- 0:58 am
- STI Down 0.1%
- by Matthew Allen
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Singapore's Straits Times Index (STI) is down 0.1% at 3182.40 midday, tracking weakness in most regional markets after Wall Street's decline Tuesday, with worries over the U.S. debt ceiling clouding sentiment. Market volume is a beefy 872 million shares by midday (versus 731 million Tuesday), though elevated interest in Genting Singapore counts for a lot of the increase.
DBS Vickers Securities says the U.S. debt issue has seen day-by-day developments and investors will continue to watch for macro developments there (as well as earnings results). It notes a vote on a plan to cut government spending in exchange for lifting the debt ceiling (now delayed to Thursday) will be key.
- 1:07 am
- U.S. Deserves Ratings Cut, Says Chinese Investment Officer
- by Eliot Gao
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The U.S. deserves a ratings downgrade and a default can't be ruled out, a former strategist for China's sovereign wealth fund said.
Peng Junming, now the chief investment officer for investment firm Empire Capital Management, said the U.S. is likely to reach a deal on raising the deficit cap and cutting the deficit but that shouldn't undermine the case for a ratings cut.
"They should cut the rating by at least one level to AA+," as the level of U.S. debt is too high compared to the nation's gross domestic product, he said.
Moody's Investors Service, Standard & Poor's and Fitch Ratings have all warned they may downgrade their AAA credit rating of U.S. Treasurys as Democrats and Republicans wrangle over raising the $14.29 trillion federal debt ceiling.
Peng, who worked at China Investment Corp.'s asset allocation and strategic research department as well as at China's foreign exchange regulator, the State
Administration of Foreign Exchange, said ratings agencies should have cut the ratings for the U.S. long ago.
"There shouldn't be a default though," he said. "Reasonable politicians should
be able to avoid this."- 2:09 am
- Asian Currencies Scale New Heights
- by Martin Vaughan
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Asian currencies soared to new highs against the dollar Wednesday, as investors showed the greenback no mercy on increasing expectations the U.S. will lose its triple-A credit rating.
The U.S. currency fell to ¥77.78 against the yen, its lowest since the post World War II-low of ¥76.25 marked in March. Japan Finance Minister Yoshihiko Noda reiterated that he will continue to closely monitor the market.
Central banks in Thailand and South Korea for a second straight day intervened to keep their currencies from rising too quickly and damaging their export-dependent economies.
Wednesday's gains extended a months-long trend of investors piling into Asian currencies and out of currencies like the dollar and euro, which are burdened by seemingly intractable fiscal problems.- 2:39 am
- European Stocks To Start On The Back Foot
- by Andrea Tryphonides
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European stocks are expected to start modestly lower with investors still reluctant to put any money on the table until there is clarity over the debt situation in the U.S.
Chris Weston, institutional trader at IG Markets, has called all the main indexes to start 0.2% lower: London's FTSE 100 down 10 points at 5920, Frankfurt's DAX down 17 at 7,332 and Paris' CAC-40 down seven at 3,781. The Dow Jones Industrial Average forward futures contract was up 21 points at 12,453 at 6 a.m. GMT.
Weston said, "The political spat continues and as a result the expectation is negotiations will be ongoing into next week, right up to that August 2 deadline. With this backdrop it seems unlikely we're going to see much activity in the markets. Safe haven assets will continue to gain in popularity."
This flight to safety could certainly be seen in the continuing rise in the price of gold. At 6:05 a.m. GMT, spot gold was at $1.623.70 per troy ounce, up $3.40
from its New York settlement Tuesday.- 3:40 am
- Singapore Dollar Rises To Fresh Record
- by Gaurav Raghuvanshi
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The Singapore dollar rose to a fresh record against the U.S. dollar on Wednesday as the markets remained jittery over the fiscal standing of the world's biggest economy.
The U.S. dollar fell below a critical support level to be quoted as low as S$1.1992 early in Asian trade and was hovering just above S$1.2000 for most of the day as the markets weighed the possibility of a downgrade of U.S.'s triple-A sovereign debt rating, held for nearly a century, as negotiations on raising the nation's debt ceiling remain stalled.- 4:06 am
- Spot Gold Hits New High
- by Francesca Freeman
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Spot gold hit a fresh record high of $1,625.54 a troy ounce in Europe Wednesday as the debt ceiling debate in the U.S. rattled on, heightening the risk of both a credit default and ratings downgrade in the world's largest economy.
Further gains are expected in gold in coming sessions, with analysts tipping a rise to $1,650 an ounce as investors increasingly seek to diversify into tangible assets as confidence in paper currencies ebbs.- 4:43 am
- BofA-ML: Default Risk Starting to be Priced in
- by Isabella Steger
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From a note from Bank of America-Merrill Lynch:
Although the market had completely discounted [a default scenario] until a few days back, we are now seeing some probability of this being priced in. Aug 4 bills (the first Treasury maturity after the Aug 2 drop-dead date) have cheapened nearly 4bp to July 28 bills, indicating some risk that the Treasury may postpone this payment. Furthermore, the U.S. CDS curve has inverted for the first time, with 1-year CDS spreads trading nearly 20bp higher than 5-year CDS spreads. Although not a very liquid product, we see this as indicating that the market is pricing in a small probability of a postponed payment.- 5:30 am
- Ruble Hits Two-Year High on U.S. Default Fears
- by Ira Iosebashvili
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Worries over a U.S. debt default drove the ruble to its highest level since late 2008 against a euro-dollar basket Wednesday, despite market players predicting the Russian currency's rally may be a short one.
The ruble has gained on the U.S. dollar over the past few days as Republicans and Democrats remain in stalemate in Washington.
"Everybody believes they are going to raise the debt ceiling in the U.S., but they are still moving money out of the dollar just in case. This will go on for a while longer," said Alexei Borichev, a trader at ING Groep NV in London.
Russia's currency rose 0.3% against the basket to trade at 32.98, a level not seen since December 2008. The central bank's currency basket is comprised of 45% euro and 55% dollars.
The ruble firmed against the dollar by 0.2% to 27.45, its strongest reading since May 5 and within 29 kopecks of breaking the year's highest levels.
Traders said end-of-month corporate tax payments, during which exporters sell dollars and euro and buy the local currency, have also been contributing to the ruble's strength.- 7:19 am
- Dollar Remains Under Pressure
- by Siva Sithraputhran
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The U.S. debt-ceiling impasse continues to weigh on the dollar, despite renewed concerns over the euro after German Finance Minister Wolfgang Schauble that the euro zone's debt woes are far from over.
Many traders still predict a last-minute breakthrough, but markets remain nervous and RBS currency strategist Paul Robson said he'd advise selling the dollar against the yen and Swiss franc.
While all three are considered safe havens, the latter two are seen as more bankable in the current circumstances and both notched good gains Wednesday.
A host of other currencies were also up against the greenback, with the Singapore, Australian and New Zealand dollars all hitting record peaks during Asian hours and not straying too far since.
The euro was recently at $1.4468 from $1.4511 late Tuesday in New York- 7:30 am
- U.S. Must End Debt Stalemate, France Budget Minister Says
- by William Horobin
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The French government Wednesday urged the U.S. to find a solution to the debt ceiling debate as the impasse threatens the world economy.
"We think the global economy needs an American agreement. An agreement must be found in the U.S. on this question, both on American debt and also on the recovery of American public finances," French government spokeswoman and budget minister Valerie Pecresse said after the weekly meeting of the French cabinet.
Ms. Pecresse compared the situation in the U.S. to France, where President Nicolas Sarkozy is trying to overcome opposition to constitutional change to write a fiscal rule into the constitution.- 7:40 am
- Crude Futures Lower as Investors Wait for Debt Solution
- by Sarah Kent
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Crude futures are lower in range trade, as investors are pulling back from the market while they wait for U.S. lawmakers to reach an agreement on the debt ceiling.
"We think the short-term outlook is 'more of the same'," said MF Global in a note. "We would advise the sidelines for the moment, as in this type of environment, prices can swing abruptly, particularly on news of an accord," it added.
The front-month September Brent contract on London's ICE futures exchange was 20 cents, or 0.2%, lower at $118.28 a barrel. The front-month September contract on the New York Mercantile Exchange was trading down 48 cents, or 0.5%, at $99.11 per barrel.
President Barack Obama has warned that if the U.S. does default, it could push the country into a "deep economic crisis" and the three main ratings agencies have said they would cut the U.S.'s triple-A credit rating. Standard & Poor's has said it could do so even before Aug. 2.
This would likely have a significant negative impact on demand in the world's largest oil consumer and could further widen the price gap between Brent and WTI.
The spread between Brent and WTI prices has been in the spotlight in recent months due to its atypical trading pattern. Historically, Brent has traded at a small discount to WTI, but since the beginning of the year it has risen to a premium of as much as $23 a barrel above its U.S. counterpart.
"Since the focus here is on the U.S., WTI is likely to be affected the most, which could mean the spread between WTI and Brent continuing to widen over the next few days," Commerzbank said in a note.- 8:03 am
- Gold Rises to Record High
- by Francesca Freeman
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Gold has notched another record high, as investors have turned to the traditional safe haven amid heightened risk of both a credit default and ratings downgrade in the U.S.
The price of spot gold peaked at a new high of $1,625.54 a troy ounce, marking yet another record after a month of almost uninterrupted gains.
Whether or not the U.S. borrowing limit is raised in time for the Aug. 2 deadline and a default is avoided, analysts said gold prices will likely hover not far off their current levels.
Mitsubishi analyst Matthew Turner said while a debt agreement before the deadline could soften gold prices initially as risk appetite improves and the dollar gains, losses would likely be tempered by cynicism among market players over the deal's durability.
"In the case of a resolution, I think we will see prices come down, but not as much as if we hadn't had this political wrangling in the first place," he said. "People are concerned whether this kind of situation could come back further down the line."
On the flip side, a failure by Congress to agree on a plan would probably boost the appeal of gold, particularly since U.S. treasuries--another traditional safe haven asset--would further lose their shine, said market players.- 8:25 am
- Companies Bracing for U.S. Default
- by Kate Linebaugh and Vipal Monga
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While companies generally expect Washington to resolve the debt-ceiling impasse at the last moment, they are lining up extra sources of financing, and carefully husbanding cash just in case a deal falls through.
All the uncertainty comes just as businesses were starting to spend some of their record piles of cash. The confusion is also giving them another reason to delay hiring and investment. Read more from today's Journal.- 8:53 am
- For Obama, Golden Opportunity Is Fading
- by Jonathan Weisman
- Add a Comment
A debt-ceiling showdown that offered President Barack Obama a chance to seize the initiative—and buoy his re-election bid—has devolved into partisan finger-pointing, leaving the president to marshal public opinion rather than broker the grand compromise he sought.
Democratic officials say they understand that a default-driven economic crisis would downgrade not only the nation's bond rating but also Mr. Obama's re-election prospects. Ultimately, it may not matter exactly whom the public blames for a default. If fiscal chaos at the top further damages the economy, many Democrats acknowledge, the president stands to lose. Read more from today's Journal.- 9:14 am
- Breaking
- Add a Comment
New CBO report says Sen. Reid's plan cuts deficit by $2.2 trillion over 10 years. The plan had proposed $2.7 trillion. More to come. UPDATE: Here is the link to the article.- 9:28 am
- Shiller, Seigel Debate the Debt Mess
- by E.S. Browning
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How can we fix the debt mess? Economist Jeremy Siegel would cut Medicare spending sharply without raising any taxes, but his old friend Robert Shiller argues that government spending actually needs to rise -- and that taxes should rise with it.
“The great problem with debt is Medicare, long-term,” says Prof. Siegel, who adds that a significant cutback in Medicare spending is inevitable. Says Prof. Shiller: “I have the most politically unpopular idea. ... My proposal, it sounds awful: tax and spend.”
Watch this video of the two old friends debating the issue, or read more in MarketBeat.- 9:51 am
- Democrats' Budget Cuts Fall Short of Estimate
- by Kristina Peterson
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Congress's official budget scorekeeper on Wednesday said a budget plan put forth by Senate Democrats would cut the deficit by about $2.2 trillion over 10 years, short of the reduction the party had thought it would generate.
The Congressional Budget Office analysis of the plan authored by Senate Majority Leader Harry Reid (D., Nev.) would provide $500 billion less in deficit reduction than the $2.7 trillion Democratic lawmakers had said it would save over 10 years.
Late Tuesday, the CBO said a plan advanced by House Speaker John Boehner (R., Ohio) would reduce the deficit by $850 billion, $350 billion short of its target of $1.2 trillion in spending cuts in the plan's first phase. The shortfall led Mr. Boehner to postpone a scheduled vote on this proposal, which also would raise the debt ceiling by $900 billion. Read more.- 10:00 am
- Stocks Open With a Loss
- by Jonathan Cheng
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The U.S. dollar was mixed, rising against the euro but declining against the yen. Gold futures rose to about $1625 an ounce, after settling Tuesday at a record high on the New York Mercantile Exchange. Crude-oil futures fell to about $98.28 a barrel.
(Photo: Getty Images)- 10:11 am
- Looking to Plan B -- or Not
- by Joseph B. White
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So is there a Plan B?
White House spokesman Jay Carney said Tuesday that the administration is “working on a plan B” to avert a default if Congress fails to deliver a bill lifting the debt ceiling that President Barack Obama will sign.
Wednesday morning, NPR aired an interview with White House Chief of Staff William Daley in which Mr. Daley tells NPR Morning Edition Host Steve Inskeep that he has “no idea what Plan B is.”
Inskeep: “So is the president powerless in this situation?"
A House vote is now delayed until Thursday. The deadline set by the administration is Tuesday.
Daley: “The Congress has the power to act. They have the obligation to act. The president cannot usurp the power that’s in the Congress. So it’s up to the Congress to live up to their obligation and act, and we expect they will.”- 10:31 am
- Doing the Math on Boehner Plan's Odds
- by Corey Boles and Naftali Bendavid
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Here’s why the numbers matter: Without any Democratic support, Mr. Boehner (R., Ohio) can only afford to lose 22 Republican votes for his plan to pass the House. And House Minority Whip Steny Hoyer (D., Md.) said "very few" Democratic representatives would back the Boehner plan, scheduled for a vote Thursday.
Rep. Jim Jordan (R., Ohio), the chairman of the Republican Study Committee, said Tuesday there weren’t 218 House Republicans to vote for Rep. Boehner’s plan, which would lift the debt ceiling and cut the deficit by $3 trillion in two stages over the next six months.
The list of House Republican congressmen who say they will oppose Mr. Boehner’s plan:
Todd Aikin, (R., Mo.); Michele Bachmann, (R., Minn.); Paul Broun, (R., Ga.); Jason Chaffetz, (R., Utah); Jeff Flake, (R., Ariz.); Chuck Fleischmann, (R., Tenn.); Phil Gingrey, (R., Ga.) ; Louie Gohmert, (R., Texas); Tom Graves, (R., Ga.); Tim Huelskamp, ( R., Kan.); Jim Jordan, (R., Ohio); Connie Mack, ( R., Fla.); Rep. Ron Paul (R., Tex.); Steve Southerland. (R., Fla.); and Rep. Joe Walsh, (R., Ill.).
(Photo: Getty Images)- 10:59 am
- McConnell Endorses Boehner Proposal
- by Siobhan Hughes
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"I'd like to reiterate my very strong support for Speaker Boehner, the House Republican leadership and this plan to prevent default and reduce Washington spending," Sen. Mitch McConnell (R., Ky.) said on the Senate floor. "The nation's had a chance to see the Speaker at his best over the past few days." Read more.
(Photo: European Pressphoto Agency)- 11:16 am
- CBO Letters to Congress
- by Joseph B. White and Kristina Peterson
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The Congressional Budget Office letters to Sen. Reid and Mr. Boehner.- 11:22 am
- Bipartisan Disgust for Rating Agencies
- by Mark Gongloff
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There are no juicy headlines yet out of the House Financial Services subcommittee hearing on the credit-rating agencies this morning, but the agencies are already feeling plenty of bipartisan ire for their threats to downgrade the U.S.
Continue reading at MarketBeat.- 11:39 am
- Pentagon to Contractors: Form a Line
- by Nathan Hodge
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If the government runs low on cash, who's first to get a check from Uncle Sam? According to a top Pentagon procurement official, defense companies, like other government contractors, may have to start forming a line.
Richard Ginman, the director of defense procurement and acquisition policy, told reporters at a breakfast this morning in Washington that if the government can’t borrow money, it will be the Treasury Department and the White House Office of Management and Budget that will determine the sequence for paying the bills as revenue comes in.
"We have the money, we'll have the bill, it will go into a line. How that's chosen to be done is not a Department of Defense call," he said.
Mr. Ginman likened the situation to a private individual waiting for a paycheck. “As [government] receipts come in, it would be akin to having a checkbook, and you're waiting to get your next paycheck, and you have three bills, and you can’t pay them all, you’re going to pick which ones you are going to pay,” he said.
And in the case of the Department of Defense, the bills would pile up quickly. In the 2010 fiscal year, the Pentagon spent around $200 billion on service contracts, and around $160 billion on supplies, equipment and weapons. What's more, the department is subject to the prompt payment rule, which imposes late fees on federal agencies that don’t pay in a timely fashion.
Mr. Ginman said he could not disclose any of the internal discussions of how the Pentagon would handle a potential default situation, or what kind of guidance it might provide to its contractors.
"I’m really not at liberty to go into details into what are we doing inside the department," he said. "It’s all predecisional what we would say or not say."- 12:00 pm
- Washington Parnterships' Theme Songs
- by Laura Meckler and Neil King Jr.
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Today’s Wall Street Journal features a look at the relationship issues between the major players in the debt crisis. Debt blog offers a bonus: Theme songs for some of Washington’s unlikely partners. Your suggestions welcome.
Frenemies: House Speaker John Boehner & House Majority Leader Eric Cantor (R., Va.)
Relationship issues: Cantor courts the tea-party crowd that’s leery of the speaker.
Theme song: Johnny Cash’s "Ring of Fire"
Co-Dependents: Senate Minority Leader Mitch McConnell (R., Ky.) & House Speaker John Boehner
Relationship issues: Boehner had dumped on McConnell’s Plan B for solving the debt-limit crisis, but now Sen. McConnell is expressing support for the Speaker's embattled proposal.
Theme song: Modern English's "I Melt with You"
Old Warhorses: Vice President Joe Biden & Senate Minority Leader Mitch McConnell
Relationship issues: McConnell has said his top goal is to ensure Obama—and Biden—are defeated.
Theme song: The Who's "Won’t Get Fooled Again"
The Odd Couple: Senate Majority Leader Harry Reid (D., Nev.) & Senate Minority Leader Mitch McConnell
Relationship issues: They talk to each other nearly every day the Senate is in session. But they also bash each other nearly every day the Senate is in session.
Theme song: Cee Lo Green's "Forget You"
Campus Rivals: Senate Majority Leader Harry Reid & House Speaker John Boehner
Relationship issues: When they're out in public, they trash each other. But some day, they'll have to make a deal.
Theme Song: The Beatles: "Come Together"
It's Complicated: President Barack Obama & House Speaker John Boehner
Relationship issues: They can't get past the tax thing.
Theme song: Neil Sedaka's "Breaking Up is Hard to Do"- 12:07 pm
- Boehner Gaining Ground
- by Naftali Bendavid
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Several Republicans emerged from a closed-door meeting of House Republicans this morning saying they believe momentum has shifted toward Speaker John Boehner’s revised debt plan.
Rep. Jim Jordan (R., Ohio), a conservative leader, had said Tuesday morning he was “confident” the Boehner bill would fail. Today, Mr. Jordan declined to repeat that assertion. “I don’t know where the votes are today,” Mr. Jordan said after this morning’s session. “ I just know that I’m against the bill.”
Conservative opposition to Mr. Boehner’s plan built on Tuesday, and late in the day the Congressional Budget Office struck another blow with a report saying the plan’s initial spending cuts amounted to $850 billion, not $1.2 trillion as advertised. That forced GOP leaders to postpone a vote from Wednesday to Thursday. Mr. Boehner is using the time to craft a bill more to conservatives’ liking; details will be available later today.
In the meeting, Mr. Boehner argued to his fellow Republicans that his bill was the best remaining alternative, and that House Republicans control only one-half of one-third of the government. He and Rep. Paul Ryan (R., Wisc.) said one reason the CBO did not credit the Boehner plan with more cuts is that so many cuts had already been made in an earlier 2011 spending bill.
Rep. Blake Farenthold (R., Texas) suggested he’d been leaning against the Speaker’s plan but was now leaning toward supporting it.
“They’re working real hard to get the message out,” he said.
But not everyone was persuaded. Rep. Trey Gowdy (R., S.C.), who had been leaning against the bill, said he still feels that way.
“I’ve got to vote the collective conscience of my constituents,” Mr. Gowdy said.- 12:15 pm
- AAA vs.AA
- by Victoria McGrane
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The Third Way, a moderate think tank in Washington, D.C., today sent a one-page chart to lawmakers on Capitol Hill as well as to the White House that compares interest rates being paid by countries that enjoy triple-A ratings (Australia, Canada, Norway) with those being paid by countries with double-A ratings (Abu Dhabi, Chile, Belgium) to highlight the potential consequences of a downgrade.
The difference in yield in a 10-year note from these two camps is about 0.75 percentage points, according to the chart’s math. The higher the yield on a country’s debt, the higher interest rate that country is paying, and some analysts say the United States could pay as much as $100 billion more a year in interest on its debt if ratings firms decide to downgrade it.- 12:25 pm
- Boehner's Plan Loses a Supporter
- by Corey Boles and Naftali Bendavid
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Thanks to Rep. Mick Mulvaney (R., S.C.), we now count 16 House Republicans as publicly opposing House Speaker John Boehner’s plan to raise the debt ceiling and reduce the deficit.- 12:27 pm
- Hatch Presses Treasury on Fallback Plans
- by Damian Paletta
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Sen. Orrin G. Hatch, the ranking Republican on the Senate Finance Committee, sent a letter to members of the Financial Stability Oversight Council asking them to detail what contingency plans the government had to generate cash if the debt ceiling isn’t raised by Aug. 2.
Mr. Hatch also asked what contingency plans financial regulators had, including regulatory forbearance in the event of a ratings downgrade, as well as the contingency plans held by the Federal Reserve if a money market fund was to "break the buck." He said he wants answers by Thursday at 5 p.m.
His letter also pressed the Treasury for an update on the government's fiscal position, asking for a new tally of receipts and expenditures through July 27.
"Unfortunately, Congress and the American people do not have sufficient information about Treasury’s actual and projected revenues, expenditures, and cash flows to make informed judgments," the letter said. "Many Americans and members of Congress are, unfortunately, relying on estimates and projections from either large Wall Street financial institutions or non-governmental organizations often labeled 'think tanks.' The lack of information is unsatisfactory."
Treasury’s daily cash and debt statement can be found online here.- 12:47 pm
- Details of the Debt Plans
- by Jonathan Weisman
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House Speaker John Boehner (R., Ohio) and Senate Majority Leader Harry Reid (D., Nev.) have competing plans to raise the nation’s statutory borrowing limit and begin chipping away at the federal budget deficit, but beyond a few chosen losers – graduate students and farmers, the people and programs that would bear the pain of the plans wouldn't be known until well after they are passed.
That is because the fine print for meeting the cuts would be written by the congressional appropriations committees long after a final deal is reached.
Under Mr. Boehner’s initial plan, over the next decade, federal spending would fall $850 billion compared to where it would be if current spending simply increases with inflation, according to the Congressional Budget Office. Under Mr. Reid’s plan, deficits would be shaved by $2.2 trillion between 2012 and 2021. Mr. Boehner wants another $1.8 trillion in savings to be decided upon next year by a bipartisan congressional committee. Mr. Boehner is revising his plan to increase the savings.
From what we know now, however, most of those savings would come from a statutory cap on spending that is subject to Congress’s annual spending bills. Mr. Boehner would set the cap at $1.043 trillion for the fiscal year that begins in October, compared to the $1.266 trillion in spending CBO anticipates for fiscal 2012. Mr. Reid’s FY2012 cap is slightly higher, at $1.045 trillion. In 2021, Mr. Boehner would cap spending at $1.234 trillion, $331 billion less than what CBO expects the government would spend otherwise. Mr. Reid’s 2021 cap, at $1.228 trillion is slightly tougher, saving $337 billion.
Both plans single out graduate students for a hit. Grad students would lose their subsidized student loans, saving the government $21.6 billion over 10 years. Student-loan-repayment incentives would also be severely curtailed, for another $3.6 billion in savings. And Pell grants would get small increases.
Both plans would also exempt from the spending caps spending increases to police entitlement programs for waste, fraud and abuse. The CBO says such “program integrity” spending would cut spending on disability insurance, Medicare, Medicaid and supplemental income payments by $12 billion through 2021 under the Boehner plan. The Reid plan would see more savings, $13.7 billion, because it allows for more enforcement spending.
That is where Messrs. Reid and Boehner part company.
CBO also says a separate spending increase for health-care fraud efforts in the Reid plan would yield $2.8 billion in savings from Medicare, Medicaid and the children’s health-insurance program. Mr. Reid also bumps up spending for the Internal Revenue Service’s tax collectors, yielding $42 billion in extra taxes through 2021.
Mr. Reid’s plan also includes an electromagnetic spectrum auction, which would reap $13.1 billion, and it reduces payments to farmers by limiting the acreage eligible for subsidies. That adds another $11.1 billion to the savings total.- 12:56 pm
- S&P President: Analysts Don't Expect U.S. Default
- Add a Comment
S&P President Deven Sharma tells a congressional committee analysts don’t expect a U.S. default, won’t comment on U.S. debt plans. Sharma: “The more important issue is the long term growth rate of the debt.” He’s testifying now at a hearing ostensibly on the credit rating agencies’ role in the subprime mortgage market collapse.- 1:11 pm
- Lessons From Lehman
- by Kate Linebaugh and Ronald Fink
- Add a Comment
Toolmaker Snap-On Inc. said it has more buffers in place than it did during the 2008-2009 market turmoil. For instance, the Kenosha-Wis.-based company has a $500 million revolving credit line that it hasn’t tapped, and it has another $100 million asset-backed facility in place that it could use if needed.
“Companies have put items in place to eliminate the risk of short-term volatility,” Snap-On Chief Financial Officer Aldo Pagliari said.
For one, they’re carrying more cash, Mr. Pagliari said. They’re also relying less on the commercial paper market to sate their short-term cash needs, a market that was in heavy use when the Lehman bankruptcy filing caused it to seize up.
Freescale Semiconductor Chief Financial Officer Alan Campbell said failure to reach agreement on raising the debt ceiling “could create a loss of confidence in the general macro environment" not unlike that seen during the financial crisis.
But he says the company decided “to take a much deeper cut" at reducing its overall risk than it strictly needed to when it restructured the business in 2009. By cutting costs, Freescale has reduced its breakeven point to $4 billion in revenue from $5 billion.
He also said the company has capitalized on attractive interest rates when refinancing its debt. And, he adds, "Our interest is fixed, so if we saw Libor moving, it wouldn’t have much effect on us."
(Photo: Getty Images)- 1:41 pm
- Opposition Emails Anger Lawmakers
- by Patrick O’Connor
- Add a Comment
But his staff’s tactics caused a stir Wednesday.
When GOP lawmakers huddled behind closed doors in the Capitol basement, several conservative Republicans rose to complain that study committee aides had sent emails to conservative groups in an attempt to pressure the GOP lawmakers to oppose Rep. Boehner’s plan. Among the groups that received emails were the Club for Growth and the Heritage Foundation.
The Republican Study Committee members complained that staff whose salaries they pay are working against them.
“It is inappropriate to use my dues to solicit outside organizations to put pressure on me,” freshman Texas Rep. Bill Flores said as he left the meeting.
“I am just as fiscally conservative as anybody in the Republican conference and just as conservative as anybody in the (committee),” he said, “and it is highly offensive to have somebody try to hide behind an outside group to try to persuade me to vote a certain way. I’m accountable to my constituents, not the outside groups.”
The fissure comes as Mr. Jordan seeks to stir conservative opposition to a deficit-reduction package offered this week by Mr. Boehner that seeks to raise the country’s borrowing limit in two steps and match the increase with corresponding spending cuts.
Mr. Flores was joined in his complaints by a pair of fellow freshmen, North Carolina Rep. Renee Ellmers and Indiana Rep. Todd Young. At one point in the closed-door meeting, Oregon Rep. Greg Walden, a member of the elected leadership team, read a copy of one email sent by the staff and asked the staff member to answer for its substance, people present said afterward. The aide declined.
Mr. Jordan apologized to the group Wednesday morning and said afterward that he had no idea his staff sent the emails to outside groups.
“I apologized,” he said afterward. “I said that’s not appropriate.”
The group is discussing the matter at a previously scheduled meeting this afternoon.
(Photo: Getty Images)- 1:49 pm
- Banks Await Regulatory Guidance
- by Matthias Rieker
- Add a Comment
One bank spokesman called the potential default of the U.S. government, or potential downgrade of Treasurys from triple-A, "a beast."
Money-market liquidity and counter-party risk, along with interest-rate risk, are the biggest challenges banks face, requiring them to adjust their risk management.
So what are regulators telling banks to do? Just to stay tuned.
"We expect to be able to give additional guidance to financial institutions when there is greater clarity from the Congress and when Treasury outlines its specific operational plans," the Fed said.- 1:55 pm
- Aug. 4 T-Bills Selling Off
- by Mark Gongloff
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The yield on Aug. 4 T-bills has jumped to nearly 0.12%, , more than doubling this morning, in a sign of anxiety about a looming Debtpocalypse.
That’s roughly the same yield as a 6-month bill, according to this table from TradeWeb. It’s hardly a shockingly high yield, but it could be a sign the market is starting to price in just a smidgen of anxiety about a short-term default. (The “Mty” columns in this chart show the maturities of various bills, in month/day format. The “yield” column is the bid/ask yield.)
Interestingly, the bill maturing on Aug. 2 yields nearly nothing — the market apparently doesn’t expect Debtpocalypse that day.- 2:12 pm
- Debt Fight Spreads to Foreign Aid Budget
- by Joseph B. White
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There are more than three rings in the Washington debt circus. One of the more contentious sideshows: The scrum over funding American diplomacy.
The short story: Looking to cut the budget wherever possible, Republicans are pushing to slash the budget for the State Department and related agencies, including the U.S. Agency for International Development. Democrats are pushing back.
In a way, the fight over foreign-affairs funding is purely political theater—the Republican proposals are dead-letters in the Senate, and Democratic counter-proposals will get no traction in the lower house. But more broadly, the fight underscores a long-standing ideological divide between those who think the U.S. already spends too much on diplomacy and other forms of soft power and those who think U.S. diplomacy has already been pared to the bone.
Last week, the House Foreign Affairs Committee passed a bill out of committee that would sharply cut U.S. funding to a spate of foreign countries and international organizations, including the United Nations.
That prompted an immediate rejoinder from across the aisle—California Democrat Howard Berman called it a Republican "tantrum"—while Secretary of State Hillary Clinton called the proposed bill "debilitating" to U.S. foreign policy, especially at a time of upheaval across the Middle East.
Yesterday, the House Appropriations Committee introduced its own legislation that would cut funding for the State Department and foreign operations by 18% compared to last year’s bill and even more compared to President Obama's budget request. Today, Senate Foreign Relations Committee chair John Kerry (D-MA) introduced his own bill that would fully fund State and foreign operations.
The back-and-forth over foreign aid isn’t a huge deal in monetary terms: the trimmed-down Republican funding proposal would provide State with about $40 billion, down from about $48 billion last year. Either number is less than one-tenth of the Pentagon’s annual budget. (Speaking of size: There are more musicians in military bands than there are U.S. diplomats.)
But it does highlight a couple of enduring misconceptions about the weight and role of U.S. diplomacy. U.S. voters consistently and erroneously believe that foreign aid is a huge part of the budget—and thus a prime target during the debt talks. In a Gallup poll earlier this year, foreign aid was the number-one preferred target for cuts. But people vastly overstate the size of the foreign-aid budget: In a different poll late last year, respondents said foreign aid totaled 27% of the budget (try 1%, actually).
Another beef is that foreign-assistance programs don’t help advance U.S. security goals in the same way that “hard power” programs like defense do. While programs like U.S. AID have plenty of critics, you won’t find many among the folks who actually fought the bad guys on the ground.- 2:23 pm
- Capital One Altered Plans Amid Debt Deadlines
- by Matthias Rieker
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Capital One Financial Corp. said it accelerated stock and bond issues and an earnings report to avoid potential turbulence involving the U.S. government debt ceiling.
Overall, big banks have said little about how they are preparing for fallout from the debt-ceiling impasse—beyond saying they are monitoring the situation.
However, Capital One's finance chief in an interview said that the bank wanted to ensure it didn't need the capital markets around the time the U.S. debt would hit its legal ceiling, which is expected to happen Aug. 2. Read more.- 2:37 pm
- Herman Cain Shows Sympathy for House Speaker
- by Katie Glueck
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"Those are simply exaggerated scare tactics," said Mr. Cain, the former CEO of Godfather's Pizza. "We've got enough money in the Treasury to pay the interest on the debt, pay our soldiers and their families, pay the Social Security receipts and to pay Medicare and Medicaid. You put everything else on the table.”
The Treasury says that the Aug. 2 deadline is real and that failure to raise the debt ceiling by then will mean the federal government won’t be able to pay all its bills, prompting "catastrophic" economic consequences.
Mr. Cain's comments matched the outlook of many tea party activists. He voiced opposition to raising the debt ceiling and called for the passage of a balanced budget amendment to the Constitution.
But he broke with some of the more conservative members of the movement when he expressed sympathy for House Speaker John Boehner (R., Ohio), who has been struggling to hold the House GOP conference together behind a plan to raise the debt ceiling.
"I think he’s got one of the toughest jobs in Washington, D.C.," Mr. Cain said. "One of the things that has contributed to some of the confusion is that Republicans weren't all on the same page from the beginning. If they had shown solidarity, I think they would have done a better job."- 2:49 pm
- Tea Party Activist: 'Maybe We Should See About a Different Speaker'
- by Katie Glueck
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Conservatives criticized the "Reid, Pelosi, Obama" government in the last election, but some tea party movement leaders were grumbling today that House Speaker John Boehner (R., Ohio) is veering too close to the policies of his Democratic counterparts.
Jenny Beth Martin and Mark Meckler,the co-founders of America's largest Tea Party group, criticized Mr. Boehner's approach to negotiations on the debt ceiling at a breakfast in Washington Wednesday. While the organization, Tea Party Patriots, hasn't polled its members to ask whether Mr. Boehner should be unseated, it's a subject that comes up and should be addressed, Ms. Martin said.
"Many members are unsatisfied with Boehner," Ms. Martin said. "People are bringing this up to us. Maybe we should see about a different Speaker."
Mr. Meckler said that earlier this month, 51 local Tea Party groups in Ohio sent a letter to Mr. Boehner urging him to take a firm stance on cutting spending.- 3:00 pm
- Downplaying a U.S. Ratings Downgrade
- by Phil Izzo
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Standard & Poor's has said that it may drop the U.S.'s triple-A credit rating to double-A even if the country raises the debt ceiling and manages to avoid default. S&P is looking for the U.S. to make big structural changes to get its long-run debt in order, and despite some discussion between President Barack Obama and House Speaker John Boehner earlier in the debt-ceiling debate, a broad plan looks dead in the water.
That has made a downgrade look likely and has sparked a debate on what effect such an action would have. Moderate think tank Third Way put out a report comparing interest rates in countries that have a triple-A rating with those that have a double-A. The report notes that moving from the neighborhood of Germany, Canada and Hong Kong to the less upscale burg populated by Spain, Japan and Chile could add 0.75 percentage point to bond yields. And some analysts say that could result in the U.S. paying as much as $100 billion more a year in interest on its debt if ratings firms decide to downgrade.
Many others are downplaying the effect of a downgrade. AllianceBernstein wrote in a note that markets aren’t particularly spooked right now, and there isn’t much evidence that a downgrade brings anything new to the table. Read more.
- 3:13 pm
- Hill Documents Reveal Identify of S & P Officials
- by Damian Paletta
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Documents obtained by the House Financial Services Oversight Subcommittee appear to have unearthed the identify of four officials who are on the Standard & Poor’s sovereign ratings committee that will determine whether to downgrade U.S. government debt from a AAA to a AA+ in the near future.
The identify of people on this committee is usually a closely held secret.
But in an April 11 email to Treasury Department officials, John Chambers – S & P's chairman of its sovereign ratings committee – said that he would be joined by three other S & P officials , David Beers, Nikola Swann, and Marie Cavanaugh for a meeting at Treasury. Mr. Chambers says they "are all members of the committee."
Mr. Beers is the managing director of sovereign international public finance ratings. Ms. Swan is the primary S & P analyst for the U.S. Ms. Cavanaugh is a top managing director at S & P.
An S & P spokesman declined to comment.
It is unlikely they are the only ones on the committee that will determine whether to downgrade U.S. debt. These committees usually have between five and nine members.
S & P has been the most aggressive of the credit rating agencies in warning that it could downgrade U.S. debt if a major package isn’t agreed to soon that would reduce the trajectory of future deficits. It has said such a downgrade could come as soon as early August.
The emails between Treasury and S & P includes a number of questions about the history of S and P’s ratings of U.S. government debt, as well as attempts to schedule meetings and conference calls to discuss both the Obama administration’s deficit reduction plans and S & P’s views on the matter.- 3:29 pm
- Ominous Sign? Stocks Down for a Fourth Day
- by Joseph B. White
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Stocks are down sharply today and headed toward a fourth straight day of losses barring a late session rally. As of 3:14 p.m, the Dow Jones Industrial Average is down 1.4%, the Nasdaq is off 2.49% and the S&P 500 has slumped 1.9% since today's opening bell.
Since last Friday, the Dow is now off more than 400 points, or about 3% since Friday. Lehman Monday? No. An ominous sign? Could be.
Among the factors blamed for the accelerated selling: The Congressional Budget Office reports rapping both the House Republican and Senate Democratic deficit cutting plans for overstating their actual savings. Weak durable goods orders didn’t help, either. Read more.- 3:43 pm
- Investors Hunt AAA Gold
- Add a Comment
Over on the Source blog, David Cottle writes that with Treasurys' risk-free status under threat, there’s a global hunt for the elusive "solid AAA" rating:
Even if the capital markets' nervous prayers are answered, and the U.S. Congress stitches together a timely deal to raise the Federal debt ceiling, a clear threat to the country’s gold-standard credit rating will remain.
Read more at the Source blog.
So, with the 'risk-free' status of the Treasury bond under threat, it’s no wonder that investors are casting around in the pool of other triple-A rated sovereigns for alternatives. However, away from T-bonds' 'deep end,' it's a pool that gets very shallow, very fast.- 3:54 pm
- Video: Political Gridlock Puts Economy at Risk
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Alan Blinder, a professor of economics at Princeton University and a former Fed vice-chairman, tells the WSJ's E.S. Browning that the U.S. is shooting itself in the foot with respect to the debate over debt reduction.
Even considering default is a "ridiculous debate" that could lead to a downgrade of U.S. debt, he said. Watch the video.- 4:19 pm
- Carney: No "Off Ramps"
- by Joseph B. White
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Asked whether Wall Street analysts are right that the Treasury could delay an outright default past Aug. 2, Mr. Carney declared the date "hard and fast."
"There are no off-ramps," Mr. Carney said. "People keep looking for off-ramps. They don't exist. OK? What I have said, what everyone has said, is that once we lose our borrowing authority we become at risk of default on our obligations."
Mr. Carney also tried a new tack in his effort to discredit House Speaker John Boehner’s proposal to give the White House only six months of leeway under a new debt cap. If that plan is adopted, Mr. Carney protested, Congress could be re-running the debt ceiling argument during the Christmas season.
"Does anybody think that's a good idea? What kind of impact would that have on the economy? One of the most important seasons in -- of the year for our economy, for anybody who sells anything, right? Let's throw into doubt whether or not the United States is going to go into default around Christmas. Brilliant."- 4:25 pm
- More on the Markets
- by Jonathan Cheng and Rob Wells
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The U.S. stock markets took a hit Wednesday as traders expressed concern about the lack of a debt ceiling and deficit deal. The Dow Jones Industrial Average was down by about 1.56% at 12,302 while the S&P 500 index lost 2.03% and the Nasdaq composite index shed 2.65%, according to preliminary closing figures.
The declines were led by technology and industrial stocks, but market pessimism also grew after the Congressional Budget Office said budget plans put forth by Senate Democrats and House Republicans wouldn't reduce the deficit by as much as promised. That throws the latest round of negotiations over the U.S. debt crisis into question.
"The reality is that that triangle--the House, the Senate and the administration--doesn't seem capable of coming up with a compromise that addresses in a meaningful way the fiscal issues we have here in the U.S.," said Douglas Cliggott, U.S. equity strategist at Credit Suisse Group. "That really does push the probability of a downgrade comfortably over 50%, unfortunately." Read more.- 4:29 pm
- Boehner Appeal to Conservatives: Obama, Pelosi and Reid Hate My Plan
- by Danny Yadron
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Speaker John Boehner made a new argument Wednesday for why conservative House Republicans should support his debt ceiling-increase bill.
"Barack Obama hates it. Harry Reid hates it. Nancy Pelosi hates it," Mr. Boehner said on The Laura Ingraham Show. "Why would Republicans want to be on the side of President Obama, Harry Reid and Nancy Pelosi? Beyond me."
The Republican leader of the House is still trying to persuade the rest of his caucus to support his debt ceiling plan, which is currently being retooled to offer more spending cuts. House leadership is expected to hold a vote on the measure Thursday. As of Wednesday afternoon, 17 Republican House members said they publicly oppose the plan.
As for why conservatives oppose his bill, Mr. Boehner offered the following:
"They want more and, my goodness, I want more too,” he said. "A lot of them believe if we get past Aug. 2 and we have enough chaos, we could force the Senate and the White House to accept a balanced budget amendment. I don't think that strategy works. I think the closer to get Aug. 2 the less leverage we have."- 4:49 pm
- Would a Downgrade Matter?
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The WSJ's David Wessel asks: How much will a U.S. downgrade to AA really matter?
Money market mutual funds won't have to dump Treasurys, he notes, and U.S. banks will not be required to keep bigger capital cushions against U.S. Treasury holdings.
But don't relax yet.
If the U.S. government loses S&P's good-financial-housekeeping seal of approval, one would expect investors to demand higher yields in compensation. If they do, that's expensive. A sustained one-half percentage-point increase in interest rates would add $435 billion to the federal deficit over 10 years and $65 to monthly payments on a $200,000 mortgage.
Some disagree on the effect, reports Wessel. "Still," he notes, "it's hard to grasp a world in which the one security regarded as 'risk-free' is rated lower than the government debt of Austria, Denmark, Finland, the Netherlands and Hong Kong (all AAA.)"
"The ripples from a downgrade are unpredictable." Read the story.- 4:54 pm
- Boehner 'No' Count: 18
- by Corey Boles and Rob Wells
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Add Rep. Dennis Ross (R., Fla.) to the group of House Republicans who would vote "no" on House Speaker John Boehner's plan to raise the debt ceiling and cut the deficit. That brings the count to 18 Republicans who have announced that they will oppose their own leader's budget plan.
Here's why the numbers matter: without any Democratic support, Mr. Boehner (R., Ohio) can only afford to lose 23 Republican votes for his plan to pass the House. Don't expect many Democrats to help out the man from Ohio.
Updated list of House Republicans opposing the Boehner deficit and debt ceiling plan:
Todd Akin, (R., Mo.); Michele Bachmann, (R., Minn.); Paul Broun, (R., Ga.); Jason Chaffetz, (R., Utah); Rep. Jeff Duncan (R., S.C.); Jeff Flake, (R., Ariz.); Chuck Fleischmann, (R., Tenn.); Phil Gingrey, (R., Ga.) ; Louie Gohmert, (R., Texas); Tom Graves, (R., Ga.); Tim Huelskamp, ( R., Kan.); Jim Jordan, (R., Ohio); Connie Mack, ( R., Fla.); Rep. Mick Mulvaney (R.,S.C.); Rep. Ron Paul (R., Tex.); Rep. Dennis Ross (R., Fla.); Steve Southerland. (R., Fla.); and Rep. Joe Walsh, (R., Ill.).- 5:15 pm
- Crisis? What Crisis? On Capitol Hill, There’s Plenty of Time
- by Danny Yadron
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WASHINGTON--Stocks are falling, the dollar is weakening and American companies are starting to hoard cash. But on Capitol Hill, the source of the current debt crisis, some lawmakers appear unfazed.
Laughter and cheers emanated Wednesday morning from a meeting of House Republicans. "There was a lot of levity," Rep. Trent Franks (R., Ariz.) said after the meeting broke up. He declined to say what jokes caused the outburst, other than to say some were "fundamentally hysterical."
With six days until the U.S. faces the threat of default, many lawmakers are refusing to sweat. Those who oppose raising the debt ceiling say the U.S. won't face any real consequences if Congress takes no action. Those who want the debt ceiling raised say the consequences are so dire that Washington will simply have to broker a last-minute deal. But even they say there's time.
Sen. Ben Nelson, a moderate Democrat from Nebraska, said Wednesday he feels lawmakers are "concerned," though not yet at a "level of panic."
As of Wednesday afternoon, 18 House Republicans said publicly they'd oppose the current House plan, which is near the limit of what Mr. Boehner can afford to lose.
Republicans are generally more sanguine than Democrats in part because some, especially in the House, believe disaster won't strike after the debt ceiling is breached.
Rep. Andy Harris, a freshman Republican from Maryland, asked if he's nervous about the looming Aug 2 deadline, replied, "No, no. Tuesday is a long way off."
Some Democrats are reflecting the White House position that failure to act by Aug. 2 could be devastating. "We're in a dangerous place of our own creation," Rep. Peter Welch (D., Vt.) said. "How it will work out, I don't know."
But Democratic veterans, old hands who've seen Congress's last-minute Houdini act before, say the 11th hour hasn't arrived yet.
"Magical things can happen in Congress in a very short time," Senate Majority Leader Harry Reid said at a press conference. Asked when he must get a debt ceiling bill from the House in order to have it passed and signed by the president in time, he responded, "probably soon."
Republicans who want to raise the debt ceiling aren't pulling out their hair, either. Rep. Nan Hayworth (R., N.Y.), who held a meeting last week with 50 lawmakers to explain the dangers of not raising the debt ceiling, was optimistic—relatively.
"We have not had a vote yet," Ms. Hayworth said. "Many momentous things happen in the last hours."
- 6:24 pm
- Boehner Releases Revised Debt Plan
- by Katie Glueck
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The office of House Speaker John Boehner (R., Ohio) just released a summary of the latest draft of Mr. Boehner's plan to reduce spending and boost the debt ceiling early Wednesday evening. The Speaker’s office says the new version was scored by the Congressional Budget Office.
The summary indicates that Mr. Boehner’s new plan will fall short of his original goal of slicing $1.2 trillion from federal spending over 10 years as part of a first phase of cuts. But Mr. Boehner’s office says the new plan will deliver spending cuts that are larger than the debt increase. The earlier plan from Mr. Boehner fell short in that area, generating protest from conservatives in his party.
Among other things, Mr. Boehner’s office says the new bill will:
• Cut and cap spending by $917 billion over 10 years – that’s more than the $900 billion debt hike;
• Cut $22 billion in spending for FY2012 and hold spending below FY2010 levels until FY2016;
• Continue reducing discretionary spending each year compared to President Obama’s budget;
• Require Congress to draft proposals that produce reductions of at least $1.8 trillion. The Speaker’s office says these cuts will “help protect programs like Medicare and Social Security from bankruptcy.”
• The summary concludes by noting that “This bill is far from perfect, but it’s a positive step forward that denies President the $2.4 trillion blank check that lets him continue his spending binge through the next election.”
- 6:37 pm
- OCC Working on Guidance in Case of Default
- by Matthias Rieker and Victoria McGrane
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The Office of the Comptroller of the Currency "is working on guidance to address issues arising from a failure to extend the debt ceiling," a spokesman said Wednesday. The OCC, along with the Fed, regulates the nation's largest banks.
"For example, there may be disruptions in the timing of various federal benefit payments that could cause some customers to inadvertently overdraw their checking accounts, and we will encourage national banks to work with their customers and exercise judgment related to overdraft or penalty fees."
Big banks have been complaining that regulators, particularly the Treasury and the Federal Reserve, won’t answer their myriad questions about what would happen if credit ratings firms downgrade the U.S.’s triple-A rating or if the government defaults on its debts. What order will the Treasury pay its bills in? Will the Fed accept Treasuries as collateral at the discount window if there’s a default? If so, would the haircut change?
Here’s what the Fed is saying now, after days of no comment: “In these matters, the Federal Reserve serves as the fiscal agent of the United States government. As such, we have been engaged in operational planning with the Treasury. We expect to be able to give additional guidance to financial institutions when there is greater clarity from the Congress and as Treasury details its specific plans.”
- 6:47 pm
- McCain Goes Maverick Over Debt Strategy
- by Naftali Bendavid
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Sen. John McCain (R., Ariz.) took to the Senate floor today and unloaded on conservative Republicans who are demanding congressional approval of a balanced budget amendment before they'll agree to raise the debt limit.
"That is not fair," Mr. McCain said. "That is not fair to the American people, to hold out and say we won’t agree to raising the debt limit until we pass a balanced budget amendment to the Constitution. It's unfair. It's bizarro. And maybe some people have only been in this body for six or seven months or so really believe that. Others know better.”
Mr. McCain has a long history of challenging members of his own party. Mr. McCain had dialed down his maverick streak during his successful campaign to win re-election in 2010 over a Republican challenger, but the debt ceiling stalemate appears to have fired Mr. McCain’s fighting spirit. He didn’t spare Democrats, and he has criticized President Barack Obama and Senate Majority Leader Harry Reid (D., Nev.) for blocking Republican plans to cut spending. Mr. McCain also supported an earlier GOP plan to cut spending, institute a cap on future spending and balance the budget.
- 7:08 pm
- Robert Shiller: 'Tax and Spend'
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Despite the national debt crisis, Yale economics Prof. Robert Shiller says he believes the U.S. government should spend more money to create jobs and reduce unemployment.- 7:09 pm
- Jeremy Siegel: 'Make Cuts to Medicare'
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In a debate on how to solve the debt crisis with economist Robert Shiller, Jeremy Siegel professor of finance at the University of Pennsylvania recommends making cuts to medicare to reduce the national debt.- 7:57 pm
- S&P Stays Mum On Rating for U.S.
- by Jean Eaglesham and Jeannette Neumann
- Add a Comment
Standard & Poor's Ratings Services left the threat of a downgrade hanging over the U.S., declining to tell anxious lawmakers on Wednesday whether rival tax and spending plans floated in Washington would save the U.S.'s triple-A credit rating.
- 8:04 pm
- Markets Swoon on Debt Fear
- by Jonathan Cheng
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Financial investors grew increasingly worried Wednesday about lawmakers' failure to reach accord on raising the debt ceiling, pushing U.S. stocks to their worst one-day drop in two months and weakening the demand for Treasury securities.
The Dow Jones Industrial Average fell 198.75 points, or 1.6%, to 12302.55.- 8:14 pm
- Asian Markets Open Lower
- by Jake Lee
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Asian markets are starting to open, with Japan's Nikkei falling 1.1% in the first few minutes of trading to fall under 10,000 to 9,936.97.- 8:16 pm
- China Researcher Urges Government To Sell Dollar Assets
- by Dow Jones Newswires
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China should reduce dollar-denominated assets as soon as possible to safeguard its foreign exchange reserves, a government researcher said Thursday, as the impasse over lifting the U.S.'s debt limit dragged on in Washington.
Zhang Monan, a researcher at the State Information Center, said in a commentary published in the state-run Shanghai Securities News that U.S. government debt and the dollar have lost their long-term stability. The higher the U.S. debt level, the bigger impact it will have on the stability of China's economy.
In the face of its sky-high deficits, the U.S. will have to continue to print money to let the dollar depreciate, and a third round of asset purchases, known as quantitative easing, will be inevitable, said Zhang.
China's foreign exchange regulator, the State Administration of Foreign Exchange, has come under considerable criticism from academics and other observers for its management of the nation's foreign exchange reserves, which at the end of June reached US$3.2 trillion, the largest of any country in the world. Market watchers estimate dollar assets account for as much as two-thirds of the total.- 9:18 pm
- The Man on the Mat With Boehner
- by Patrick O'Connor
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As House Speaker John Boehner struggles to line up colleagues behind his debt-ceiling plan, his leading Republican opponent is Rep. Jim Jordan, from the district next door in Ohio.- 9:19 pm
- Treasury Crafts a Plan: Who Gets Paid, Who Doesn't
- by Damian Paletta
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The Treasury Department plans to detail how it will handle the 100 million checks it sends each month if Congress doesn't raise the federal debt ceiling, pulling back the curtain on closely held proposals that could have dramatic consequences for the U.S. economy and the nation's credit rating.
The Obama administration hopes such decisions—who gets paid and who doesn't—can be avoided if a deal to raise the borrowing limit by Aug. 2 is reached, but time is running out. White House officials still haven't decided when to release the plan and could reverse course if there is progress in the debt talks.- 9:20 pm
- Lining Up for 'Haircut'
- by Matt Phillips, Ben Levisohn, and Serena Ng
- Add a Comment
The debt stalemate in Washington is creating stress in a little-known but vital corner of the bond market, increasing the risk that banks, hedge funds and other investors will have to pay billions of dollars in additional costs if the U.S. defaults or is downgraded.- 9:30 pm
- Asian Shares Fall
- by John Phillips
- Add a Comment
Asian stock markets fell Thursday as uncertainty over the U.S. debt ceiling debate continued to weigh market sentiment, while concerns over a stronger yen dragged exporters in Tokyo.
"The scary part of the story is the fact that markets have not priced-in the U.S. defaulting on its debt. Should the unthinkable happen in the next week then a throw back to the chaos of 2008 would again become a reality," said CMC Markets analyst Ben Le Brun. "Should the majority of opinion be correct and the U.S. does avoid a default, global markets do appear as if they are positioned for a relief rally of sorts. Until then investors should brace themselves for more pain."
Japan's Nikkei Stock Average fell 1.1%, Australia's S&P/ASX 200 slid 1.2%, South Korea's Kospi Composite lost 0.8% and New Zealand's NZX-50 fell 0.5%.
Dow Jones Industrial Average futures were up 19 points in screen trade.
In Tokyo concerns over a stronger yen and weak market sentiment outweighed positive earnings reports.- 10:58 pm
- Crude To Stay Flat, Says Oil Advisory Exec
- by Cheeyew Cheang
- Add a Comment
Crude futures will trade sideways in the next few sessions due to an impasse in U.S. debt ceiling discussions, said Jim Ritterbusch, head of oil advisory firm Ritterbusch & Associates in a note.
"Overall, a continued choppy, sideways trading environment should be anticipated
as the market attempts to discount the outcome of the ongoing debt ceiling
talks," he wrote.
He expects a rise in West Texas Intermediate (WTI) and Brent prices once the matter is resolved and tips them to reach $103 and $122 a barrel, respectively. September New York Mercantile Exchange crude futures are 42 cents lower at $96.98 a barrel on Globex, while September Intercontinental Exchange Brent crude futures have risen nine cents to $117.52 a barrel.- 11:16 pm
- Indonesian Shares Down 1.2%
- by Edhi Pranasidhi
- Add a Comment
Indonesian shares are down 1.2% at 4123.584 in moderate volume, weighed by declines across Asian markets amid uncertainty over the ongoing U.S debt negotiations.
Among decliners, car maker Astra is down 3.3% at 72,550 Indonesian rupiah
and Bank Mandiri is down 1.9% at IDR7,900.
Monday, August 1, 2011
Live Blog: The U.S. Debt Battle july 27, 2011
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