Bloomberg:
- The federal budget deficit will total $1.6 trillion this year as the government borrows more than 40 percent of all the money it will spend, according to the nonpartisan Congressional Budget Office. Next year’s deficit will total $1.4 trillion, the agency said today. The CBO said it anticipates a “relatively slow and tentative” economic recovery because of “global economic weakness, continued strains in financial markets and households’ desire to rebuild their savings.” The economy will grow between the fourth quarter of this year and next year by 2.8 percent and by 3.8 percent in 2011, the agency said. Unemployment will increase next year to 10.2 percent before falling to 9.1 percent in 2011, the agency said. This year’s deficit, for the fiscal year ending Sept. 30, will amount to 43 percent of the $3.68 trillion the government will spend, the CBO said. The deficit will be equal to 11.2 percent of the economy, the biggest since World War II. The shortfall is largely attributable to the financial crisis, CBO said. The agency and the White House budget office released biannual reports today examining the government’s budget and economic outlooks over the next 10 years. The administration pegged this year’s deficit at $1.58 trillion, next year’s at $1.5 trillion and the combined shortfalls over the next 10 years at $9.05 trillion. The CBO said deficits between 2010 and 2019 will total $7.1 trillion. This year’s spending is up by $700 billion or about 24 percent, the biggest annual increase since 1952, largely because of government responses to the financial crisis, according to the CBO. The government takeover of mortgage financiers Fannie Mae and Freddie Mac has cost $291 billion while the Treasury Department’s bailout of the financial industry has added $133 billion to the deficit, CBO said. In addition, it estimated total spending tied to the stimulus package approved in February will reach $115 billion. “The alarm bells on our nation’s fiscal condition has now become a siren,” said Senate Minority Leader Mitch McConnell, a Kentucky Republican. “Spending, borrowing and debt are out of control.”
- U.S. consumer confidence climbed more than forecast and national home prices increased for the first time in three years, signaling government efforts to right the world’s biggest economy are starting to pay off. The Conference Board’s confidence index rose to 54.1 in August, the first gain since May, as consumers became less concerned about the outlook for jobs, the New York research group said today. The S&P/Case-Shiller home-price index advanced 2.9 percent in the second quarter from the previous three months, the first increase since 2006 and the biggest in almost four years.
- Hassan Nemazee, chairman of Nemazee Capital Corp. and a fundraiser for President Obama and Hillary Clinton, was arrested on charges that he tricked Citigroup Inc. into lending him as much as $74 million using phony documents. Nemazee got the loan by telling Citibank that he held accounts with hundreds of millions of dollars which could serve as collateral, U.S. Attorney Preet Bharara said today in a statement. He used fake addresses and phone numbers to mislead the bank, prosecutors said. The accounts “either never existed or had been closed years before Nemazee submitted the documents referencing those accounts,” Bharara said in the statement. Nemazee is one of the leading fundraisers for the Democratic Party. He served as national finance chairman for the Senate committee that works to elect Democrats when it was run by New York Senator Charles Schumer. In the 2008 presidential campaign, Nemazee raised at least $100,000 for Hillary Clinton, and then went on to bring in at least $500,000 for Barack Obama after he defeated her in the primary campaign, according to the Washington watchdog group Public Citizen. Clinton is now secretary of state. Nemazee also served as New York finance chairman for Massachusetts Senator John Kerry during his 2004 run for the presidency. Another prominent fundraiser for Democrats, Norman Hsu, was convicted by a federal jury in May of campaign finance fraud for making tens of thousands of dollars in illegal donations. He also pleaded guilty to cheating investors out of more than $20 million in a Ponzi scheme. He has yet to be sentenced.
- Jan Hatzius, chief U.S. economist at Goldman Sachs Group Inc., said the Federal Reserve could double the size of the central bank’s balance sheet again if needed to support economic growth. A rise in the balance sheet to $4 trillion is a “possibility,” Hatzius said in an interview on Bloomberg Radio in New York. “It is going to depend on not just what inflation does, but also on whether the economy does move back to a slower growth pace.”
- Hong Kong exports fell at a faster pace in July as demand from the U.S. and Europe weakened, signaling the economic recovery may be slow. Overseas sales shrank 19.9 percent from a year earlier to HK$212.3 billion ($27.4 billion), the government said today on its Web site, after declining 5.4 percent in June. The drop was sharper than the 12 percent estimated by economists surveyed. While the worst of the global recession may be over, Asia’s export-dependent economies are struggling to gain momentum as sales to North America and Europe languish. Imports fell 17.8 percent in July from a year earlier, leaving a trade deficit of HK$21.7 billion. Exports to mainland China fell 15.3 percent, the government said.
- China’s plan to tighten capital requirements for banks by capping cross holdings of subordinated bonds may cut lending by as much as 700 billion yuan ($102 billion), China International Capital Corp. estimated.
- Chinese stocks, the world’s worst performers this month, extended declines after Premier Wen Jiabao said the economy faces many “uncertainties” and China Construction Bank Corp. warned of asset bubbles. Aluminum Corp. of China Ltd. slid 2.9 percent after it posted a third quarterly loss and Wen said a “decline in external demand may continue for a longer time” while excess production capacity may restrain industrial growth, according to a statement on the government Web site after the market closed yesterday. China Construction Bank Corp. sank 4.3 percent after Chairman Guo Shuqing said “there are uncertainties in the economy and bubbles in the capital market.” “The weak earnings have prompted investors to think seriously about whether it’s the time to put money into equities now,” Citic Securities Co. analyst Sun Chao said in Shanghai.
- The Baltic Dry Index, a measure of shipping costs for commodities, fell to the lowest in more than three months on waning demand to ship iron ore, easing congestion and fleet expansion. The index tracking transport costs on international trade routes dropped for a sixth day, losing 49 points, or 2%, to 2,388 points. That is the lowest since May 13. Iron-ore and coal transporters led declines as both capsize- and panamax-class ships slid 3.1%. “There’s been a noticeable lack of iron-ore activity, particularly from the Chinese,” Steve Rodley, a London-based director of shipping hedge-fund manager M2M Management Ltd., said by phone today. The number of new ships delivered in July alone may have equaled the year’s first half, according to Rodley. Chinese prices for hot-rolled steel sheet have dropped 7.4% this month, indicating falling demand for the metal. At the same time, the country’s iron-ore stockpiles are just .6% below levels last September, when they rose to the highest since at least 2006.
- Companies owned by China’s central government have reported a 21% decline in profits for the first seven months from a year ago, the State-owned Assets Supervision and Administration Commission said.
- Copper prices fell the most in a week as higher inventories and declines in Asian equities revived speculation that demand will slow in China, the world’s largest buyer of the metal. Stockpiles in warehouses monitored by the London Metal Exchange rose 1.3 percent to 296,600 metric tons, the highest since June 8. “There was some more positive economic data, but the focus right now is going to be on China,” Zeman said. “The Chinese concerns and rising inventories are the two biggest factors weighing on prices.”
NY Times:
- ‘Peak Oil’ Is a Waste of Energy. REMEMBER “peak oil”? It’s the theory that geological scarcity will at some point make it impossible for global petroleum production to avoid falling, heralding the end of the oil age and, potentially, economic catastrophe. Well, just when we thought that the collapse in oil prices since last summer had put an end to such talk, along comes Fatih Birol, the top economist at the International Energy Agency, to insist that we’ll reach the peak moment in 10 years, a decade sooner than most previous predictions. Like many Malthusian beliefs, peak oil theory has been promoted by a motivated group of scientists and laymen who base their conclusions on poor analyses of data and misinterpretations of technical material. But because the news media and prominent figures like James Schlesinger, a former secretary of energy, and the oilman T. Boone Pickens have taken peak oil seriously, the public is understandably alarmed. A careful examination of the facts shows that most arguments about peak oil are based on anecdotal information, vague references and ignorance of how the oil industry goes about finding fields and extracting petroleum. And this has been demonstrated over and over again: the founder of the Association for the Study of Peak Oil first claimed in 1989 that the peak had already been reached, and Mr. Schlesinger argued a decade earlier that production was unlikely to ever go much higher. In the end, perhaps the most misleading claim of the peak-oil advocates is that the earth was endowed with only 2 trillion barrels of “recoverable” oil. Actually, the consensus among geologists is that there are some 10 trillion barrels out there. A century ago, only 10 percent of it was considered recoverable, but improvements in technology should allow us to recover some 35 percent — another 2.5 trillion barrels — in an economically viable way. And this doesn’t even include such potential sources as tar sands, which in time we may be able to efficiently tap. Oil remains abundant, and the price will likely come down closer to the historical level of $30 a barrel as new supplies come forward in the deep waters off West Africa and Latin America, in East Africa, and perhaps in the Bakken oil shale fields of Montana and North Dakota. But that may not keep the Chicken Littles from convincing policymakers in Washington and elsewhere that oil, being finite, must increase in price.
- David N. Dinkins, New York City’s first black mayor, offered some blunt advice on Monday to David A. Paterson, New York State’s first black governor: Don’t accuse your critics of racism. Mr. Dinkins was reacting to comments Mr. Paterson made in a radio interview on Friday that he was the victim of a racially motivated news media campaign to keep him from running for election next year.
- Investment banks that manage funds of hedge funds were among the hardest hit as investors withdrew an estimated $200 billion from these pools between September 2008 and June 2009, data from the Hedge Fund Journal and Newedge Prime Brokerage show. The $200 billion figure represents a 30 percent drop in assets for the fund-of-funds sector. Those funds which lost more than the average of 25 to 30 percent include the operations within investment banks. HSBC’s Alternative Investments division shrank 51.9 percent, from $46.3 billion to $22.3 billion; UBS’s Alternative and Quantitative Investments fell 32.6 percent, from $46.6 billion to $31.4 billion; and Goldman Sachs Hedge fund strategies was down 24.7 percent, from $23.9 billion to $18 billion.
Washington Post:
- Sen. Arlen Specter (D-Pa.) called on the Department of Veterans Affairs on Monday to consider suspending its use of an end-of-life planning document that critics have dubbed the "death book for veterans." "There is an issue as to whether the VA document inappropriately pressures disabled veterans who forgo critical care by subtly urging them on end-of-life decisions," Specter wrote in a letter requesting that the Senate Veterans' Affairs Committee hold a hearing on the matter. The booklet, Towey noted, includes a worksheet titled "What makes your life worth living" that presents various scenarios, such as being confined to a wheelchair, relying on a feeding tube or being unable to "shake the blues." Towey compared the wording of the worksheet to a political "push poll" meant to steer readers to a predetermined conclusion. "This hurry-up-and-die message is clear and unconscionable," wrote Towey, who noted that the Bush administration had suspended use of the document but that it has been "resuscitated" by the Obama White House. Specter said in an interview yesterday that he had not read the booklet but was disturbed by what he had gleaned thus far. "I heard an inference that people might be inappropriately influenced to withhold medical treatment," he said. Specter's letter, which was also sent to VA Secretary Eric K. Shinseki, says that "consideration should be given to suspending it temporarily until a determination is made as to its appropriateness."
Rassmussen:
- Most voters think they understand the health care reform legislation proposed by President Obama better than Congress does - and about as well as the president himself. A new Rasmussen Reports national telephone survey finds that 51% of voters rate their understanding of the health care plan as good or excellent. Only 21% say their understanding of it is poor. By contrast, just 22% say Congress has a good or excellent understanding of the plan. Thirty-five percent (35%) say Congress’ knowledge of the proposal is poor.
Politico:
- President Barack Obama has long said he wanted to look forward, not backward, when it came to investigating Bush-era interrogation policies – but his good friend, Attorney General Eric Holder, went ahead anyway Monday. And it didn’t take long to see just what Obama was worried about. The immediate reaction to Holder’s announcement suggested the investigation will be politically divisive, drive down Obama’s stock at the CIA and almost certainly re-open an uncomfortable question for the White House: just how far is Obama willing to go to extract information from terror suspects? Several Democrats cheered Holder’s announcement of a preliminary investigation – then immediately insisted he didn’t go far enough. The chairmen of the House and Senate judiciary committees kept up their calls for a “truth commission” into Bush-era practices. Others said veteran federal prosecutor John Durham must have free rein to target any potential wrongdoing, even if it takes him to the most senior levels of the Bush administration.
LA Times:
- The nation's largest business lobby wants to put the science of global warming on trial.
San Francisco:
- Nearly 1 in 10 Bay Area homeowners will be at least 60 days behind on their mortgages by the end of the year, according to a forecast being issued today. The projection by the credit reporting agency TransUnion covers Alameda, Contra Costa, Marin, San Francisco and San Mateo counties. In early 2007, as few as 1 out of every 100 Bay Area mortgages was delinquent. TransUnion analyst Ezra Becker called the new figures sobering and dramatic.
Reuters:
Citigroup Inc (C), Bank of America Corp (BAC) and AIG (AIG) are forging new employment contracts that let them void compensation agreements if they are challenged by the U.S. government, according to a person familiar with some recent contracts. According to excerpts of contracts obtained by Reuters, banks recently began inserting clauses stating that the pacts are subject to the approval of the government's "pay czar." Compensation terms would also be subject to limitations or clawback provisions imposed by the U.S. Treasury, as well as other legal and regulatory requirements.
- Toyota Motor Corp, the world's biggest automaker, will cut its global production capacity by 10 percent, or 1 million vehicles, the Nikkei business daily reported
- U.S. gasoline demand last week ran 2.2 percent below the same period a year ago despite lower prices at the pumps, MasterCard SpendingPulse said on Tuesday. Gasoline demand averaged about 9.4 million barrels a day for the week ended Aug. 21 as the weak economy kept a lid on summer vacation plans. The four-week moving average for gasoline demand, which is usually more indicative of long-term trends, was down 1.7 percent from a year ago.
- Oil prices sank 4 percent on Tuesday as dealers rushed to take profits from a rally that had culminated in a 10-month peak earlier in the day. U.S. crude oil dropped $3 to $71.37 a barrel, down from a peak of $75, in the biggest percentage loss since August 14. "It looks like crude tested the $75 level and failed," said Tom Bentz, a trader with BNP Paribas. "There's been profit-taking in the energy markets ... there's a feeling that the markets are heavy and are sinking, with crude overvalued by around $20 a barrel," said Tim Evans, analyst at Citi Futures Perspective in New York.
Daily Telegraph:
- Beijing is drawing up plans to prohibit or restrict exports of rare earth metals that are produced only in China and play a vital role in cutting edge technology, from hybrid cars and catalytic converters, to superconductors, and precision-guided weapons. A draft report by China’s Ministry of Industry and Information Technology has called for a total ban on foreign shipments of terbium, dysprosium, yttrium, thulium, and lutetium. Other metals such as neodymium, europium, cerium, and lanthanum will be restricted to a combined export quota of 35,000 tons a year, far below global needs. China mines over 95pc of the world’s rare earth minerals, mostly in Inner Mongolia.
Reforma:
- General Motors Co. will hire workers in Mexico as US demand for cars rebounds. By November, General Motors will increase production of models including the Chevrolet Avalanche and the Cadillac SRX at its plants in Silao and Ramos Arizpe, Mexico, citing Teresa Cid, spokeswoman in Mexico for General Motors. The automaker produced 508,748 cars in Mexico last year, according to the Mexican Auto Industry Assoc.
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