U.S. to a hot summer in Russia to excessive rain in Brazil–is straining the global food chain.
Javier Blas in London and Gregory Meyer, FT – The UN has called for an immediate suspension of government-mandated US ethanol production, adding to pressure on Barack Obama to address the food-versus-fuel debate in the run-up to presidential elections.
José Graziano da Silva, FT, Opinion – The worst drought for 50 years is inflicting huge damage on the US maize crop, with serious consequences for the overall international food supply.
POSTAL SERVICE: Post Office Troubles Mount With $5.2 Billion Quarterly Loss
Ron Nixon, NY Times – The losses in the latest quarter bring total losses to $11.6 billion so far in the agency’s fiscal year, which ends Sept. 30.
BACKGROUND CHECKS: Accuracy in Criminal Background Checks
Editorial, NY Times – A government lawsuit against a background check company is a good start and puts the industry on notice. But a growing trade needs even closer scrutiny.
COMPUTER SECURITY: Ex-Goldman Programmer Is Arrested Again
Peter Lattman, NY Times – The Manhattan district attorney has charged Sergey Aleynikov, the former Goldman Sachs programmer, with state crimes related to his downloading of computer code from his onetime employer.
RESEARCH FUNDING: Why the Dismal Science Deserves Federal Funding
Gary S. Becker and James J. Heckman, WSJ, Opinion – The federal deficit has ballooned in recent years, and even larger deficits are coming due to the expected growth of entitlement spending. There is little disagreement among members of both political parties that federal spending should be reduced. In such an environment it is crucial that the right criteria guide the cuts that will be made. Across-the-board cuts are not a thoughtful way to make choices.
CONSUMERS: Shopper Alert: Price May Drop for You Alone
Stephanie Clifford, NY Times – Supermarkets are mining the data from their loyalty card programs to adjust prices for and make marketing offers to individual customers.
Amir Erfati, WSJ – Yahoo Inc. said Thursday it could reverse its May decision to return more than $4 billion to shareholders from selling part of its stake in a Chinese Internet company, a signal that new Chief Executive Marissa Mayer may want to use the cash for other purposes.
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