Economic Agenda: April 28, 2010

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Mike Shepard
Wednesday, April 28, 2010; 7:38 AM

Looking ahead to Wednesday

No set time -- Senate Democratic leaders say there may be another test vote on financial regulatory overhaul legislation.

At 10:30 a.m. -- The Energy Information Administration issues weekly data on petroleum inventories.

At 2:15 p.m. -- The Federal Reserve issues a decision on interest rates at the conclusion of its two-day meeting on monetary policy.

At 2:30 p.m. -- A Senate Appropriations subcommittee holds a hearing on the Commodity Futures Trading Commission's budget, with CFTC Chairman Gary Gensler and Securities and Exchange Commission Chairman Mary Schapiro both scheduled to testify.

In Wednesday's Washington Post

Goldman Sachs spends 11 bruising hours in the public pillory during a hearing on Capitol Hill, as lawmakers berate several of the firm's current and former executives for their actions before the financial crisis. The executives mount a vigorous defense of their decisions, particularly with respect to the mortgage-related transaction that has prompted a fraud lawsuit from the Securities and Exchange Commission.

The Goldman Sachs hearing Tuesday marked one of those moments when worlds collide, writes columnist Steven Pearlstein, who finds that the meeting of Planet Wall Street with Planet Washington left a handful of things unsaid about the financial industry's behavior.

For whiz-kid trader Fabrice Tourre, the trip to Capitol Hill to meet with angry members of Congress was less than a fabulous experience, writes Washington Sketch columnist Dana Milbank.

The downgrade of Greek debt to junk status undercuts a pending international rescue plan for the country and sparks a sell-off across global financial markets. The junk rating issued by Standard & Poor's raises doubts about budget reforms proposed by Athens and deepens fears that high debt burdens across Europe could hamper economic recovery there.

A new presidential commission examining the U.S. budget deficit meets for the first time Tuesday to discuss the steps that might need to be taken to close the gap between government spending and tax revenue. As the panel meets, President Obama vows that "everything has to be on the table."

Senate Republicans block for the second straight day efforts to begin debate on a far-reaching overhaul of financial regulation, saying the legislation could harm small businesses. The procedural vote, pushed by Majority Leader Harry M. Reid (D-Nev.), falls short of the 60 votes needed to overcome a filibuster but Democratic lawmakers say they will try again Wednesday to bring the bill to the Senate floor.

Consumer confidence has reached its highest level since the onset of the financial crisis two years ago, according to a business group's monthly survey, but it remains to be seen whether that increasingly upbeat outlook will translate to increased spending by Americans.

What we're reading elsewhere

Who's sorry now? Top Goldman Sachs executives show little sign of contrition during their grilling by senators Tuesday, according to the Wall Street Journal, which cites a telling remark from the firm's chief executive Lloyd C. Blankfein: "I heard nothing today that makes me think anything went wrong."

http://online.wsj.com/article/SB10001424052748703832204575210512598974330.html?mod=WSJ_hps_LEADNewsCollection

In his own words: Testimony Tuesday from Fabrice Tourre, the only Goldman Sachs employee named in the Securities and Exchange Commission lawsuit against the firm, could end up helping the government's case, according to legal experts cited by the Wall Street Journal.

http://online.wsj.com/article/SB10001424052748703832204575210610576774470.html?mod=WSJ_hps_LEADNewsCollection

Electronic trail: E-mails sent by Goldman Sachs trader Fabrice Tourre lie at the heart of the federal case and represent another instance in which electronic messages have come back to haunt their sender, according to Bloomberg News.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aqov_F_yRUPk

Clearing inventory: As Goldman Sachs sought to trim its overall exposure to the housing market in 2006 and 2007, the firm sent out an army of salespeople to pitch mortgage-related products to its clients, according to Bloomberg News, citing e-mails released by the Senate Permanent Subcommittee on Investigations.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aoT.IqoUZk14&pos=3

A convenient villain? The Goldman Sachs hearings on Tuesday may have provided the ammunition that Democratic lawmakers need to push financial regulation overhaul legislation through Congress, according to the New York Times. Some Democratic lawmakers say that the intransigence shown by the firm's executives will stir public anger and increase pressure on Republican lawmakers to drop their opposition to the bill.

http://www.nytimes.com/2010/04/28/business/28bankers.html?ref=business

How about that bank tax? The financial regulatory bill before the Senate would go a long way toward staving off the next crisis, writes The New York Times' "Economic Scene" columnist David Leonhardt, excerpt for one thing: it needs to do a better job of keeping taxpayers from picking up the tab for the next crisis. Leonhardt recommends a bank tax along the lines of what the International Monetary Fund is pushing.

http://www.nytimes.com/2010/04/28/business/economy/28leonhardt.html?ref=business

Back for more: Institutional investors such as pension plans that incurred heavy losses during the real estate bust are once again putting money into funds that invest in commercial property, hoping to make money as the U.S. economy heals, according to the Wall Street Journal.

http://online.wsj.com/article/SB10001424052748703832204575210592443111352.html?mod=WSJ_hps_MIDDLESecondNews

Is Portugal next? As the Greek debt crisis intensifies, Portugal faces the increasing risk that it could be pulled under, too, according to Bloomberg News. That threat was highlighted on Tuesday as Standard & Poor's downgraded Portuguese debt, a move that fanned investors' fears that Lisbon will not be able to revive its economy and reduce its total debt burden.

http://www.bloomberg.com/apps/news?pid=20601109&sid=akQrIx8SPMHo&pos=10

Dr. Doom's dark euro-zone outlook: During a panel at the Milken Institute Global Conference, economist Nouriel Roubini says that the debt crisis afflicting Greece and threatening other small nations in Europe could potentially lead to the breakup of the European monetary union, according to the Los Angeles Times' "Money and Company" blog.

http://latimesblogs.latimes.com/money_co/2010/04/roubini-europe-monetary-union-euro-greece-portugal-spain-debt.html

Driving into the black: Ford Motor, the only one of the Detroit Three to decline government assistance, reports a $2.3 billion profit for the most recent quarter, marking its fourth consecutive quarterly profit, according to the New York Times. The results show how the automaker is gaining as Toyota struggles with safety recall issues and its domestic rivals, General Motors and Chrysler, wrestle with the aftermath of the bankruptcy reorganizations last year.

http://www.nytimes.com/2010/04/28/business/28ford.html?ref=business

Hedge funds under SEC scrutiny: A special unit at the Securities and Exchange Commission investigating practices at hedge funds and private equity firms is looking into whether some fund managers improperly prevented investors from withdrawing money at the height of the financial crisis, according to the Wall Street Journal.

http://online.wsj.com/article/SB10001424052748703832204575210671819894474.html?mod=WSJ_hps_LEFTWhatsNews

Insurers back away from cancellations: Two major health insurers agree to end the practice of dropping sick policyholders after Congress and the Obama administration moved to crack down on such cancellations, according to the Los Angeles Times.

http://www.latimes.com/business/la-fi-0428-insure-rescission-20100428,0,5187685.story

Also caught our eye

Fading in the stretch: Kentucky's thoroughbred industry declined sharply along with the broader U.S. economy over the past three years, and the aftermath is painfully evident in horse country, according to the New York Times. With countless horse farms up for sale and stallion prospects fetching half of what they would have at auction just two years ago, the health of an industry that employs more than 100,000 people is at stake.

http://www.nytimes.com/2010/04/28/sports/28racing.html?hp


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