Sun Aug 14, 2011 12:47PM
Deputy Head of Iran's Armed Forces Joint Chiefs of Staff Brigadier General Massoud Jazayeri
A senior Iranian commander says the collapse of the United States is definite, calling on the elite to prepare for a world without “the American empire.”
“The decline of the US empire is definite. Today, the United States is considered the biggest debtor among all the countries of the world,” Deputy Head of Iran's Armed Forces Joint Chiefs of Staff Brigadier General Massoud Jazayeri said at a Sunday speech in the Iranian capital, Tehran.
“The elite should draft a new global management model and plan for a world without the American empire,” he added
The commander referred to the social and political discrimination in the US that have pushed the American society to the brink of devastation.
Washington is struggling with its worst economic downturn since the Great Depression of the 1930s.
According to the US Department of Labor, the number of jobless individuals in the country hit 14,100,000 in June, reflecting an unemployment rate of 9.2 percent.
Amid the ongoing financial crisis in the US, Standard & Poor's credit ratings agency has downgraded the United States' rating from the top AAA to AA+ for the first time in the history of ratings.
Jazayeri also pointed to the popular uprisings in the Arab world and said the focus of hegemonic powers is on the greater Middle East, which has been undergoing significant developments and at the heart of which lies the teachings of the Islamic Revolution.
He added that in this “strategic region the US is viewed as the most hated of countries.”
Since January, two revolutions have led to the downfall of US-backed regimes in Tunisia and Egypt.
Other popular uprisings have hit Libya, Yemen, Bahrain and the wave of protests is spreading to other Arab countries.
ASH/HGH/HJL
16:47, July 08, 2011
The dispute between the Obama Administration and the U.S. House of Representatives around whether to raise the 14.3-trillion-U.S.-dollar debt ceiling has become even more intense. U.S. treasury securities will face at least a "technical default" risk if the two sides fail to reach a consensus by Aug. 2.
Currently, both sides are trying to use this "technical default" risk to coerce each other into submission. Although these are differences between the policies of different U.S. domestic political institutions and different political parties, the results will bring a major impact on the global financial system.
The United States, as the issuer of the global currency, has locked the interests of global creditors in a domestic political struggle. Even though the two sides reached a consensus before the deadline, the United States has set a bad precedent of ignoring the global economy and the interests of creditors in other countries based on its own policy.
In fact, the gross national debt reached debt ceiling as early as May 16, setting a record high in 60 years. This resulted from years of a debt-driven consumption policy adopted by the United States.
In accordance with past practice, the While House can always obtain Congressional authorization to raise the debt ceiling. Congress has raised the debt ceiling 16 times since 1993. In response to the plea from the White House to raise the debt ceiling before the upcoming general election, the Republican Party, which controls the House of Representatives, has added some new legal obligations requiring the government to cut the federal spending by 2 trillion U.S. dollars over the next 10 years without a tax increase.
For the Obama administration, accepting such a condition could mean that Obama will lose his re-election in 2012. On the other side, if Congress does not grant the debt limit increase authorization on Aug. 2, the government will theoretically fail to pay the due debt interests (the earliest interest payment to creditors will be due Aug. 15).
As a result, the Obama administration will have to suspend pension payment to domestic retirees and cease interest payment to foreign creditors. Evidently, this will lead to a catastrophic consequence that both the United States and the global financial market cannot bear. Nevertheless, the White House and Congress are both using this catastrophic consequence as a means to force the other side to submit.
Although international financial credit rating institutions have already issued clear warnings about the risk concerning the U.S. national debt and the transaction volume of CDS that is an indicator of default risk in the financial market has considerably increased, the chance is very slim for the United States to face a similar sovereign debt crisis as Greece.
First, latest statistical data shows that investors are still interested in purchasing newly issued U.S. national debt. Second, “technical default” will not prompt central banks of various banks, primary overseas holders of U.S. national debt, to dump the U.S. debt they hold.
Foreign holders of U.S. debt are faced with a real risk. Since the U.S. political parties only consider their own interests and dare to ignore the interests of foreign creditors, it is highly possible that the United States will damage the interests of foreign creditors for its own political, economic, or security interests some day.
In other words, it may use the debt default to threaten other countries. This is a terrible systematic risk hidden in the current international financial system. The U.S. debt crisis has posed a real dilemma for foreign creditors. They either have to endure the immediate enormous financial risks brought about by the U.S. debt default, or hold more U.S. debt at their peril.
At the same time, the U.S. debt crisis served as a wake-up call to China, the largest foreign holder of Treasury bonds. China should stop increasing its already massive foreign exchange reserves, and be alert of the national financial security risks in excessive holdings of U.S. dollar assets.
In the post-global financial crisis era, there is a growing international consensus that the U.S. dollar-centered international currency system should be reformed as soon as possible. Getting rid of the dollar will not only serve the interests of creditor countries, but also ensure the stability and sustainable operation of the international financial system.
By Li Xiangyang, the director of the Institute of Asia-Pacific Studies under the Chinese Academy of Social Sciences and the article is translated by People's Daily Online.
====
FACTBOX-Key issues for possible Republican candidates in 2012
19 Jul 2011 18:47
Source: reuters // Reuters
July 19 (Reuters) - U.S. Republican presidential candidates, including front-runner Mitt Romney, have pledged to close the federal deficit by cutting and capping spending and pressing for a balanced-budget amendment.
Here is a list of Republican White House hopefuls, including declared and undeclared candidates, along with their main policy issues.
MITT ROMNEY
The former Massachusetts governor has climbed to the top of the Republican heap and has blasted Obama's performance on unemployment.
But on the financial question of the hour -- whether to raise the debt ceiling -- Romney has been less than outspoken. He has avoided wading into the debate in Washington other than to call on Obama to accept Republican calls for spending cuts without taxes.
Despite positioning himself as the jobs candidate, Romney's business-oriented world view could be a double-edged sword. As chief executive of the private equity firm Bain Capital, he oversaw hundreds of job cuts.
President Barack Obama's healthcare overhaul, despised by many Republican voters, also presents a challenge for Romney. As governor, he signed a similar reform that expanded health coverage in Massachusetts.
As a one-time moderate who has embraced conservatism, he is vulnerable to the same "flip-flopper" label that dogged his unsuccessful 2008 presidential campaign.
He broke with Republican orthodoxy on the climate change issue by saying that global warming is real, that the human species is contributing to it and that greenhouse gas emissions should be reduced.
MICHELE BACHMANN
The fiery congresswoman from Minnesota, who is riding a surge of popularity among Republican voters, has signed the cut, cap and balance pledge.
However, Bachmann says the pledge is only a step in the right direction, saying she also wanted it to defund the healthcare reform law. "I want it to go a little further, because I also think it needs to defund Obamacare," she said.
Bachmann bears a strong political likeness to Sarah Palin, the other conservative woman in Republican presidential circles. Both are outspoken fiscal hawks, Tea Party leaders and prone to gaffes that have raised doubts about their ability to win a general election contest against Obama.
But Bachmann has a stronger policy background. The 55-year-old former tax lawyer founded the Tea Party Caucus in the House of Representatives.
Bachmann has a way of combining policy spheres. She describes the debt problem as also the biggest U.S. national security threat and equates fiscal and social conservatism.
She has also been critical of Obama's call for Israeli-Palestinian negotiations to use the Jewish state's pre-1967 borders as a starting point, saying in an ad that the president has "betrayed Israel."
RICK PERRY
The Texas governor has not declared his candidacy but speculation has been rife that he could shake up the Republican field by jumping in as an alternative candidate for conservative voters who are wary of Romney.
Perry has cast-iron conservative positions on social issues including opposition to abortion and gay marriage. He boasts a track record as governor for creating jobs and keeping taxes low. And he is a proven election winner as the longest serving governor in Texas history, with strong support from the Tea Party movement.
But the cowboy boot-sporting 61-year-old could also face a roadblock in the form of previous Governor George W. Bush.
Analysts say Americans may not rush to hold open the Oval Office door to another conservative governor from Texas so soon after Bush, whose policies have become unpopular with many.
Perry might also have to answer questions about remarks he made in 2009 in which he seemed to suggest that Texas could secede from the United States.
TIM PAWLENTY
Pawlenty, who has also signed the debt pledge, is credited with tackling a $4.3 billion deficit without raising taxes while Minnesota governor, although Democrats complain he just patched over budget holes.
Pawlenty has worked to increase his presidential profile by pledging to tell voters hard truths about Medicare and Social Security cuts while taking up the potentially risky position of opposing ethanol subsidies in the corn state of Iowa.
Pawlenty has vowed to grow the U.S. economy by an ambitious 5 percent annually through generous tax cuts, aggressive spending reductions and deregulation. But after economists raised doubts about the growth target, he called it only an "aspirational" goal.
Pawlenty has apologized for the "mistake" of once supporting a regional cap-and-trade scheme to reduce greenhouse gas emissions.
A lack of foreign policy experience could hinder him. But he accused Obama of a timid response to the Arab Spring uprisings in the Middle East.
SARAH PALIN
Palin remains one of the Republican Party's leading celebrities but has held back from plunging into presidential politics, saying a decision on her future will come in August or September.
Analysts say she can afford a late start in the campaign because of her powerful name recognition.
The former Alaska governor, who converted her status as the 2008 Republican vice presidential nominee into media celebrity, withdrew from the political spotlight after missteps following the January assassination attempt on Democratic Representatives Gabrielle Giffords.
Palin reemerged in the public spotlight in April. By last week, she had resumed her trademark gun-toting rhetoric, urging conservatives in Congress not to back down from the debt ceiling debate. "Now is not the time to retreat, it's the time to reload," she said in an interview.
Her political future is clouded by questions about her qualifications for national office and poll numbers show high unfavorable ratings.
JON HUNTSMAN
The former Utah governor favors the legalization of same-sex unions, a position bound to alienate social conservatives in states like Iowa.
The White House has played up his role as ambassador to China in the Obama administration by saying Huntsman supported Obama's domestic agenda, including healthcare reform.
Huntsman says his diplomatic role was about serving his country, not serving Obama.
He is not among the Republican candidates who signed the cut, cap and balance pledge. He says the United States should pressure China to allow its yuan currency to revalue.
Huntsman says he would not have intervened in Libya.
NEWT GINGRICH
The former speaker of the U.S. House of Representatives has failed so far to overcome a series of implosions that have hurt his campaign, despite a concerted effort to showcase conservative economic policies that call for a balanced budget as well as cuts in spending and corporate tax rates.
The Gingrich campaign suffered a mass exodus of senior staff who questioned the Georgia Republican's commitment to campaigning.
The missteps are costly for Gingrich, who was already facing challenges on social and moral issues. He is married to his third wife, with whom he had an affair while he was married to his second wife.
(Reporting by David Morgan; Editing by Cynthia Osterman)
===
TIMELINE-U.S. debt debate
20 Jul 2011 01:07
Source: reuters // Reuters
July 19 (Reuters) - Two weeks before the United States' debt default deadline, President Barack Obama said on Tuesday he hoped Congress was ready to "talk turkey" and agree on a package of budget cuts and tax raises as some senators have proposed.
Obama said he would call Republican House Speaker Boehner to set a schedule for more talks on raising the $14.3 trillion debt ceiling before Aug. 2, when the United States will run out of money to pay its bills.
Following is a timeline of the U.S. debt debate:
Nov. 2, 2010 - Republicans win control of the House of Representatives on a promise to scale back government spending and tackle budget deficits that have hovered at their highest levels relative to the economy since World War Two.
Dec. 1, 2010 - A report by a bipartisan deficit reduction panel commissioned by Obama advocates $3 trillion in spending cuts and $1 trillion in revenue increases -- mainly by closing loopholes in the tax code -- over 10 years.
January 2011 - Six Republican and Democratic senators, known as the "Gang of Six," begin talks on a long-term deficit-reduction deal they can present to their parties.
Feb. 19 - The House passes a budget for the current fiscal year that would cut $61 billion from last year's levels. The Democratic-controlled Senate defeats it one month later.
April 9 - Obama and congressional leaders bring the government to the brink of a shutdown before they agree on a budget for the current fiscal year that cuts $38 billion from last year's levels. Billed as the largest domestic spending cut in U.S. history, it actually causes the government to spend $3.2 billion more in the short term.
April 13 - After Obama's initial proposal is criticized as inadequate, the president lays out a new deficit-reduction plan that would save $4 trillion over 12 years. He proposes that Vice President Joe Biden lead deficit-reduction talks.
April 15 - The House passes a budget that would cut spending by $6 trillion over 10 years, in part by scaling back healthcare for the elderly and the poor.
May 5 - Biden and negotiators from both parties hold their first meeting as top Republicans say there will likely be no broad agreement on tax reform and healthcare.
May 9 - House Speaker John Boehner, the top Republican in Congress, says any increase in the debt ceiling must be matched by an equal amount of spending cuts. The Treasury Department estimates it needs at least $2 trillion to cover borrowing through the November 2012 elections.
May 11 - House Republicans release a spending outline for the coming fiscal year that has its deepest cuts in education, labor and health programs cherished by Democrats.
May 16 - The United States reaches its $14.3 trillion debt limit. The Treasury Department begins tapping other sources of money to cover the government's bills.
May 17 - The "Gang of Six" talks falter as a leading conservative, Republican Senator Tom Coburn, drops out due to an impasse over healthcare.
May 31 - The House of Representatives rejects a measure to raise the debt limit in a vote staged by Republicans to pressure Obama to agree to accompanying spending cuts. Senior Democrats decry the vote as a political stunt, although 82 Democratic lawmakers join Republicans in defeating the bill.
June 9 - In a sixth meeting of the Biden group, Treasury Secretary Timothy Geithner argues that tax increases need to be part of the equation, but Republicans remain unmoved.
June 14 - Some 34 Senate Republicans vote to repeal tax breaks for ethanol, a sign that there may be some wiggle room(Flexibility, as of options or interpretation: ambiguous wording that left some wiggle room for further negotiation.) in the party's no-tax-increase stance.
June 23 - Republicans declare an impasse in the Biden talks, saying that Democrats are insisting on roughly $400 billion in new revenue by closing tax breaks for the wealthy and certain business sectors.
June 29 - The International Monetary Fund says the United States must lift its debt limit soon to avoid a "severe shock" to global markets and a still-fragile economic recovery. Obama calls for new steps to spur job growth and tax hikes on the rich, irking Republicans who remain focused on deficit cuts.
June 30 - Democratic legislators discuss a scaled-back deal that would avert default but force Congress to tackle the debt ceiling issue again before the 2012 elections. The White House rejects the idea.
July 3 - Obama and Boehner meet secretly to discuss a more ambitious "grand bargain" that would save roughly $4 trillion over 10 years through an overhaul of the tax code and changes to popular benefit programs.
July 5 - Obama invites top lawmakers to the White House to restart negotiations and clinch a deal by July 22.
July 6 - Reuters reports that a small team of U.S. Treasury officials are looking at options to stave off default should Congress fail to raise the limit. The Obama administration continues to say there is no contingency plan in place.
Keep or hold away, repel, as in The Federal Reserve Board is determined to stave off inflation. This metaphoric expression transfers beating something off with a staff or stave to nonphysical repulsion
July 7 - After hosting lawmakers at White House, Obama says Republicans and Democrats are still far apart on many issues but that all agree on the need to raise the debt ceiling.
July 8 - A dismal jobs report focuses new attention on the sputtering economy. Obama says uncertainty about the debt ceiling talks is hurting economic expansion.
July 9 - Boehner says a "grand bargain" is out of reach because Republicans will not accept the tax increases Democrats are demanding, and he calls for a more modest $2 trillion package that would rely mostly on spending cuts.
July 10 - During a testy, brief meeting at the White House, Obama and congressional leaders agree on little more than the need to meet again the following day.
July 11 - The follow-up meeting breaks little new ground, but Obama pressures both Democrats and Republicans to make concessions that would clear the way for a deal. Another meeting is planned for July 12.
July 12 - Senate Republican leader Mitch McConnell offers backup plan for raising the debt limit if there is no agreement on a broad deficit-reduction plan. Obama warns that if the debt-limit impasse is not resolved soon, government benefits for older Americans might be at risk after Aug. 2.
July 13 - Moody's Investors Service puts United States on review for possible downgrade given possibility that debt limit won't be raised in time. Obama meets lawmakers for nearly two hours but a deal remains elusive.
July 14 - Ratings agency Standard & Poor's says there is a one-in-two chance it could cut the United State's top-notch AAA credit rating if talks remain stalemated. Obama suspends debt talks and gives party leaders 24-36 hours to deliver deadlock-breaking "plan of action."
July 17 - McConnell and Senate Democratic leader Harry Reid work on McConnell's fallback plan to allow Obama to raise the debt limit. Obama meets Boehner and his deputy, Eric Cantor, secretly at White House but no progress is made toward a deal.
July 18 - Republicans push for a measure that would cut and cap government spending and require an amendment to the U.S. Constitution requiring a balanced budget. Obama says he will veto it should Congress send it to his desk.
July 19 - The "Gang of Six" resurfaces with a deficit reduction plan that proposes $3.75 trillion in savings over 10 years and contains $1.2 trillion in new revenues. Obama seizes on it calls on leaders in Congress to start "talking turkey." House Republicans pass a far more drastic $5.8 trillion deficit-reduction plan requiring the balanced budget amendment. It is expected to be blocked in the Senate. (Reporting by Andy Sullivan, Caren Bohan and Laura MacInnis; editing by Christopher Wilson)
==
SNAPSHOT-Developments in U.S. debt talks
21 Jul 2011 11:00
Source: reuters // Reuters
WASHINGTON, July 21 (Reuters) - Here is what to expect on Thursday in negotiations to raise the U.S. government's $14.3 trillion debt limit by Aug. 2 and avoid a U.S. credit default:
* No face-to-face meetings between President Barack Obama and congressional Democratic and Republican leaders scheduled. That could change.
* House Speaker John Boehner at a news conference is expected to talk about where he and his fellow Republicans stand in debt talks and their reaction to an ambitious $3.7 trillion deficit reduction plan offered by the bipartisan "Gang of Six" senators. The news conference is set for 11:15 a.m. EDT (1515 GMT)
* House Democratic leader Nancy Pelosi will likely talk about the Gang of Six plan at her weekly news conference. The news conference is set for 10:45 a.m. EDT (1445 GMT)
* Senate Democratic leader Harry Reid says the Senate will take up the House-passed Republican plan to "cut, cap and balance" the budget. A procedural vote is set for Saturday and the bill is not expected to get the 60 votes needed in the 100-member Senate to advance. Democratic opponents say the bill's goals would require deep cuts to the Social Security retirement program as well as Medicare and Medicaid health programs for the elderly and poor. (Reporting by Donna Smith; Editing by Eric Beech)
===
Reuters
Tax hikes far from inevitably a U.S. job killer
(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)
By Christopher Swann
NEW YORK, July 21 (Reuters Breakingviews) - U.S. Republicans have warned before that tax hikes cause job losses. Presidents Ronald Reagan and Bill Clinton faced similar claims over their deficit reduction plans. Tax increases aren't ideal, but the strong job creation that followed in both cases refutes the simplistic notion that they always cost jobs.
House Speaker John Boehner's insistence that tax rises are a sure job killer is just the latest iteration of the refrain. In 1993 Congressman Newt Gingrich predicted tax increases would lead to recession. Republican colleague Dick Armey called the move a "job-killer" and Senator Robert Packwood said he was willing to bet his mortgage that both the deficit and unemployment would rise. Luckily for the senator, Clinton did not take the bet. In the event, 23 million jobs were generated in America during the Clinton presidency -- seven times more than were added under his successor, the tax-cutting George W. Bush.
Even Reagan, the tax-cutting hero, slapped down opponents of his tax increases in 1982, accusing them of "selfishness, partisanship and just plain bullheadedness." Again, the economy burgeoned in the following years.
Of course, tax increases are never welcome, least of all at a time of already sluggish growth. But deep spending cuts would also damp economic expansion and job creation, at least in the short term.
And at less than 15 percent of GDP, federal tax revenue is running at the lowest level since 1950. It's true that this reflects a recession-induced weakness in tax receipts. But it's also the case, according to an updated Treasury working paper, that Congress has passed laws that reduced tax revenue almost every year for the past decade, and there have been none that increased it.
U.S. lawmakers have no easy options in bringing public finances under control. And forcing financial discipline on the government is an important medium and long-term goal. But Reagan was right that it's bullheaded to flatly rule out tax increases on principle -- just as it is to refuse to countenance(Appearance, especially the expression of the face:) economizing on health spending or raising the retirement age. As U.S. economic history makes clear, the relationship between taxes and jobs is a lot less predictable than Boehner would have Americans believe.
CONTEXT NEWS
-- U.S. House of Representatives Speaker John Boehner said on July 21 that he would not back a deal to avert an imminent default if it allowed temporary income tax cuts to expire.
-- "I've never voted to raise taxes and I don't intend to," Boehner told a news conference. He said that allowing tax cuts enacted by George W. Bush to expire as currently scheduled would amount to a tax increase.
-- "The American people understand that tax hikes destroy jobs," he said at a press briefing on July 11.
-- According to the Washington Post on July 20, anti-tax crusader Grover Norquist, founder of Americans for Tax Reform, told the newspaper that allowing the Bush tax cuts to expire "is not technically a tax increase."
-- Tax Policy Center analysis of federal tax receipts: http://link.reuters.com/jap72s
((christopher.swann@thomsonreuters.com))
(Editing by Richard Beales and Martin Langfield)
===
Reuters
U.S. downgrade would force bond buyers to rethink
(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)
By Martin Hutchinson
NEW YORK, July 21 (Reuters Breakingviews) - Standard & Poor's could cut America's AAA rating even if Congress does a deal on the debt ceiling. That would force a rethink. The 18 other top-rated sovereigns are either caught up in the EU mess or tiny. Without the "risk-free" benchmark of U.S. Treasuries, even ultra-cautious bond investors would have to get used to credit risk.
The United States' $7.8 trillion of Treasury bonds, notes and inflation-protected securities in public hands, together with more than $5 trillion of federal housing agency paper and the debt of several insurance companies, would all be affected if America's rating slipped to AA, according to S&P.
For bond investors fixated on AAA credits, there is not much capacity elsewhere to pick up the slack. Other S&P top-rated sovereign entities include the Isle of Man, Guernsey and Liechtenstein, which are tiny. Even the largest of them, Germany, had only 2 trillion euros ($2.9 trillion) of public debt outstanding at the end of 2010. Moreover, six of the entities are euro zone members, and several others are closely connected to the EU's debt troubles. Only Australia, Canada, Norway, Singapore and Switzerland hold top ratings without such blemishes, but all five have relatively small amounts of debt.
Top-rated companies do exist, but in the United States, for instance, there are only four of them. That is nowhere near enough to absorb investor demand -- even assuming buyers could get used to relying on corporate rather than government credit.
Giant U.S. money market funds -- obliged to hold almost all their assets in AAA credits -- might be spared a huge sell-off in a downgrade scenario because their rules refer to short-term ratings and S&P's threat might only apply longer-term. For other investors, adjusting portfolio holdings, and even their guiding rules, to include U.S. and other AA-rated names should require only modest changes -- though banks and some insurance companies might have to raise a bit more capital. And the U.S. government bond market would still be there, even if interest-rate comparisons with Treasury yields would have to contemplate negative numbers as well as positive.
The biggest impact could be psychological: there would no longer be a globally accepted liquid benchmark viewed as "risk-free". Fifty years of thinking, and computer models, would need tweaking.
CONTEXT NEWS
-- Standard & Poor's reiterated on July 21 that it sees a real risk that future U.S. government deficits may meaningfully miss discussed targets and that there is a 50-50 chance the U.S. AAA credit rating could be cut within three months, perhaps as soon as August.
-- A rating cut based on the longer-term outlook could come even if President Barack Obama and the U.S. Congress come to a shorter-term agreement on raising the statutory cap on federal debt.
-- Among the securities affected by any downgrade would be $7.8 trillion of Treasury notes, bonds and TIPS, more than $5 trillion of federal housing agency debt, plus debt issued by six AAA-rated U.S. insurance groups.
-- Apart from the United States, 18 sovereign entities have AAA ratings from Standard & Poor's: Australia, Austria, Canada, Denmark, Finland, France, Germany, Guernsey, Hong Kong, Isle of Man, Liechtenstein, Luxembourg, Netherlands, Norway, Singapore, Sweden, Switzerland, and the United Kingdom.
((martin.hutchinson@thomsonreuters.com))
(Editing by Richard Beales and Martin Langfield)
==
Boehner-Obama Talks Collapse, On To Plan B — The Question Is Which One?
Brian Beutler | July 22, 2011, 6:39PM
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Barack Obama, Debt, Debt Ceiling, Default, Deficit, Entitlement reform, Entitlements, Harry Reid, John Boehner, Mitch McConnell, Nancy Pelosi, Spending, Taxes
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House Speaker John Boehner (R-OH) has abandoned talks with President Obama. In a letter to House members Friday, Boehner said "I have decided to end discussions with the White House and begin conversations with the leaders of the Senate in an effort to find a path forward," to raise the debt limit and avoid default.
So where do we go from here? Tuesday, August 2, is the day the debt limit must be raised if the nation is to avoid defaulting on its debt and/or other payment obligations. Between now and then Congressional leaders of both parties will have to figure out exactly how they're going to avoid that.
All of them -- Boehner, House Minority Leader Nancy Pelosi (D-CA), Senate Majority Leader Harry Reid (D-NV), Senate Minority Leader Mitch McConnell (R-KY) -- will discuss those options in depth at the White House 11 a.m. Saturday.
There are a few ways it can go. The one most recently floated comes from Pelosi. It would cut well over $2 trillion from current discretionary spending -- factoring in the expected wind-down of the wars in Iraq and Afghanistan -- interest payments on the national debt, and certain mandatory programs. No entitlements. In exchange, Congress would raise the debt limit, and expedite a legislative debate on entitlement and tax reform.
Talking Points Memo on Facebook
Option two -- the Reid/McConnell plan, is sitting on a shelf in the Senate. It will include about $1.5 trillion in cuts, and create a 12-member ad hoc congressional committee to address entitlements and tax reforms. This plan would transfer the authority to raise the debt limit to President Obama, and give members of Congress the chance to take a symbolic protest vote against that action.
An earlier version of that plan, proffered by McConnell, included no cuts to spending, no committee, but would have required Obama and Democrats in Congress to go through myriad political machinations, before the debt limit can be raised.
There are numerous other hypothetical options, including a simple, clean debt limit extension -- the question is what can pass the House and Senate, and to what extent Republican leaders are willing to twist their members arms, at the risk of their future leadership posts, to get the job done.
===
Obama, lawmakers scramble to salvage US debt deal
23 Jul 2011 22:56
Source: reuters // Reuters
* Congress drafting legislation, wants plan by Monday
* Treasury out of money on Aug. 2; AAA rating at risk
* Default would raise interest rates, hit global growth
* Congress aims to show progress before Asian markets open (Adds comment from Rep Charles Dent)
By Alister Bull and Richard Cowan
WASHINGTON, July 23 (Reuters) - Scolded by President Barack Obama, Congress scrambled on Saturday to produce a deficit plan within 48 hours that keeps the United States from a catastrophic debt default now days away.
A day after talks collapsed in acrimony, Obama held an emergency meeting with congressional leaders at the White House and told them to find areas of agreement.
Their goal: Seal a deficit-reduction package of spending cuts and perhaps tax increases that will allow a vote by the Aug. 2 deadline to raise the U.S. debt ceiling beyond $14.3 trillion and avoid economic calamity.
A Republican leadership aide said lawmakers are working on a plan for $3 trillion to $4 trillion in savings over 10 years, but another high-ranking Republican official said no numbers had been settled. Republican leaders want "to show progress" by 4 p.m. EDT (2000 GMT) on Sunday, the aide said.
It was unclear whether Republicans would agree to steps to raise tax revenue to help reduce the deficit, an Obama demand that has been the key sticking point to a deal.
Underscoring the threat facing America's credit rating and standing in the financial markets, House of Representatives Speaker John Boehner told fellow Republicans that leaders hope to show signs of progress by Sunday afternoon, to avoid spooking Asian financial markets opening at that time.
"I am concerned that there might be an adverse reaction in the markets," Republican Representative Charles Dent said in a telephone interview with Reuters after the call.
Dent said Boehner told members a default was not an option and lawmakers have to come to agreement.
"We need to have something posted online by Monday," a Republican congressional aide said.
Congressional leaders huddled in Boehner's office in the early evening on Saturday for an hour.
Republicans were proposing behind closed doors a deal with two installments of debt limit increase and deficit reduction. Democrats said they only wanted one that would extend the debt limit through the 2012 election year, a Democratic aide said.
Saturday's White House emergency meeting lasted a bare 50 minutes, a day after Obama complained that Boehner had left him at the altar and refused to return his phone call.
The mood around the table in the White House Cabinet Room appeared strained. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Full coverage of U.S. budget and debt [ID:nUSBUDGET]
Dwindling options for debt limit talks [ID:nN1E76L1YA]
Obama admin, S&P clash over credit threat [ID:nN1E76L1JM]
Anything possible if U.S. downgraded [ID:nN1E76I1M8]
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
In the talks, Obama warned lawmakers not to pursue a short-term extension of the $14.3 trillion U.S. debt limit, as some want. He wants an extension that would allow for U.S. borrowing to pay its bills through 2012, when he and most lawmakers are up for re-election.
"Congress should refrain from playing reckless political games with our economy. Instead, it should be responsible and do its job, avoiding default and cutting the deficit," White House spokesman Jay Carney said after the talks.
A short-term extension of mere months could cause Wall Street credit agencies to strip America of its gold-plated triple-A rating and increase interest rates for American consumers, Obama told them.
Boehner, the top U.S. Republican, promised that Congress this weekend "will forge a responsible path forward" and that House and Senate leaders will work to find a bipartisan solution to "significantly reduce Washington spending and preserve the full faith and credit of the United States."
Senate Republican leader Mitch McConnell said congressional leaders were working on new legislation that will "prevent default while substantially reducing Washington spending."
A senior Republican aide said a fallback option initially presented by McConnell would not be the basis of the new bill. New legislation would be aimed at cutting spending, preventing default and not raising taxes, the aide said.
WINDOW QUICKLY CLOSING
With the world's biggest economy set to run out of money to pay all of its bills on Aug. 2, the window was closing fast for a "grand bargain" of spending cuts and tax increases in exchange for Congress raising the debt ceiling.
The fits and starts in the negotiations have left both sides fuming. Obama has said he has agreed to deep spending cuts in social programs that make his own Democrats uneasy but that Republicans must allow some taxes to rise, a prospect they have rejected.
Financial markets are growing more edgy and U.S. banks and businesses are making contingency plans for the possibility of a debt default that would drive up interest rates, sink the dollar and ripple through economies around the world.
Credit rating agencies want spending restraints for the United States to keep its prized Triple-A rating, which makes U.S. Treasuries the solid foundation for global investors and lowers borrowing costs for state governments, businesses, homeowners and consumers.
Both Republicans and Democrats chafed at the compromises a far-reaching deal would require before the presidential and congressional elections in November 2012, with each side accusing the other of not doing enough and demanding too much.
Closed-door talks last week between Obama and Boehner collapsed Friday largely over how much revenue would be raised through tax reform -- with Obama wanting $1.2 trillion over 10 years and Boehner putting $800 billion on the table.
Boehner has to overcome resistance from Tea Party movement conservatives in his own party and could run into problems for having signaled a willingness to give ground on revenue increases in closed-door talks at the White House.
"If not reversed within the next few days through crisis negotiations, this breakdown will be highly detrimental to the already fragile health of both the U.S. and global economies," Mohamed El-Erian, co-chief investment officer at Pimco, the world's top bond fund manager, told Reuters. (Additional reporting by Laura MacInnis, Matt Spetalnick, Andy Sullivan and Donna Smith; Writing by Steve Holland; Editing by Eric Walsh and Todd Eastham)
===
SNAPSHOT-Developments in U.S. debt talks
26 Jul 2011 22:07
Source: reuters // Reuters
WASHINGTON, July 26 (Reuters) - Here is the situation on Tuesday as lawmakers try to close in on a deal for Congress to raise the U.S. government's $14.3 trillion borrowing limit by an Aug. 2 deadline and avoid a debt default:
* Competing plans to raise the debt ceiling from the Democratic-controlled Senate and Republican-controlled House of Representatives have a lot of similarities, White House senior adviser David Plouffe says.
* President Barack Obama's chief of staff, Bill Daley, says: "There are lots of plans out there but I'm confident that the default that some people fear will not occur."
* The White House says it is continuing to talk behind the scenes with members of Congress to break the impasse.
* A Reuters poll shows 30 of 53 economists surveyed think at least one of the major credit agencies will strip the United States of its top-notch credit rating. Most also say wrangling over debt has already damaged the economy.
* A Reuters/Ipsos poll finds 56 percent of Americans want a combination of government spending cuts and tax increases in a deal to bring down the U.S. budget deficit and permit a vote to raise the debt ceiling -- the approach favored by Obama and his fellow Democrats.
* Obama will not use a clause in the U.S. Constitution to bypass Congress and raise the debt limit on his own, the White House says.
* Republican Representative Jim Jordan, who is aligned with the fiscally conservative Tea Party movement, opposes a plan proposed by House Speaker John Boehner, the top Republican in Congress. Representative Steny Hoyer, the Democrats' top vote counter in the House, says "a few" Democrats may vote for it.
* The U.S. dollar falls broadly and gold hovers near a record high above $1,619 an ounce as investors seek safety. The debt gridlock also hits U.S. stocks.
* International Monetary Fund chief Christine Lagarde urges the United States to quickly resolve the stalemate, warning that failure to reach agreement would have serious consequences for the world economy.
* United Parcel Service Inc
* Americans answer Obama's request to make their voices heard on the debt crisis, crashing websites with e-mails and flooding the telephone lines of lawmakers in Washington with thousands of calls. (Compiled by John O'Callaghan)
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Duel Or Duet? Reid And Boehner Poised To Introduce Different Bills To Avoid Default
Brian Beutler | July 24, 2011, 9:00PM
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House Speaker John Boehner (R-OH) and Senate Majority Leader Harry Reid (D-NV)
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Barack Obama, Debt, Debt Ceiling, Default, Deficit, Entitlement reform, Entitlements, Harry Reid, John Boehner, Mitch McConnell, Nancy Pelosi, Spending, Taxes
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Congressional leaders failed Sunday to reach agreement on a plausible path to raise the country's borrowing limit ahead of international market openings on Monday. At least publicly.
According to sources in both parties, House Speaker John Boehner (R-OH) and Senate Majority Leader Harry Reid (D-NV) are likely to introduce separate debt packages in their respective chambers Monday, each with a different approach to avoiding a catastrophic default, and the key question now is whether the two plans can be reconciled in some way -- whether the trains are moving in the same direction or set to collide head on.
Reid sought to answer that question in a late Sunday statement, ripping the GOP for its continued insistence that the debt limit fight be raised in two condition-laden steps, forcing Congress to replay this same fight in several months.
"Tonight, talks broke down over Republicans' continued insistence on a short-term raise of the debt ceiling, which is something that President Obama, Leader Pelosi and I have been clear we would not support," Reid said. "A short-term extension would not provide the certainty the markets are looking for, and risks many of the same dire economic consequences that would be triggered by default itself. Speaker Boehner's plan, no matter how he tries to dress it up, is simply a short-term plan, and is therefore a non-starter in the Senate and with the President."
Boehner's plan would reportedly codify about $1 trillion in spending cuts, and raise the debt limit by the same amount -- an extension that would last until about January by which point Congress would have to pass extensive entitlement and tax reforms, or risk default yet again.
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Reid will counter this with legislation modeled on a plan first articulated by House Minority Leader Nancy Pelosi (D-CA). It's a cuts-only bill (no tax revenue) that Dems believe will score $2.7 trillion in savings. But it will likely rely on a projected "peace dividend" -- the expected drawdown of forces in Iraq and Afghanistan -- and Republicans have indicated in the past they don't support counting reduced war expenditures as savings.
"In an effort to reach a bipartisan compromise, we are putting together a $2.7 trillion deficit reduction package that meets Republicans' two major criteria," Reid said. "[I]t will include enough spending cuts to meet or exceed the amount of a debt ceiling raise through the end of 2012, and it will not include revenues. We hope Speaker Boehner will abandon his 'my way or the highway' approach, and join us in forging a bipartisan compromise along these lines."
Democrats don't currently have GOP=Grand Old Party (Republican Party) buy-in on the plan, and House GOP aides were conspicuously silent about the proposal Sunday evening. But a highly placed Senate Democratic aide says the hope is that GOPers in both bodies feel pressed to support it on the grounds, more or less, that it's everything they've asked for from the beginning.
"It's $2.5 trillion in cuts and no revenue," the source said, before Reid's statement claiming a higher figure. "We think Republicans will have a hard time opposing it.
Democratic leaders left the White House Sunday reiterating that their opposition to a short-term debt limit increase is their only major bright line at this point. It remains to be seen whether Republicans will now claim a short-term increase is inviolable to them. It also remains to be seen whether Senate Republicans -- particularly dogged conservatives like Jim DeMint (R-SC) and Rand Paul (R-KY) -- will use procedural tricks to delay Senate action on Reid's legislation. Even if the plan ultimately has enough votes to overcome a filibuster=(The use of obstructionist tactics, especially prolonged speechmaking, for the purpose of delaying legislative action.) -- still a big if -- Senate rules allow individual senators to delay final passage of a new bill by about five days. If Reid moves tomorrow and House and Senate Republicans join him, it might still not make its way to Obama's desk until August 2nd.
==
Debt-ceiling showdown: The legal battleground
26 Jul 2011 22:11
Source: reuters // Reuters
* Obama appears to dismiss 14th Amendment maneuver
* If he opted for it, legal challenge would be hard
* Courts tend to avoid disputes seen as political
By Carlyn Kolker
NEW YORK, July 26 (Reuters) - President Barack Obama says he will not bypass Congress and cite an obscure part of the U.S. Constitution to prevent a government debt default, but legal experts say it would prove difficult to challenge him in court should he change his mind.
Former President Bill Clinton argued last week that the 14th Amendment that states the "validity" of government debt "shall not be questioned" means that Obama could simply ignore the congressionally imposed debt ceiling and go on borrowing.
Obama has indicated he considered the possibility, but on Tuesday his spokesman, Jay Carney, appeared to rule it out.
"The Constitution makes clear that Congress has the authority, not the president, to borrow money and only Congress can increase the statutory debt ceiling. That is just a reality," Carney told reporters.
But if the country is about to go into default, the temptation to act to avert calamity will grow. Legal experts say if the president were tempted to act unilaterally he might escape without his actions being overturned in court.
Regardless of how controversial a 14th Amendment maneuver might be, a legal challenge would be very hard to mount and so far, no one has stepped forward to say they would challenge him in court.
Nor has anyone said they would sue him if he took the alternative, equally controversial, step of using his broad authorities as guardian of the constitutional order to unilaterally raise the borrowing threshold.
Theoretically, there are aggrieved parties who might consider legal action, including Congress, individual citizens or interest groups, and investors such as foreign governments.
NOT UNPRECEDENTED
A successful lawsuit against the executive branch of the United States would not be unprecedented.
In 1952, during the Korean War, the country's steel companies successfully sued President Harry Truman and prevented him from seizing mills in Ohio.
In 1971, The New York Times Company and the Washington Post Company took President Richard Nixon to court over the right to publish the Department of Defense's Pentagon Papers, detailing U.S. involvement in Vietnam. The Supreme Court prevented Nixon from obtaining an injunction to block publication.
The plaintiffs in those cases were able to demonstrate standing, the legal doctrine under which parties must show they are harmed in order to bring a case in court. Anyone suing Obama over the debt ceiling would confront that same burden.
It wouldn't be enough for a plaintiff to claim that Obama is overstepping his authority or acting illegally. "In order to sue, you have to have injury in fact. The touchstone issue is, can someone get to court?" said Jonathan Zasloff, a law professor at the University of California, Los Angeles.
That same standard would apply if a party pre-emptively filed a lawsuit to stop Obama invoking the 14th Amendment.
Challengers might argue that relying on the 14th Amendment to raise the debt ceiling qualified as an abuse of executive power. But it would be extremely difficult for them to show that they would suffer specific harm such as lost money, property or rights, legal experts said.
The anti-tax group Club for Growth, which opposes increased federal borrowing, does not consider a legal challenge over the 14th Amendment likely, said executive director David Keating. "It's difficult to get standing," Keating said.
Individual members of Congress, congressional leaders, or Congress itself might have better luck suing, by claiming their constitutional authority to handle appropriations was violated by the President's move.
TAKE PRESIDENT TO COURT
Members of Congress have taken presidents to court before.
In 1996, President Clinton signed the line-item veto act, allowing the president to veto separate parts of a spending bill. Six members of Congress who opposed the law sued the treasury secretary and the director of the Office of Management and Budget, claiming the law was an unconstitutional over-reach of executive power.
But in 1997 the Supreme Court said the lawmakers did not have standing to sue, ruling they did not allege personal injury or that the institution of Congress was harmed.
A third potential aggrieved party -- the kind that typically shows up in court -- is a jilted investor, whether an individual holding U.S. treasury bonds or, perhaps, a foreign country that buys U.S. government debt.
But if Obama were to raise the debt limit himself, he'd be paying bondholders back -- the opposite of a government default. Instead of abrogating bond deals the President would be ensuring that obligations to creditors were met.
The best option for critics of an eventual 14th Amendment move by Obama may also be a longshot: Impeachment. Already one Republican House member, Representative Tim Scott of South Carolina, has said that if Obama bypasses Congress and raises borrowing on his own, it would be an "impeachable offense." (Reporting by Carlyn Kolker; editing by Eileen Daspin, Eric Effron and David storey)
===
Stocks fall as lawmakers remain at odds over debt
APBy CHIP CUTTER - AP Business Writer | AP – 23 mins ago
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Specialist Michael Pistillo, left, calls out prices as he works at his post on the floor of the New York Stock Exchange Wednesday, July 27, 2011. (AP Photo/Richard Drew)
Specialist Michael Pistillo, left, calls out prices as he works at his post on the …
Traders work on the floor of the New York Stock Exchange Wednesday, July 27, 2011. (AP Photo/Richard Drew)
Traders work on the floor of the New York Stock Exchange Wednesday, July 27, 2011. …
NEW YORK (AP) — The biggest evidence yet that investors are concerned about keeping their money safe: they're selling stocks of small companies.
Those stocks usually fall much more than large-company stocks if the economy slows down or the stock market turns volatile. With the deadline for a debt deal less than a week away, the stocks that investors consider to be the riskiest are falling the most.
The Russell 2000 index, which tracks smaller U.S. companies, fell 2 percent Wednesday, far more than both the Dow Jones industrial average and the Standard & Poor's 500 index.
The Russell fell 16 points, or 2 percent, to 808.50 in afternoon trading. That was twice as much as the 0.9 percent decline in the Dow average, which lost 115 points to 12,385.
The S&P 500 index fell 19, or 1.4 percent, to 1,312. All 10 company groups that make up the S&P 500 fell. Utilities and telecommunications stocks, seen as the most stable, fell the least. The Nasdaq composite index dropped 59 points, or 2.1 percent, to 2,781.
The stock market has been sinking since last Friday as an Aug. 2 deadline for raising the U.S. borrowing limit approaches. With no sign of a compromise between Republicans and Democrats in Washington, investors are becoming more fearful that the U.S.'s triple-A credit rating could be lowered or that the country might default on its debt. Either event would raise interest rates across the board and slow down the already weak U.S. economy.
House Speaker John Boehner had planned to hold a vote on his debt-limit plan Wednesday. That was postponed after conservative lawmakers balked at the proposal and congressional budget officials said it would have cut spending less than advertised. The White House had also threatened to veto Boehner's plan.
"As hours pass and the uncertainty builds, I think the market is starting to price in the potential that we might not have a solution by Aug. 2," said Channing Smith, managing director of Capital Advisors Inc. "Confidence in our political system is beginning to fade."
The Dow is down 2.2 percent this week. It is headed for its biggest weekly decline since early June. The S&P 500 is also down 2.2 percent, and the Russell 2000 is down 4 percent.
Some analysts fear that if the debt issue is not resolved stocks could fall as much as they did in 2008, when the House of Representatives voted down a bill to create the Troubled Asset Relief Program on Sept. 29. On that day, the Dow plunged about 778 points. Four days later, Congress passed the TARP bill and President George W. Bush quickly signed it into law. The Dow then jumped as much as 946 points in a week.
Most investors still expect some kind of resolution in the coming days. But the uncertainty over possible changes to tax rates or government spending has made investors uneasy, said Todd Salamone, senior vice president of research at Schaeffer's Investment Research. "Investors just want a lot of clarity," he said.
A decline in orders for manufactured goods also pushed stocks lower. The government said orders for durable goods fell 2.1 percent in June because of a drop in demand for commercial aircraft, automobiles and heavy machinery. Manufacturing has been disrupted this year by parts shortages from Japan and higher energy prices.
Earnings results were mixed. Amazon.com Inc. rose 5.7 percent after the online retailer reported that its earnings and revenue were far higher than analysts were expecting.
Dunkin' Brands Group Inc. shot up 39 percent on the company's first day on the Nasdaq. The parent of Dunkin' Donuts and the Baskin-Robbins ice cream chain went public to help pay down its debt.
Juniper Networks Inc. plunged 20 percent, the most of any company in the S&P 500, after the computer networking equipment maker issued an earnings forecast that was lower than many analysts expected. Computer networking equipment companies, including Cisco Systems Inc., have struggled this year because many Internet providers spent heavily on their products in 2010. As a result, they don't need as much new equipment now. Cisco fell 3 percent, while equipment maker JDS Uniphase Corp. fell 6.3 percent.
Delta Air Lines Inc. fell 5 percent. The airline's earnings were lower than analysts had anticipated because of higher jet fuel expenses and costs related to voluntary buyouts for 2,000 workers.
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SNAPSHOT-Developments in U.S. debt talks
27 Jul 2011 22:19
Source: reuters // Reuters
WASHINGTON, July 27 (Reuters) - Here is the situation on Wednesday as lawmakers try to close in on a deal for Congress to raise the U.S. government's $14.3 trillion borrowing limit by an Aug. 2 deadline and avoid a debt default:
* House of Representatives Speaker John Boehner, the top Republican in Congress, offers a revised deficit reduction proposal to meet conservatives' demands for more spending cuts. The new plan provides a $900 billion debt limit hike and seeks $917 billion in spending cuts over 10 years. It calls on Congress to produce an additional $1.8 trillion in savings.
* Earlier, Boehner tells Republicans in a closed-door meeting to drop their opposition to his plan and "get your ass in line" behind what he has described as the best chance to win the deep spending cuts.
* A separate plan crafted by Senate Majority Leader Harry Reid, a Democrat, is being tweaked after a budget analysis found it would cut $2.2 trillion from deficits, about $500 billion less than claimed. Democrats want at least a $2.4 trillion debt limit hike to provide enough borrowing authority through the November 2012 elections. They are trying to match that with an equal amount of deficit cuts, a key Republican demand.
* The Boehner plan will not pass the Democratic-led Senate, Senate Democrats say.
* Amid the brinkmanship, Reid, Senate Republican Leader Mitch McConnell and Boehner are discussing how to break the impasse, lawmakers say.
* The U.S. Treasury Department says the government will no longer be able to borrow money on Aug. 2 and there is no way to guarantee it will be able to pay all of its bills without a debt limit increase.
* White House spokesman Jay Carney says time is running out to reach a compromise on the debt limit and Republicans and Democrats must come together now on an agreement.
* Wall Street suffers its worst day in eight weeks and major global stock markets fall sharply on concerns about the impasse in Washington, while the U.S. dollar rebounds after a sell-off this week. Gold falls after earlier hitting record highs for the sixth time in two weeks.
* Standard and Poor's President Daven Sharma tells a U.S. congressional panel the ratings agency does not think the United States will default on its debt. But he says it must have a credible plan to reduce its debt burdens if it wants to keep its top-notch credit rating.
* Bank of Japan board member Hidetoshi Kamezaki warns that the impasse in U.S. debt talks is a having considerable impact on foreign exchange markets and a U.S. default could have serious effects on Japan's financial system. (Reporting by Donna Smith; Editing by John O'Callaghan)
==
SNAPSHOT-What is happening in the U.S. debt crisis
29 Jul 2011 17:47
Source: reuters // Reuters
WASHINGTON, July 29 (Reuters) - Here is what is happening on Friday as lawmakers scramble to close in on a deal for Congress to raise the U.S. government's $14.3 trillion borrowing limit by an Aug. 2 deadline and avoid a debt default:
* President Barack Obama says in a televised statement that if the United States loses its AAA credit rating it won't be because the country can't pay its bills. It would be "because we didn't have an AAA political system to match our AAA credit rating." He urges the public to let lawmakers know they want a bipartisan compromise that can pass Congress.
* Senate Majority Leader Harry Reid says time is running out and he will start Senate action on a compromise debt and deficit plan backed by Democrats. He calls on Senate Republican leader Mitch McConnell to work with him on a compromise. Reid says a short-term debt limit extension is unacceptable. The Senate could vote early Sunday morning.
* McConnell accuses Democrats of trying to round up opposition to the House Republican plan to "keep this crisis alive."
* House of Representatives Speaker John Boehner retools his proposal to raise the debt ceiling in two stages to attract more support from conservative Republicans. The reworked plan calls for spending cuts and a short-term debt limit hike. The main change is a provision linking an additional increase in the debt ceiling to passage by both the House and Senate of a balanced budget amendment to the Constitution. The House is expected to to vote on the revised plan on Friday afternoon.
* Senator Charles Schumer, a member of the Democratic leadership, said the balanced budget requirement "will guarantee a default" and that it was "an absurd, absurd proposition."
* The U.S. Treasury is preparing an emergency plan for how the government would function and pay its obligations if Congress fails to raise the government's borrowing authority. Treasury officials say they will provide more information on their plans as the Aug. 2 deadline draws near.
* The Treasury is due to announce next week its borrowing needs for the current quarter and its plans for selling debt to meet those needs. The uncertainty over the debt ceiling could jeopardize the plan. Treasury officials met with primary-market dealers and a Treasury official says dealers agree Congress should act quickly and raise the debt limit for as long as possible.
* Investors are growing increasingly alarmed by U.S. lawmakers' inability to reach accord on the debt ceiling and are watching developments in Washington closely. U.S. stock prices remain weak. (Reporting by Donna Smith; editing by Christopher Wilson)
===
18:24
US debt ceiling
thechelskikid
18UP
Right so let me get this straight. The Republicans can't even agree a plan amongst themselves to present to the Senate even though they know that whatever the plan is, it will be thrown out. The Tea Party will not compromise on anything so that they can make a funamental point about their principles. They will therefore have to discuss an even more unpalatable(Not pleasant or agreeable:) plan proposed by the Senate as they don't have a unified proposal themselves. In the meantime the world's largest economy is becoming a laughing stock and the Ratings Agencies are waiting to pounce.
If it wasn't so serious it would be laughable. The debt ceiling has been raised 104 times in the past, invariably on the nod. Do the Republicans really believe that by holding the country to ransom this will help their political ambitions in the next election? The playground posturing is pitiful to watch. Like most people, I am confident a deal will be reached. I just hope it is one that the Credit Agencies believe in.
No wonder they call them the Tea Party - they're all as mad as hatters! GLA
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WEEKAHEAD-View from editors in the Americas for July 31 week
29 Jul 2011 20:07
Source: reuters // Reuters
NEW YORK, July 29 (Reuters) - Following is the view from editors in the Americas on major news in the week ahead:
Watch Reuters Insider's Week Ahead:
http://link.reuters.com/vyq82s
* U.S. debt ceiling drama down to the wire
* Markets on edge as U.S. default looms
* U.S. economic data in focus after dismal GDP
* GM, Pfizer, Procter & Gamble, retailers report earnings
U.S. DEBT CEILING DRAMA
The U.S. government is expected to be gripped by the wrenching debate over raising the federal debt limit and agreeing on associated spending cuts and possibly tax increases. The United States will be unable to borrow money to pay its bills if Congress does not raise the $14.3 trillion borrowing limit by Tuesday. Uncertainty over the solution and signs of a possible downgrade in the country's top-notch triple-A credit have already rattled markets and driven stock prices and the dollar down. With no agreement in sight by the weekend, talks were expected through Monday. President Barack Obama said on Friday there were "plenty of ways out of this mess but we are almost out of time." The White House declined to show its hand on possible solutions.
MARKETS ON EDGE
Markets could go anywhere next week. The government could cobble together a last-minute deal to raise the borrowing limit, removing the restraint on equities, inducing selling in bonds and taking the wind out of the forex market's hiding place, the Swiss franc. Or the government could default - however temporarily. Expect short-term drops in stocks, a flurry of buying in bonds and flight to the franc. Key to investors are the repo, commercial paper and other funding markets potentially roiled(Violently disturbed or agitated, as by storms) by a default. Once an agreement is reached, some equilibrium will be found - and markets can then wait for a credit downgrade.
SCRAMBLING TO VALIDATE GDP FORECASTS
Surprisingly weak figures on U.S. economic growth during ,the first half of the year will have forecasters scouring data for any hint the hoped-for second-half pickup is in train. The big number comes on Friday: the government's count on non-farm payrolls for July.
((Non-Farm Payroll
A statistic researched, recorded and reported by the U.S. Bureau of Labor Statistics intended to represent the total number of paid U.S. workers of any business, excluding the following employees:
- general government employees
- private household employees
- employees of nonprofit organizations that provide assistance to individuals
- farm employees
This monthly report also includes estimates on the average work week and the average weekly earnings of all non-farm employees.
Investopedia Says:
The total non-farm payroll accounts for approximately 80% of the workers who produce the entire gross domestic product of the United States. The non-farm payroll statistic is reported monthly, on the first Friday of the month, and is used to assist government policy makers and economists determine the current state of the economy and predict future levels of economic activity.
Related Links:
When economic data comes out, it can have a marked impact on the currency market. Find out how to profit. Trading On News Releases
Learn to put the CB data sets to trading use. Each chapter takes you through one of the board's benchmark indicators or surveys, their significance and their applications. A Guide To Conference Board Indicators
Trading this news release can be profitable, but it's not for the faint of heart. Trading The Non-Farm Payroll Report
We look at this closely watched economic indicator to see what it means and how it's calculated. Understanding The Consumer Confidence Index
It's the key to any market economy, so investors need to learn the measures and how to analyze them. Consumer Confidence: A Killer Statistic))
A preliminary Reuters poll found economists believe 90,000 jobs were added during the month, an improvement from June but not enough to drag the 9.2 percent unemployment rate lower. The Institute for Supply Management's factory gauge on Monday should show activity eased in July but stayed in expansion territory, while a services sector measure is expected to stay roughly flat at an unspectacular but positive level. Car sales figures on Tuesday will be watched closely to see if a projected pickup emerges now that supply restraints from Japan are fading.
AUTO SALES TURNING POINT?
After two months of disappointing sales, the U.S. auto industry is hoping July will mark a turning point when it reports monthly sales data on Tuesday, the same day the Treasury says the United States will run out of money to pay its bills if Congress fails to raise the debt ceiling. With Japanese automakers replenishing(To fill or make complete again; add a new stock or supply to) inventories, economists expect an annual sales rate of about 12 million vehicles -- better than the 11.45 million in June, but still far off the 13 million rate in January and February. On Thursday, General Motors will announce Q2 earnings.
RETAIL SALES & CONSUMER EARNINGS
Monthly sales tallies from major U.S. retailers such as Target and Macy's on Thursday will show whether shoppers came out for summer sales and have started to spend on back-to-school goods. On the same day, investors will get more insight into the strength of consumer spending when Kraft Foods Inc reports second-quarter results. Procter & Gamble's fourth-quarter earnings on Friday will show whether it measured up in the midst of sharply higher commodity prices and a U.S. consumer slump.
PFIZER, TENET HEALTHCARE, OTHERS REPORT RESULTS
Pfizer is likely to report lower second-quarter earnings on Tuesday, hurt by generic competition overseas for its Lipitor cholesterol fighter. Analysts will be looking for reassurance that Pfizer can post stable earnings after November when Lipitor faces a much bigger generic onslaught in the United States. On the same day, the market will be watching for whether hospital operator Tenet Healthcare is weathering the recession better than industry leader HCA Holdings. Allergan reports on Wednesday, and Cigna winds up the health insurer reporting season on Thursday.
===
If U.S. defaults, lawsuits await
29 Jul 2011 22:13
Source: reuters // Reuters
* U.S. cuts about 100 million checks per month
* Many obstacles to private suits against government
* Government contractors especially vulnerable
By Erin Geiger Smith and Carlyn Kolker
NEW YORK, July 29 (Reuters) - If the United States stops paying its bills, who can sue?
Potentially, at least, it's a staggering answer: In all, the U.S. government cuts about 100 million checks a month, including to Medicare and Social Security recipients, bondholders, and government contractors. Anyone whose check from the government was not paid on time could try to file a lawsuit, and legal experts say it is not unimaginable that aggrieved parties would be tempted to turn in substantial numbers to the courts if their situation gets dire enough.
The government has not yet provided details on who would get paid and who wouldn't if the debt limit is not raised by next week.
Should recipients of federal entitlements including the Social Security and Medicare programs for seniors stop receiving their payments, they would likely have to go through an administrative procedure before getting into court. If those challenges did get into the federal courts, judges might be reluctant to question how the available federal funds were distributed.
"It would be hard for courts to have any standards in which they could contest the president's allocation," said Charles Rothfeld, a Supreme Court litigator in the Washington office of law firm Mayer Brown.
The American Association for Retired Persons declined to say whether the group would consider legal action in the event that entitlement checks stop flowing. "We expect Social Security checks will not be jeopardized," AARP spokeswoman Mary Liz Burns said. "We're focused on what could happen right now."
SUING THE SOVEREIGN
Potential plaintiffs looking to sue the United States would also have to overcome one of the most potent weapons in the government's legal arsenal: the doctrine of sovereign immunity, which protects the government from liability except when it has specifically waived immunity or consented to a suit.
Nevertheless, some creative legal thinkers are already devising theories about how lawsuits against a U.S. government in default could proceed. They are citing the same, once-obscure 14th Amendment constitutional provision that many have urged President Barack Obama to invoke in order to raise the debt ceiling on his own.
Under Section 4 of the 14th Amendment, which holds that the "validity" of government debt "shall not be questioned," the federal government could be obligated to pay at least bondholders and government contractors, Cornell University constitutional law professor Michael Dorf said. Under that theory, bondholders and contractors could seek standing in court by citing the 14th Amendment.
But Dorf said that would be a very difficult case to make, because under sovereign immunity individuals are generally prevented from suing the federal government to recoup money, as opposed to challenging government conduct.
"These are all questions we haven't had to consider because it's never happened before," Dorf said.
BREACH OF CONTRACT
One group bracing for an interruption in payment is government contractors. But they are unlikely to bring lawsuits immediately, experts in government contracting said, even though they are operating under a contract.
That is because unlike typical contracts between private parties, government contracts, whether for fighter jets or delivering office supplies, contain clauses that give one side -- the government -- an inordinate amount of leverage. "When you sign up for a government contract, you have a duty to perform. And that's without regard to if the government is paying you," said Angela Styles, co-head of Crowell & Moring's government contracts practice.
Another factor mitigating against litigation is that contractors know they will eventually get compensated, likely with interest. Of course, that assumes the debt crisis will be solved sooner rather than later.
"You have the problem you have with any debtor who can't pay his bills," said Dorf "You can get a judgment, but if the debtor doesn't have the money, it doesn't help." (Editing by Eileen Daspin and Eric Effron)
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SCHUMER SAYS "ENFORCEMENT MECHANISM" FOR FUTURE U.S. DEFICIT RED
31 Jul 2011 13:19
Source: reuters // Reuters
SCHUMER SAYS "ENFORCEMENT MECHANISM" FOR FUTURE U.S. DEFICIT REDUCTION IS A KEY ISSUE BEING DEBATED
MCCONNELL SAYS "THERE ARE NO TAX INCREASES IN THIS PROPOSAL"
31 Jul 2011 13:19
Source: reuters // Reuters
WASHINGTON, July 31 (Reuters) - Senate Republican leader Mitch McConnell said on Sunday that U.S. deficit negotiations are "very close" to a $3 trillion deal to raise the federal debt limit.
McConnell told CNN he hoped the deal would come soon and was confident that it would not raise taxes but set the stage for further deficit reductions down the road.
He said he expected a deal that he could recommend would win "a significant percentage" of Republican support. (Reporting by David Morgan)
===
Chinese state media criticises US debt deal
AFP
(1 hour ago) Today
The National Debt Clock, a billboard-size digital display showing the increasing US debt, is seen on the corner of Sixth Avenue and West 44th Street on August 1, 2011 in New York City. - AFP Photo
BEIJING: State media in China, the largest holder of US debt, chided the United States on Tuesday over a deal to raise its borrowing limit, saying it was hiding “risks and troubles” for the world economy.
The US House of Representatives late Monday approved a package that would slash spending in return for raising the legal limit on US sovereign debt, in a bid to avoid a catastrophic default.
“Although the United States has basically avoided default, its sovereign debt problems remain unresolved,” said a comment piece in the People’s Daily, a mouthpiece of the ruling Communist Party.
“They are just deferred and there is a tendency for them to grow. This is casting a shadow over the recovery of the US economy and hiding even bigger risks and troubles for the global economy.” China, sitting on the world’s biggest foreign exchange reserves of around $3.20 trillion at the end of June, is the largest holder of US Treasuries.
The debate over the debt ceiling, which the newspaper labelled a “political fight”, would hurt the credibility of US Treasuries, though a default was “essentially unlikely”, it said.
The last-minute deal revealed the long-term risks to China’s massive holdings of US Treasuries, said a separate article in the overseas edition of the People’s Daily.
“It is necessary to change the current concentration on US dollar assets, but what is more important is to change the trend of increasing holdings of dollar assets in future,” Li Xiangyang, a researcher at the official Chinese Academy of Social Sciences, wrote in the article.
“This requires a fundamental adjustment in the economic growth model.” The official Xinhua news agency chimed in by saying the United States remained a “debt economy” and the long-term risks of a default still existed.
The United States is very likely to let the dollar depreciate to pass off the debt to its creditors, which may cause more flows of speculative funds, or hot money, into emerging economies like China and push up inflation, it said.
“If the US chooses to repudiate debt in this hidden manner, it will seriously impact the stable growth of the global economy,” Xinhua said, which last week urged the United States to “live within one’s means”.
State television also criticised the agreement in a rare editorial broadcast on the national evening bulletin on Monday, saying it had more “pomp and ceremony than substance”.
“The American taxpayer and global debt holders suddenly find out that the debt crisis is only a tool… that the main concern is to get more political capital for the next presidential election,” China Central Television said.
The Chinese government has so far made no official response to the deal to raise to the limit on US borrowing and enact at least $2.1 trillion in spending cuts over the next decade.
The Democratic-led Senate was expected to approve the emergency measure in a noon (1600 GMT) vote Tuesday – scarcely 12 hours before a midnight deadline by which the world’s richest nation would run out of cash to pay its bills.
Tropical storm Don is forecast to strike the United States at about 01:00 GMT on 30 July.
02 Aug 2011 09:59
Source: Content partner // Tropical Storm Risk
Tropical storm Don is forecast to strike the United States at about 01:00 GMT on 30 July.Data supplied by theUS National Hurricane Centersuggest that the point of landfallwill benear27.2 N,97.1 W.Don is expected to bring 1-minute maximum sustained winds to the region of around83 km/h (51 mph).Wind gusts in the area maybeconsiderably higher.
The information above is provided for guidance only and should not be used to make life or death decisions or decisions relating to property. Anyone in the region who is concerned for their personal safety or property should contact their official national weather agency or warning centre for advice.
This alert is provided by TropicalStorm Risk (TSR) which is sponsored by Benfield, Royal & SunAlliance,Crawford & Company and University College London (UCL). TSR acknowledges thesupport of the UK Met Office.
===
Re: Official Senate vote count in: 74-26...
Sandyguy
14UP
The deal is done but its a sticking plaster on the gaping wound that is a similar affliction for most developed economies- debt.
The US, like the UK, has run up staggering amounts of debt through profiligate ( Given over to dissipation; dissolute.
Recklessly wasteful; wildly extravagant.
Read more: http://www.answers.com/topic/profligate#ixzz1TvAKNZ8n
)spending across the spectrum. They have created and financed the 'good years' through debt and like a teenager with a credit card, the time has arrived when the threatening letters are falling onto the doormat.
Increasing the amount of debt is not the answer. The cuts proposed by the US plan do not really take effect until the end of the 10 year plan and will ultimately prove to be negligable as US growth will be well below expectations.
As I say, this is not just a US problem but one shared across the world. For too long countries have lived beyond their means relying on future generations to pay for their high living lifestyles. All the borrowing led to a consumer bubble that fueled global growth but like an amphetamine high, it ends and the headaches and pain starts.
No country or person can borrow their way out of debt. The only answer is living within your means. If that means going without a holdiay for us or sacrificing a social program or healthcare initiative for a country then so be it. Life is full of hard choices and is ultimately about pulling through.
The lie that economies can continue to grow year on year needs to be countered. as the developing nations grow stronger, we in the West must either innovate with technology to keep ahead of the curve or we must accept that we are all going to see our standard of living stagnate or fall.
Its a gloomy outlook and there may be some rays of sunshine on the way to give us false glimmers of hope but ultimately the West has become too fat and decedant to maintian their global position. It is as true for Britain as it is for Greece, Portugal or the US- we are on the slide no matter what we do. We may be able to slow the decline but without radical reform we will not stop it.
As one commentator once noted: Watching Great Britain retreat from her empire is like watching the Roman Empire become Italy. We are still on that journey.
Sandy
===
by anthony.derosa 12:43 PM
Need to know : Key elements of deal
Top Stories:
House approves debt deal a day before deadline
Obama says cuts will not come too quickly
Stocks jump, gold falls after U.S. debt deal
Governments welcome debt deal, still worry about ratings
Timeline: How U.S. debt talks spiraled into crisis
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by anthony.derosa edited by Brian Tracey 7:51 PM yesterday
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Moody's affirms the Triple A credit rating for the United States, but it has put them on negative outlook. That means that it sees downside risks for the US credit and may downgrade the rating in the coming months. It probably would like to see whether the Special Commission can make substantial additional progress in cutting the deficit and how the mix of spending or even tax reform that could be on the table affects the growth outlook, and hence the deficit trajectory. More to come when we see the full statement
by Stella Dawson 5:52 PM
Dow closed out for the day down 265 points
by steveholland1 via twitter 4:04 PM
Dow has now dropped 239 points
by steveholland1 via twitter 3:52 PM
DEAL DONE: President Obama returns to the Oval Office after a epeech in the Rose Garden on reaching a debt deal, and further steps he will press to support the economy.
by Stella Dawson 2:31 PM
IMF Chief Lagarde is out welcoming the U.S. agreement to raise the debt ceiling and cut the deficit. There is a caveat. Like the ratings agencies, she notes that the challenge ahead for the U.S. policymakers is to develop clear, medium-term objectives for reducing the debt and the deficit. At the same time, she welcomes the phasing in of the spending cuts over time, given the fragility of the U.S, economy.
by Stella Dawson 2:29 PM
Default has been avoided, but the credit outlook for the United States remains concerning. Standard & Poor's said it wants at least $4 trillion in deficit reduction to show that politicians are serious about tackling the debt load. Congress has delivered $2.1 trillion over 10 years, half the amount the ratings agency proposed. The focus turns to S&P, which already has placed the country on negative watch for losing its Triple A sovereign credit rating. For an in-depth look at the power and the politics of the credit ratings agencies, see this Reuters report just published
by Stella Dawson 2:24 PM
Pres Obama has now signed the debt deal into law.
by steveholland1 via twitter 2:02 PM
READER COMMENT: I was hoping that this deal could lower the gold price....sigh!
comment by anonymous edited by Stella Dawson 1:56 PM
READER COMMENT: Wall Street is not nervous of overall economy, the continued spending will increase our debt and a default will still be in the future. It's in duck and cover mode.
ANSWER: You make a good point. Gold surged more than 1 pct today to an all-time high at $1,640.39 and the Swiss franc rallied -- these are risk-averse trades.
comment by Thunder005 edited by Stella Dawson 1:55 PM
US Dollar index: tracking its decline since mid 2010. The overall index jumped yesterday as confidence grew that the debt deal would pass. It has tracked in a range of 74.2 to 74.7 today. The Swiss franc rose against the dollar on safety flows, the yen strengthened a little too and the euro is a tad softer.
by Stella Dawson 1:45 PM
Pelosi: Giffords synonymous with "respect," "patriotism."
by jbendery via twitter 1:42 PM
Hoyer: FAA atandoff example of how GOP works: They were prepared to let US default, and to "walk away" without resolving FAA reauth.
by jbendery via twitter 1:41 PM
Checking in on markets, it's not pretty. The relief rally on the U.S. avoiding default was indeed brief. Stocks, bond yields and the dollar all are down today on weak economic data and worries that the U.S. still faces a credit rating downgrade because the debt deal fails to lock in place sufficiently large deficit reduction measures. Here is the stock report
by Stella Dawson 1:41 PM
DCCC chairman Steve Israel: Debt bill "may not have been a great deal, but it is now a done deal." Time to move back to jobs.
by jbendery via twitter 1:34 PM
DEBT VOTE - GOP yesses pt. 3: Risch, Roberts, Snowe, Thune and Wicker.
by LisaDCNN via twitter 1:33 PM
READER COMMENT: Could we get a Republican to explain why jobs were not created, as claimed, by not allowing the Bush tax cuts to expire. The general public is of the opinion that Republicans are covering up their inside connections by rather ignorantly avoiding tax hikes. We hear so many claims about balancing a budget with an absolute refusal to consider tax increases. It would be great if politicians would talk with less rhetoric and be more honest with themselves and the public. Also, it seems as though very few of our politicians have a mind of their own - most lack leadership skills and very apparently follow the thoughts of a few more respected politicians.
ANSWER: It is extremely hard to quantify exactly how many jobs were created by extending the Bush-era tax cuts. The idea was that you keep more money in people's pockets, giving them more spending power, and that will lift aggregate demand and as more people buy more stuff, companies will start hiring again. I will see if I can dig out any data on that.
comment by INDEPENDENT edited by Stella Dawson 1:33 PM
DEBT VOTE - GOP yesses pt. 2: Enzi, Hoeven, Hutchison, Isakson, Johanns, Kirk, Kyl, Lugar, McCain, McConnell, Murkowski, Portman more...
by LisaDCNN via twitter 1:32 PM
DEBT VOTE - GOP yesses: Alexander, Barrasso, Blunt, Boozman, Brown of Mass., Burr, Cochran, Collins, Corker, Cornyn, Crapo more...
by LisaDCNN via twitter 1:31 PM
READER COMMENT:
The biggest myth is that raising taxes is the way to get yourself out of recession.edited by Stella Dawson 1:28 PM
If you lower business taxation and provide additional tax breaks you are proving businesses with the opportunity to employ more people with greater levels of disposable income via lower income tax thresholds
Collectively you will end raising a larger overall pool of tax revenue with this approach.
When you raise taxes, you make businesses less competitive and reduce the dispoable income of your population.
That is a sure fire way to prolong and deepen a economic recession / depression.
comment by PaulMc
=====
American kamikaze: US narrowly averts default
By Huma Imtiaz
Published: August 3, 2011
The debt-ceiling bill proposes cutting over $2 trillion in spending over the next decade, while raising the debt-ceiling limit i.e. how much the United States can legally borrow by nearly the same amount from its current figure of $14.3 trillion. PHOTO: AFP
WASHINGTON:
It took months of debate, statements, proposals and press conferences that provided fodder for news bulletins and comic gold for late night comedy shows, but on Tuesday afternoon, the United States Senate finally passed the debt-ceiling bill, less than 24 hours after the US House of Representatives passed the bill.
The debt ceiling bill, passed by a vote of 74-26 in Senate, will now be sent to President Obama for his signature, who must sign it before midnight to avoid the United States to default on its obligations, though it may be too late to avoid a downgrade of the country’s credit rating.
(Read: US ‘almost out of time’ for deal, Obama)
The debt-ceiling bill proposes cutting over $2 trillion in spending over the next decade, while raising the debt-ceiling limit i.e. how much the United States can legally borrow by nearly the same amount from its current figure of $14.3 trillion.
But according to many in Washington, this bill was not just a bill. With a House of Representatives controlled by Republicans, and being subject to the ideology and demands of the extreme right-wing Tea Party faction, and a Senate controlled by Democrats, it took weeks for a decision to be reached, representing what many describe as the new dysfunction in the US political system.
The Republicans wanted no changes to taxes, and proposed cuts in Social Security, the pension programme for elderly Americans, and Medicare, the healthcare programme designed to assist Americans over 65 years of age.
The Democrats, many of whom reportedly did not agree with the President’s push to “compromise”, wanted less spending cuts and an increase in taxes on the wealthy. The acrimony felt by some Democrats on the President urging for a compromise and agreeing to take taxes off the table got to the point that a Democrat leader dubbed the debt ceiling deal as a “Satan sandwich”.
In Monday’s vote in the House of Representatives, only half of the Democrats in the House voted in favour of the debt-ceiling bill. The bill was passed by a vote of 269-161, with 66 Republicans voting against the proposal, a number that almost exactly corresponds with the size of the Tea Party faction.
The spending cuts, which will be agreed on by a bipartisan committee, could range from defence to social security, as well as an overhaul of the tax codes, that would help identify the loopholes present at the moment – however, if the committee does not agree to the cuts, triggers in the legislation will automatically place cuts between defence and domestic spending.
Addressing the press on Monday, White House Press Secretary Jay Carney said, “Social Security, Medicaid and beneficiaries in Medicare would be excluded from any harm. The whole point of the trigger is that nobody wants to do them and that it’s equally onerous for both sides. And that, again, creates greater potential for the committee’s action to bear fruit.”
Last week, President Obama urged compromise, and addressing the nation said, “We can’t allow the American people to become collateral damage to Washington’s political warfare.”
Addressing a press conference on Tuesday, shortly after Senate passed the bill, the President said that voters may have voted for a “divided government” but they did not vote for a “dysfunctional government.”
(Read: Obama asks parties to ‘work together’)
The Associated Press and Reuters both report that President Obama has already signed the bill into law.
But the damage to the US credit rating may already have taken place. The Wall Street Journal reports that price of credit default swap contracts – or the cost of insuring against the likelihood of default – for US government bonds is now higher than that for Brazilian government bonds. (With additional input from agencies)
Published in The Express Tribune, August 3rd, 2011.
====
'China says US debt bomb not defused'
Wed Aug 3, 2011 8:10AM GMT
Shanghai stock exchange market (file photo)
China has warned that a new deal by US lawmakers to raise America's debt ceiling has failed to resolve the debt crisis of the world's biggest economy, reports say.
"The months-long tug of war between Democrats and Republicans... failed to defuse Washington's debt bomb for good, only delaying an immediate detonation by making the fuse an inch longer," China's official Xinhua news agency said on Wednesday.
The report, also reflected in Western media, cautioned that a failure to restrict Washington's borrowing could "jeopardize the well-being of hundreds of millions of families within and beyond the US borders.”
On Tuesday, US President Barack Obama voted in favor of a bipartisan plan to raise the debt ceiling of the United States in exchange for spending cuts, just hours before the first ever government default in US history.
According to the new bill, the debt ceiling will be raised by $2.4 trillion, to reach a total of $16.7 trillion. The bill also includes a $2.1 trillion in spending cuts over the next decade.
The cuts could affect such entitlement programs of the country as Medicare, Social Security, and military expenditures.
Meanwhile, China's leading ratings agency Dagong has downgraded America's credit rating from A+ to A. The agency says it predicts a negative outlook for the US economy in the coming months.
====
Aug. 6, 2011 8:25 AM ET
China blasts US over credit rating downgrade
ALEXA OLESEN, Associated Press THE ASSOCIATED PRESS STATEMENT OF NEWS VALUES AND PRINCIPLES
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BEIJING (AP) — China, the largest foreign holder of U.S. debt, demanded Saturday that America tighten its belt and confront its "addiction to debts" in the wake of Standard & Poor's decision to downgrade the U.S. credit rating.
China currently owns $1.2 trillion of U.S. Treasury debt, the largest stake of any central bank. The commentary carried by the state-run Xinhua News Agency was Beijing's first official response to the S&P decision.
"The U.S. government has to come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone," Xinhua said.
It said the rating cut would be followed by more "devastating credit rating cuts" and global financial turbulence if the U.S. fails to learn to "live within its means."
"China, the largest creditor of the world's sole superpower, has every right now to demand the United States to address its structural debt problems and ensure the safety of China's dollar assets," it said.
Xinhua said the U.S. must slash its "gigantic military expenditure and bloated social welfare costs" and accept international supervision over U.S. dollar issues.
Last month, China's top general, Chen Bingde, also linked America's financial woes to its military budget and asked whether paring back on defense spending wouldn't be the best thing for U.S. taxpayers.
Such comments reflect Beijing's desire that Washington reduce its military presence in Asia. The U.S., rattled by China's military buildup, also routinely chides Beijing for its fast-growing defense spending.
Xinhua also suggested a new global reserve currency might be necessary to replace the dollar, a position China has frequently advocated.
"Mounting debts and ridiculous political wrestling in Washington have damaged America's image abroad," Xinhua said. "To cure its addiction to debts, the United States has to re-establish the common sense principle that one should live within its means."
Jitters over the U.S. handling of its debt problems were also being felt elsewhere in Asia, said Kishore Mahbubani, Singapore's former ambassador to the United Nations.
The dean of Singapore's Lee Kuan Yew School for Public Policy said the last-minute agreement by the U.S. Congress to lift the debt limit and avoid default has policymakers in Asia questioning the stability of U.S. global leadership.
"It's definitely undermined U.S. credibility," Mahbubani said late Friday. "Everyone is wondering if you have such a dysfunctional political process, how can you provide global leadership. It's very dangerous for the world."
___
Associated Press writer Alex Kennedy in Singapore contributed to this report.
Associated Press
Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
===
Reuters
Credit ratings love-hate has simple answer
(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)
By Richard Beales
NEW YORK, Aug 6 (Reuters Breakingviews) - It's a love-hate relationship. The White House doesn't like the fact that Standard & Poor's downgraded America's debt on Friday -- it even picked holes in the firm's numbers. European officials don't welcome critiques of sovereign credit, either. Yet governments seem broadly inclined to regulate rating firms tightly. The better answer is to cut them loose.
Without official recognition, the powerful big three raters -- S&P, Moody's Investors Service and Fitch Ratings -- would eventually become just competitors with other credit researchers. Investors would have to decide whose analysis was most credible. They could ignore S&P if they chose, or discount all three firms' views because of their many failures to spot early warning signs ahead of the 2008 crisis and look elsewhere for insight.
Last year's Dodd-Frank Act started a process of de-deifying the troika, requiring the U.S. Securities and Exchange Commission to find alternatives to the use of credit ratings in regulations. The SEC did just that in one area on July 26, specifying alternative criteria that qualify a debt issuer to use "short form" disclosure for new offerings.
At the same time, Dodd-Frank also requires the SEC to intensify its oversight of officially recognized rating firms. European Commission President Jose Manuel Barroso last month also talked about tighter regulation. He even hinted at encouraging homegrown rivals to counter a perceived anti-European bias (apparently forgetting that Fitch is majority-owned by France's Fimalac).
More pervasively, global Basel III rules on bank capital still have ratings baked in. It's not easy to find a straightforward alternative, but it shouldn't be beyond the imagination of bankers and watchdogs. Traditional ratings anyway carry far too much weight given their narrow primary purpose as indicators of default probability. A multifaceted approach would bring better risk management. The trouble is, even investors with the resources and skill to perform their own credit analysis often like ratings because they provide a framework for arbitrage.
Moody's supports removing ratings from regulations, according to the firm's July 27 congressional testimony. Another witness, Lawrence White of New York University's Stern School of Business, made the case for dismantling regulation of the raters. Perhaps the White House's spat with S&P will clarify minds. Governments don't need to hold these particular enemies close or worry about their mistakes: they should just release them to fight for influence on their merits.
CONTEXT NEWS
-- Standard & Poor's on Aug. 5 downgraded the credit rating of the United State to AA-plus from AAA.
-- The U.S. House Financial Services Committee on July 27 heard testimony about rating agency oversight from regulators, a public pension fund investor and an academic as well as from S&P, Moody's Investors Service, Rapid Ratings and the Kroll Bond Rating Agency.
-- The U.S. Securities and Exchange Commission on July 26 voted to adopt new rules to remove credit ratings as eligibility criteria for companies seeking to use "short form" registration when registering securities for public sale.
-- House Financial Services Committee hearing and testimony:
http://link.reuters.com/gew92s
-- SEC release on "short form" disclosure criteria: http://link.reuters.com/hew92s
((richard.beales@thomsonreuters.com))
(Editing by Rob Cox and Martin Langfield)
===
White House urges unity in US
Sat Aug 6, 2011 6:19PM GMT
White House spokesman Jay Carney (File photo)
In response to the humiliating downgrade of the Americas AAA debt rating by S&P, The White House has urged political rivals to unite and fix the economy.
“The bipartisan compromise on deficit reduction was an important step in the right direction. Yet, the path to getting there took too long and was at times too divisive. We must do better to make clear our nation's will, capacity and commitment to work together to tackle our major fiscal and economic challenges,” AFP quoted White House spokesman Jay Carney as saying.
The Standard & Poor's credit rating agency downgraded the United States' rating by one notch to AA-plus and added a negative outlook for the first time in the history of the ratings.
The credit agency said the move comes due to US politicians' increasing failure to handle the country's huge fiscal deficit and debt load.
Last week, US President Barack Obama voted in favor of a bipartisan plan to raise the country's debt ceiling in exchange for the spending cuts, just hours before a government default.
Carney added that the US President would "strongly encourage" the Democratic and Republican lawmakers to put their "common commitment to a stronger recovery and a sounder long-term fiscal path" above "political and ideological differences."
According to the new bill, the debt ceiling will be raised by USD 2.4 trillion, to reach a total of USD16.7 trillion. The bill also includes a USD 2.1 trillion in spending cuts over the next decade.
This comes while the S&P believed USD 4 trillion was required in spending cuts over 10 years to retrain the US top notch rating, a proposal which was refused by the Republicans.
In addition to the S&P, Chinese leading rating agency Dagong has also downgraded America's credit rating from A+ to A. China is the largest holder of the US treasuries.
The new lower US credit rating is being seen as a major embarrassment for the Obama administration and could raise the cost of the country's borrowing.
===
According to Reuters today the Chinese are calling for a NEW stable independent world currency.
... Ahhh... but - we already got one! It's called gold, and its been the world currency - insofar as all currencies (and therefore commodities - and this week Obama's credibility) are measured against it - ever since those guys began making vases!
The trouble with the idea is that ALL currencies are subject to fear, greed and politial manipulation! And that includes gold - ergo, since gold is not "stable"; and if there WERE a "stable" currency we wouldn't need any others coz no one would want them" - it ain't gonna work!
This guys, is going to be my Monday Elephant - so log on at http://expertwitnessissues.blogspot.com - and tell me why it ain't so, coz if it is, the Chinese have goofed!
Long and strong! TT2
===
Reuters
Timing of S&P U.S. downgrade couldn't be better
(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)
By Agnes T. Crane
NEW YORK, Aug 6 (Reuters Breakingviews) - The Standard & Poor's downgrade of the United States couldn't have come at a much better time. Markets may be wobbly, but interest rates are at historic lows and buyers of U.S. debt are plentiful as the world braces for another economic slowdown. There may be some initial turbulence when investors return on Monday, but if the rating agency waited until markets acted first the consequences would be far more severe.
After all, the rating agency's decision shouldn't have come as a shock. S&P made no secret of what it expected from the debt ceiling brawl that put the full faith and credit of the largest debtor nation in the world on the line. It wanted roughly $4 trillion in deficit reduction and a credible plan to fix longer-term deficit problems. It got neither.
Yet despite expectations of a downgrade, during last week's financial market rout investors plowed into U.S. Treasuries. Ten-year yields fell as low as 2.34 percent. With few alternatives at their disposal, it will take more than the downgrade by one closely-watched rating firm to change America's go-to status for investors in times of trouble.
Anyway, the fact that Fitch Ratings and Moody's Investors Service affirmed their AAA ratings also should keep a lid on any forced selling in credit markets as investors with mandates to hold only top-rated debt can lean on the opinions of the other two raters.
Moreover, it's hard to see an alternative to S&P's verdict having much of a salutary effect on markets. For starters, affirming its AAA rating, after it had aggressively drawn its line in the sand, would have destroyed S&P credibility with investors -- far more than the $2 trillion error it initially made in its assumptions.
Even worse, it would have sent a signal to Washington that its political shenanigans come without consequences. It's better for S&P to call out the failings of America's leaders before global investors do. The euro zone's woes serve as a cautionary tale of how swiftly investors lose confidence -- and how difficult it is to regain.
S&P's unprecedented downgrade serves U.S. lawmakers notice that their inability to govern and their willingness to hold creditors hostage has consequences. If losing the AAA crown is what it takes to knock heads together, that's far preferable to waiting for markets to unleash their wrath.
CONTEXT NEWS
-- The United States lost its top-tier AAA credit rating from Standard & Poor's on Aug. 5 in an unprecedented blow to the world's largest economy in the wake of a political battle that took the country to the brink of default.
-- S&P cut the long-term U.S. credit rating by one notch to AA-plus on concerns about the government's budget deficit and rising debt burden. The action is likely to eventually raise borrowing costs for the American government, companies and consumers.
-- "The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics," S&P said in a statement.
-- The outlook on the new U.S. credit rating is "negative," S&P said, indicating another downgrade was possible in the next 12 to 18 months.
-- Standard & Poor's press release: http://link.reuters.com/few92s
((agnes.crane@thomsonreuters.com))
(Editing by Rob Cox and Martin Langfield)
=====
On Sunday August 7, 2011, 4:13 pm
http://finance.yahoo.com/news/ECB-to-intervene-decisively-rb-356849071.html?x=0&.v=2
LONDON (Reuters) - The Euro system of central banks has decided to intervene decisively on markets to respond to the escalating debt crisis, a euro zone monetary source said after a European Central Bank conference call on Sunday.
Officials on the conference call carefully considered the situation in Italy and Spain, and took note of a statement by France and Germany which stressed their commitment to European financial reforms, the source said.
"The Euro system will intervene very significantly on markets and respond in a significant and cohesive way," the euro zone monetary source said, adding a statement by the ECB will be issued shortly.
(Editing by Sophie Hares)
====
US Treasury bonds shrug off downgrade
Interest rates on the benchmark 10-year US Treasury bonds actually fell on Monday – showing that what investors fear most about the US is weak growth
Fears that America would have to pay more to borrow on the world's financial markets after being stripped of its coveted AAA rating proved to be wide of the mark on Monday, as yields on US Treasury bonds fell.
While this may prove to be a temporary phenomenon, there are good reasons to think that bond yields – the interest rate the US government has to pay the investors who finance America's debt – will remain low and could even fall further. On Monday morning the yield on the benchmark 10-year Treasury bond was just under 2.5%, but some analysts believe it could fall as low as 2% over the coming months.
In one sense, a decline in US bond yields is counter intuitive. The debt downgrade by S&P was supposed to warn investors that the US is now a riskier place to put their money. Investors, in turn, should demand higher interest rates for holding US assets.
So what's happening? There were three explanations floating being touted around on Monday. The first is that despite the downgrade, US assets are still considered safe. There is only a marginal difference between America's old AAA rating and its new AA+ rating; the real impact at this stage is psychological and political.
The second reason US bond yields may be falling is that the S&P decision came at a time when the eurozone is going through an existential crisis. To the average investor, the world looks a pretty scary place at present, and in times of trouble smart money looks for safe havens – traditionally gold, the Swiss franc and US bonds.
However, it is the third explanation that looks most compelling, namely that movements in US bond yields reflect what investors think about the underlying health of the American economy. Bond yields tend to go up when economies are growing rapidly and financial markets catch a whiff (A slight, gentle gust of air)of inflation. Bond yields tend to fall when growth is weak and they fall a lot when there is a perceived threat of deflation. Economic fundamentals have more influence on the bond markets than the credit rating agencies, in other words.
Japan is proof of this. It lost its AAA rating a decade ago and has national debt of 225% of GDP, yet Japanese 10-year bond yields are 1%. The real measure of Japan's stagnation has been the stock market not the bond market, with the Nikkei trading at just over 9000 points – a quarter of its level at the peak of the boom. Similarly, the true barometer of the health of the US economy over the coming weeks and months will be the S&P 500, not the 10-year bond yield.
===
Reuters
China's diatribe on U.S. debt could backfire
(The author is a Reuters Breakingviews columnist. The opinions expressed are her own)
By Wei Gu
HONG KONG, Aug 8 (Reuters Breakingviews) - China's diatribe against Washington's economic policy after the weekend's U.S. credit-rating downgrade could backfire. Pouncing on overseas woes may be an attempt to shift domestic attention from China's recent train tragedy. But the cost for Beijing could be more U.S. pressure on matters like currency and Sino-American trade.
The news service commonly seen as the Communist Party's mouthpiece made two demands after Standard and Poor's stripped the United States of its triple-A status. First, it called for international supervision of U.S. debt and for China to be given certain guarantees on its exposure. This is largely familiar stuff. But the second request -- for America to slash its military expenditure to help balance its massive budget gap -- marked a new departure. It reflects concern after recent U.S. military drills in disputed waters of the South China Sea, and worry about more U.S. arms sales to Taiwan, a topic expected to emerge during Vice President Joe Biden's upcoming visit to China.
Of course, it suits China to talk down the United States. With the yuan only allowed to appreciate slowly against the dollar, there are trade advantages of a weak dollar for China, though slower demand from the United States will eventually hurt Chinese exports. China's tightly managed currency regime is one reason why U.S.-China bilateral trade imbalance rose by 20 percent to $273 billion in 2010. With worries about global recovery spiking, Beijing will be more inclined to keep its currency in check to help exports.
But Beijing's warnings lack teeth. China is the biggest foreign owner of U.S. Treasuries and it has no choice but to keep buying. There is no other market deep enough to park a majority of its $3.2 trillion of reserves.
U.S. Treasury
Created in 1798, the United States Department of the Treasury is the government (Cabinet) department responsible for issuing all Treasury bonds, notes and bills. Some of the government branches operating under the U.S. Treasury umbrella include the IRS, U.S. Mint, Bureau of the Public Debt, and the Alcohol and Tobacco Tax Bureau.
Investopedia Says:
Generally speaking, the U.S. Treasury is responsible for the revenue of the U.S. government, but here are some other key functions:
- Printing of bills, postage, Federal Reserve notes, and minting of coins
- Collection of taxes and enforcement of tax laws (through the IRS)
- Management of all government accounts and debt issues
- Overseeing U.S. banks
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If your investments in the stock market are keeping you from sleeping at night, it's time to learn about the safer alternatives in the money market. The Money Market
Discover these safe alternatives to Treasury bonds. Agency Bonds: Limited Risk And Higher Return
Learn the complex concepts and calculations for trading bonds including bond pricing, yield, term structure of interest rates and duration. Advanced Bond Concepts
Bond investing is a stable and low-risk way to diversify a portfolio. However, knowing which types of bonds are right for you is not always easy. The Bear On Bonds
Chinese authorities will hope in vain that Washington will listen to its concerns on military spending. But dictation of U.S. military policy by Chinese media will give fodder to those politicians on Capitol Hill who would like to portray China as a threat to America's security. Lawmakers could respond with proposed trade sanctions and louder criticism for the inflexible yuan. With so much at stake for China, Beijing needs to choose its words carefully.
CONTEXT NEWS
-- The People's Daily newspaper, the chief mouthpiece of China's ruling Communist Party, said on Aug. 8 the troubles facing the United States and European Union grew out of the political dysfunctions of the Western democracies and will seriously impede stable development of the global economy.
-- The official Xinhua news agency on Aug. 6 said the United States must slash its "gigantic military expenditure and bloated social welfare costs" and accept international supervision over U.S. dollar issues.
-- Xinhua's said in another article that U.S. Vice President Joe Biden may talk about U.S. arm sales to Taiwan during a 10-day trip to China, starting Aug. 16, which also include stops in Japan and Mongolia.
-- Beijing officials have so far been publicly mute about the blow to Washington after Standard and Poor's stripped the United States of its top-tier AAA credit rating on Aug. 5.
((wei.gu@thomsonreuters.com))
(Editing by Chris Hughes and David Evans)
By Wei Gu
HONG KONG, Aug 8 (Reuters Breakingviews) - China's diatribe against Washington's economic policy after the weekend's U.S. credit-rating downgrade could backfire. Pouncing on overseas woes may be an attempt to shift domestic attention from China's recent train tragedy. But the cost for Beijing could be more U.S. pressure on matters like currency and Sino-American trade.
The news service commonly seen as the Communist Party's mouthpiece made two demands after Standard and Poor's stripped the United States of its triple-A status. First, it called for international supervision of U.S. debt and for China to be given certain guarantees on its exposure. This is largely familiar stuff. But the second request -- for America to slash its military expenditure to help balance its massive budget gap -- marked a new departure. It reflects concern after recent U.S. military drills in disputed waters of the South China Sea, and worry about more U.S. arms sales to Taiwan, a topic expected to emerge during Vice President Joe Biden's upcoming visit to China.
Of course, it suits China to talk down the United States. With the yuan only allowed to appreciate slowly against the dollar, there are trade advantages of a weak dollar for China, though slower demand from the United States will eventually hurt Chinese exports. China's tightly managed currency regime is one reason why U.S.-China bilateral trade imbalance rose by 20 percent to $273 billion in 2010. With worries about global recovery spiking, Beijing will be more inclined to keep its currency in check to help exports.
But Beijing's warnings lack teeth. China is the biggest foreign owner of U.S. Treasuries and it has no choice but to keep buying. There is no other market deep enough to park a majority of its $3.2 trillion of reserves.
Chinese authorities will hope in vain that Washington will listen to its concerns on military spending. But dictation of U.S. military policy by Chinese media will give fodder to those politicians on Capitol Hill who would like to portray China as a threat to America's security. Lawmakers could respond with proposed trade sanctions and louder criticism for the inflexible yuan. With so much at stake for China, Beijing needs to choose its words carefully.
CONTEXT NEWS
-- The People's Daily newspaper, the chief mouthpiece of China's ruling Communist Party, said on Aug. 8 the troubles facing the United States and European Union grew out of the political dysfunctions of the Western democracies and will seriously impede stable development of the global economy.
-- The official Xinhua news agency on Aug. 6 said the United States must slash its "gigantic military expenditure and bloated social welfare costs" and accept international supervision over U.S. dollar issues.
-- Xinhua's said in another article that U.S. Vice President Joe Biden may talk about U.S. arm sales to Taiwan during a 10-day trip to China, starting Aug. 16, which also include stops in Japan and Mongolia.
-- Beijing officials have so far been publicly mute about the blow to Washington after Standard and Poor's stripped the United States of its top-tier AAA credit rating on Aug. 5.
((wei.gu@thomsonreuters.com))
(Editing by Chris Hughes and David Evans)
Reuters
reuters.com
====================
Reuters
Different duty may call for U.S. Treasury boss
(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)
By James Pethokoukis
WASHINGTON, Aug 8 (Reuters Breakingviews) - There was little upside for President Barack Obama to let U.S. Treasury Secretary Tim Geithner go back to New York. Finding a solid, willing replacement would be as big a pain as getting a Senate confirmation. And with markets nervous, Obama needs someone with crisis experience -- just in case. But while Geithner is looking stuck in Washington for a while, he may have a smaller role in this latest iteration of the crisis.
Obama's request makes all kinds of sense. It has been a running joke in the White House that he is as much warden as boss, making the former New York Fed boss wear a tracking ankle bracelet to prevent escape. His departure would force the president to pick a successor almost sure to further inflame supporters already angry about the debt ceiling deal. But cross off all the budget hawks, bankers and corporate chieftains, and the potential shortlist begins to look a bit light on gravitas.
The president's political foes also would almost surely turn Senate hearings into a partisan autopsy of his economic record. Republicans would ask the nominee loaded questions about why the 2009 stimulus didn't prevent unemployment from reaching such high levels. The hearings in all likelihood would have become the opening round of the 2012 election campaign -- and with more heat than light.
In any case, Geithner's also probably not a bad guy to have around if Europe's debt problems start to spin out of control, or if mortgage madness sends U.S. banks back into serious trouble. Although he's unpopular among Republicans, many of them still quietly praise his adept handling of the financial meltdown when he first arrived in Washington. What's more, Geithner is the sole survivor of Obama's top economic team -- and therefore should help preserve some sense of stability as a sounding board for his boss.
But if another financial crisis fails doesn't flare up, Geithner might wind up with a lighter schedule in the coming months. The budget debate has moved back to Congress where a "super-committee" will search for more debt reduction. And it is the White House, not Treasury, that will probably push forward new job creation proposals. Either way, Geithner may find himself able to spend plenty of time in the Big Apple, after all.
CONTEXT NEWS
-- Treasury Secretary Timothy Geithner, who had considered stepping down after the government borrowing limit was raised, confirmed on Aug. 7 that he will remain at his post at President Barack Obama's request.
-- "I love my work. And I think if a president asks you to serve, you have to do it," Geithner told NBC/CNBC in an interview.
-- With the U.S. unemployment rate above 9 percent and the economy still scarred by crisis, "we still have a lot of work to do", he added.
-- Geithner had indicated he might leave after a debt-ceiling increase was approved, partly because his family was returning to New York, where his son is planning to attend his final year of high school this autumn.
-- But administration officials had signaled that both Obama and White House chief of staff William Daley had urged him not to leave now.
-- The high-stakes drama over the debt ceiling increase, which brought the world's biggest economy to the brink of default, has given way to a new set of concerns after ratings agency Standard & Poor's downgraded U.S. debt late on Aug. 5.
-- "The president asked Secretary Geithner to stay on at Treasury and welcomes his decision," White House spokesman Jay Carney said in a statement.
((james.pethokoukis@thomsonreuters.com))
(Editing by Jeffrey Goldfarb and Martin Langfield)
==========================================
Reuters
BofA boss deserves slack on style
(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)
By Antony Currie
NEW YORK, Aug 10 (Reuters Breakingviews) - Brian Moynihan doesn't win many points for style. Bank of America's chief executive came off flat, as he often does, during a Q&A session on Wednesday hosted by hedge fund manager Bruce Berkowitz. But not every bank boss can have the swagger JPMorgan's Jamie Dimon does. And Moynihan has been pretty straightforward laying out his bank's strengths - and admitting to its weaknesses.
It would certainly help if Moynihan could pitch with more punch. He's not great with a script: he stumbles over words, and too often his delivery falls into a soporific( Inducing or tending to induce sleep.
Drowsy.) monotone. His finance chief Bruce Thompson is guilty of the latter, too.
((ad-lib (ăd'lĭb')
v., -libbed, -lib·bing, -libs.
v.tr.
To improvise and deliver extemporaneously.
v.intr.
To engage in improvisation, as during delivery of a speech.
n. (ăd'lĭb')
Words, music, or actions uttered, performed, or carried out extemporaneously.
adj.
Uttered, performed, or carried out spontaneously))
Moynihan's better when ad-libbing, but during the grilling spent too much time talking around questions before answering them. He doesn't share Dimon's narrative ease with facts and figures, nor his penchant for memorable turns of phrase.
Such abilities can make a difference raising confidence -- though JPMorgan's stock has taken a bit of a beating too. But it's not as if Moynihan has dodged the issues facing his bank. Quite the opposite: he has spent a good deal of time mopping up predecessor Ken Lewis's mess, although recent news has shown there are more hurdles to clear to settle mortgage claims than the bank and its shareholders would like.
BofA's balance sheet, as Moynihan routinely reminds investors, looks pretty solid, with capital ratios almost double and cash held almost triple what it had going into the last crisis. Tellingly, shareholders don't seem to have a specific beef with the bank's various businesses. Berkowitz promised to ask Moynihan the toughest questions among the thousands submitted by fellow shareholders. But for all the hype, they were pretty tame.
It may turn out that there are other financial skeletons in BofA's closet. Or Moynihan's management style may prove to be lacking what's needed to run a sprawling, too-big-to-fail operation like BofA. But so far, the critics haven't hit on it. They need more ammo against him than a mere lack of elan.
CONTEXT NEWS
-- Bank of America Chief Executive Brian Moynihan and Chief Financial Officer Bruce Thompson were grilled about the bank and their performance on a 90-minute conference call with investors hosted by hedge fund manager Bruce Berkowitz of Fairholme Capital.
-- Bank of America's stock fell 20 percent in a rout on Aug. 8 before recovering some of the losses a day later. The bank's shares declined another 8 percent on the afternoon of Aug. 10 following the Q&A session. They have lost about half their value since hitting their 2011 high in January.
-- Fairholme will be posting a replay of the call as well as a transcript on its website: http://link.reuters.com/nem23s
((antony.currie@thomsonreuters.com))
(Editing by Jeffrey Goldfarb and Martin Langfield)
=========================
Standard & Poor's faces investigation over 'possible insider trading' over downgrade of U.S. debt
Commission begins asking preliminary questions
Rumours of decision to drop U.S. to AA+ were abound
S&P director hints Tea Party rhetoric played a part
Spokesman for agency denies any wrongdoing
By Laurie Whitwell
Last updated at 3:45 AM on 13th August 2011
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Warning: John Chambers, chairman of S&P's sovereign ratings committee, has said the U.S. could suffer a further downgrade
A shock investigation of possible insider trading at Standard & Poor's has reportedly begun, with the country still reeling from the rating agency's historic downgrade of U.S. debt.
Authorities want to know who had prior knowledge of the decision, which sparked a wild week of trading on Wall Street that saw breathtaking losses and rapid rises.
The Securities and Exchange Commission, which has oversight of credit rating firms, has started asking preliminary questions, the Financial Times reported.
However, the regulator is not aware of a leak from an S&P insider, nor was it aware of an aberrational trade, the paper said.
Rumours of a post-bell downgrade were rampant on Wall Street early on Friday and some commentators suggested it sounded like a leak, which could have come from either S&P or the Treasury.
And, though misdeeds may be difficult to prove, S&P could have its license revoked if it leaked word of the downgrade, according to the 2006 Credit Rating Agency Reform Act.
The U.S. Senate Banking committee has also begun looking into last week's decision by S&P's to downgrade the U.S. credit rating.
Headquarters: Standard & Poor's has come in for strong criticism since downgrading U.S. debt
Hope and a prayer: Wall Street traders experienced a crazy week after S&P's downgrade
An S&P spokesman strongly denied any wrongdoing.
He said tonight: 'In the course of our business, we are in regular communication with regulators, but we do not discuss particular interactions we might have with them.
'S&P takes its confidential information and securities trading policies, and the related securities regulation, very seriously. Our policies prohibit analysts or rating committee members from trading and holding securities or options of the companies or governments they rate.
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'In our July 14, Credit Watch Negative announcement, we indicated that there was an at least 50 per cent chance of a potential of downgrade if an agreement regarding the debt ceiling is reached, but does not change the trajectory of U.S. debt growth in the medium term.
'In addition, we published several reports and broadly communicated our views regarding the potential impact on other fixed income securities.'
Green Bay cackle: Barack Obama has slammed S&P's decision but was laughing today after being presented with a stock certificate by Green Bay Packers football cornerback Charles Woodson, left
The news of a potential insider trading investigation into Standard & Poor’s, comes as a director at the agency hinted for the first time that Tea Party rhetoric was to blame for the downgrade.
Senior director Joydeep Mukherji said that one reason the U.S. lost its triple-A credit rating was that several lawmakers expressed scepticism about the serious consequences of a credit default — a position put forth by some Republicans.
Without specifically mentioning the party, Mr Mukherji said the stability and effectiveness of American political institutions were undermined by the fact that 'people in the political arena were even talking about a potential default.'
'That a country even has such voices, albeit a minority, is something notable,' he added. 'This kind of rhetoric is not common amongst AAA sovereigns.'
GOP leadership in the House and Senate was vocal in warning about the dangers of default.
But some lawmakers blasted warnings by the Obama administration that a failure to raise the debt ceiling would unleash an economic catastrophe, including Republican presidential candidate Michele Bachman, who voted against the debt limit increase and said the nation would avoid default even without a deal.
Read more: http://www.dailymail.co.uk/news/article-2025530/Bombshell-investigators-start-insider-trading-enquiry-Standard--Poors-Who-prior-knowledge-downgrade.html#ixzz1Utuc05k7
==============
Billionaire Buffett: Tax the rich
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US billionaire Warren Buffett has called for the country's super-rich to pay more tax(AP)
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Monday August 15 2011
Billionaire investor Warren Buffett has called for "mega-rich" Americans to pay more taxes.
Mr Buffett said in a New York Times opinion piece that he would immediately raise rates on households with taxable income of more than one million dollars, and he would add an additional increase for those making 10 million dollars or more.
He also recommends that the 12 members of Congress charged with devising a deficit-cutting plan leave rates for 99.7% of taxpayers unchanged.
"My friends and I have been coddled long enough by a billionaire-friendly Congress," Mr Buffett wrote. "It's time for our government to get serious about shared sacrifice."
Mr Buffett noted that the mega-rich pay income taxes at a rate of 15% on most investment income but practically nothing in payroll taxes. The middle class, meanwhile, typically falls into the 15% and 25% income tax brackets and is hit with heavy payroll taxes. He said Washington legislators "feel compelled to protect us, much as if we were spotted owls or some other endangered species."
Mr Buffett said he knows many of the mega-rich well, and most would not mind paying more in taxes, especially when so many fellow citizens are suffering. He also said he has yet to see anyone shy away from investments because of tax rates on potential gains, even when rates were much higher in the mid-1970s, 1980s and 1990s.
"People invest to make money, and potential taxes have never scared them off," he said.
======
Warren Buffett, Business Personality
Born: 30 August 1930
Birthplace: Omaha, Nebraska
Best Known As: Investment genius and head of Berkshire Hathaway Inc.
Warren Buffett is the chairman of Berkshire Hathaway Inc. and is one of the world's wealthiest men. Buffett is known as "the Sage of Omaha" for his remarkable savvy in stock market investments and for the success of Berkshire Hathaway -- the textile company he acquired in 1965 and turned into a holding company for investments in many other businesses. Over the years Buffett bought stock in financial powerhouses like Coca-Cola, Geico Insurance, Gillette, and the Washington Post Company (where Buffett became a board member and close friend of Post head Katharine Graham). Berkshire Hathaway became famously successful: $1000 invested in the company in 1965 would have been worth over $5 million by the year 2000. By the 1980s Buffett was a regular in the Forbes annual list of the world's richest people, and by the late 1990s he was second in wealth only to Microsoft CEO Bill Gates. In June of 2006, with his personal wealth valued at roughly $44 billion, Buffett announced plans to give 85% of his Berkshire stock over time to five charitable foundations, primarily theBill and Melinda Gates Foundation.
Buffett and the former Susan Thompson were married from 1952 until her death in 2004. They had three children: Susan (b. 1952), Howard (b. 1954) and Peter (b. 1958)... Buffett received a bachelor's degree from the University of Nebraska in 1950, and a master's degree in economics from Columbia University in 1951... On 30 August 2006, his 76th birthday, Buffett married Astrid Menks.
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