Bloomberg:
- Bernanke Says Fed Is Prepared to Act as Needed. Federal Reserve Chairman Ben S. Bernanke said central bankers “remain prepared” to act as needed to aid growth even as they get ready to eventually raise interest rates from almost zero and shrink a record balance sheet. While Fed officials plan for the exit, “we also recognize that the economic outlook remains unusually uncertain,” Bernanke said today in testimony to the Senate Banking Committee. “We will continue to carefully assess ongoing financial and economic developments, and we remain prepared to take further policy actions as needed to foster a return to full utilization of our nation’s productive potential in a context of price stability.” Bernanke didn’t elaborate on steps the Fed might take as he affirmed the Fed’s policy of keeping rates low for an “extended period.”
- Bank Debt Swaps Fall to Week-Low on Stress Test Bets, Earnings. The cost of insuring against losses on European financial bonds fell to the lowest in one week on speculation that stress tests will reassure investors that banks can withstand a crisis. The Markit iTraxx Financial Index of credit-default swaps on 25 of the region’s banks and insurers dropped 5 basis points to 135.5, JPMorgan Chase & Co. prices show. The contracts are down from a 15-month high of 200 basis points June 8.
- Regulatory Bill May 'Freeze' Asset-Backed Market, Industry Says. The U.S. financial-regulation bill may halt the already diminished market for asset-backed securities by increasing liability risk for credit raters, a securitization-industry group and bank analysts said. The legislation, set for signature by President Barack Obama, eliminates credit-rating companies’ shield from lawsuits when underwriters include their assessments in documents used to sell debt. Moody’s Investors Service and Fitch Ratings have already told Wall Street that because of an increased risk of being sued, they will no longer let underwriters use ratings in bond-registration statements. The change, if combined with an existing Securities and Exchange Commission rule that restricts sales of asset-backed debt without ratings in offering documents, will put a “flash freeze” on the market, said Tom Deutsch, executive director of the American Securitization Forum. His concerns are shared by analysts at RBS Securities Inc. “A number of transactions that had been planned for the upcoming weeks have been shelved indefinitely given this proposal,” Deutsch said in an interview yesterday.
- Fannie Subpoenas to Show $30 Billion Bad Mortgages, Rosner Says. and Fannie MaeFreddie Mac’s regulator may identify as much as $30 billion of debt included in mortgage bonds that the companies can force sellers to repurchase, according to Joshua Rosner, an analyst who in 2007 predicted the collapse in the market for the securities. The Federal Housing Finance Agency this month said it issued 64 subpoenas seeking loan files and other documents related to so-called non-agency mortgage securities bought by the two government-supported companies. The U.S. is trying to determine whether misrepresentations might require issuers to repurchase debt, producing funds from firms that may include Wall Street’s largest banks to help repay taxpayer money.
- Oil Falls After Report Shows Unexpected Increase in Supplies. Crude oil fell after the government reported an unexpected increase in U.S. supplies and the highest rate of refinery operation in almost three years. Inventories climbed 360,000 barrels to 353.5 million in the week ended July 16, an Energy Department report showed. Stockpiles of gasoline and distillate fuel, a category that includes heating oil and diesel, also increased. Crude oil imports increased 7.5 percent to 9.98 million barrels a day, the biggest one-week gain since April. “The first thought that came to mind was that this report is bearish, bearish, bearish,” said Hamza Khan, an analyst with Schork Group Inc., a consulting company in Villanova, Pennsylvania. “There were inventory gains in each of the three major categories.” Stockpiles of crude oil at Cushing, Oklahoma, where New York-traded West Texas Intermediate oil is delivered, rose 985,000 barrels to 37.1 million, the biggest increase since April, the report showed. Gasoline stockpiles climbed 1.12 million barrels to 222.2 million barrels last week, the highest level since April, the report showed. Supplies of distillate fuel rose 3.94 million barrels to 166.6 million, the biggest increase since the week ended Jan. 9, 2009. “This is a pretty clear case of supply outpacing demand,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “The distillate data was particularly bearish, with inventories at the highest level for this time of year since at least 1982.”
- Hedge Funds' Potential Threat is Unclear, SEC's Schapiro Says. Federal regulators may find it difficult to determine whether hedge funds pose risks that could threaten the U.S. economy and what the government should do to rein in industry trading practices, Securities and Exchange Commission Chairman Mary Schapiro told lawmakers today. “It’s really not clear” whether the hedge-fund industry presents “systemic risks,” Schapiro said at a House Financial Services subcommittee hearing. “It will be very important” for regulators “to decide where the lines are drawn.”
- Commercial Real Estate's Death Knell May Have Been Premature. In the face of some otherwise-daunting obstacles, commercial real estate is proving to be an attractive area for investors looking for bargains as loans come due and foreclosures mount.
- Many States Adopt National Standards for Their Schools. Less than two months after the nation’s governors and state school chiefs released their final recommendations for national education standards, 27 states have adopted them and about a dozen more are expected to do so in the next two weeks. Their support has surprised many in education circles, given states’ long tradition of insisting on retaining local control over curriculum.
- Rogue Waves and Hedge Fund Returns. How exposed are hedge funds to “rogue” correlations, wherein returns of assets or asset classes that normally exhibit hedging cancellation instead exhibit hedge-killing reinforcement? In summary, evidence indicates that hedge funds with low net market exposure may earn returns largely by assuming that correlations between assets and asset classes will behave predictably, and rogue correlation spikes may swamp these funds with extremely large drawdowns.
- Oakland Council OKs Plan to Set Up Pot Factories.
The 5-2 vote came after two hours of testy debate between growers who argued the proposal could destroy their livelihoods and businessmen who said it could turn Oakland into the Silicon Valley of pot. Oakland's City Council on Tuesday approved an ordinance that could make it the first city in the state to permit industrial marijuana production, a path-breaking decision that could spur the commercialization of a crop largely grown in hidden gardens. The plan would authorize four potentially enormous pot factories, but makes no provision for the hundreds of growers who now supply Oakland's four dispensaries, which sold $28 million in marijuana last year. "This is a monumental step forward," said Dale Gieringer, an Oakland resident and the longtime head of California NORML, which backs the legalization of marijuana. "It really means moving into the era of industrial-scale operations and Oakland means to do it big."
- Obama's Next Focus of Reform: Housing Finance. Responding to the collapse in home prices and the huge number of foreclosures, the Obama administration is pursuing an overhaul of government policy that could diverge from the emphasis on homeownership embraced by former administrations. The administration's narrower view of who should own a home and what the government should to do to support them could have major implications for the economy as well as borrowers. Broadly, the administration may wind down some government backing for home loans, but increase the focus on affordable rentals. The shift in approach could mean higher down payments and interest rates on loans, more barriers to lower-income people buying houses, and fewer homeowners overall, government officials said.
- Researcher Will Enable Hackers to Take Over Millions of Home Routers. Cisco and company, you've got approximately seven days before a security researcher rains down exploits on your web-based home router parade. Seismic's Craig Heffner claims he's got a tool that can hack "millions" of gateways using a new spin on the age-old DNS rebinding vulnerability, and plans to release it into the wild at the Black Hat 2010 conference next week. He's already tested his hack on thirty different models, of which more than half were vulnerable, including two versions of the ubiquitous Linksys WRT54G (pictured above) and devices running certain DD-WRT and OpenWRT Linux-based firmware. To combat the hack, the usual precautions apply -- for the love of Mitnick, change your default password! -- but Heffner believes the only real fix will come by prodding manufacturers into action.
- Fitch: U.S. Auto Loan ABS Defying Seasonality with 23% Drop in Losses. U.S. auto loan ABS is continuing to defy historical seasonal patterns at a time of the year when loss levels typically start to increase, according to Fitch Ratings. Prime auto loan ABS loss levels declined last month by 23%, while subprime losses fell 13% month-over-month. As a result of the positive loss and delinquency performance in 2010, Fitch has upgraded 30 classes of prime auto loan ABS through June, compared to eight in 2009. "Improved underwriting on recent vintages, strong recovery rates and structural features continue to benefit transaction performance," said Senior Director Hylton Heard.
- 27% Say U.S. Heading in Right Direction. Twenty-seven percent (27%) of Likely Voters say the country is heading in the right direction, according to a new Rasmussen Reports national telephone survey taken the week ending Sunday, July 18. This is the lowest finding since mid-March. Sixty-one percent (61%) of voters now expect the cost of health care to go up under the health care bill, the highest level of pessimism measured since the law was passed in March. Fifty-six percent (56%) favor repeal of the law. About half of Democrats feel the country is heading in the right direction, but 90% of Republicans and 75% of voters not affiliated with either major party believe the country is heading down the wrong track. Sixty-seven percent (67%) of all voters say the country is heading down the wrong track, three points higher than last week.
- U.S. Chamber Sparks Federal Land War. The U.S. Chamber of Commerce is making a pitch to have the government tap more natural resources on federal lands in order to create jobs and increase federal revenue. The organization made its case in “An Open Letter to the President of the United States, the United States Congress and the American People” and a speech by its president and CEO, Tom Donohue. They were part of a broader statement about “rescuing the U.S. economy and putting Americans back to work” and denouncing “the congressional leadership and the administration” for vilifying “industries while embarking on an ill-advised course of government expansion, major tax increases, massive deficits and job-destroying regulations.
- Business Problems Need Business Solutions. Today we submitted comments with the Federal Trade Commission in reaction to the Staff Discussion Draft about the future of journalism in the age of the Internet. We agree that the Internet has posed challenges as well as opportunities for publishers. Google works closely with publishers to find business solutions so journalism can thrive online, and we’re optimistic about the news industry’s future. But we strongly disagree with a number of policy recommendations set forth in the Staff Discussion Draft, such as the suggestion that Congress enact a federal hot news doctrine -- something that would not only hurt free expression, but also the very profession of journalism that the proponents of hot news say they support.
- Apple unsure when it will be able to meet demand for iPhone 4, iPad. As Apple continues to face overwhelming demand for the
iPhone 4 and iPad, selling every unit it can make, the company remains unsure when its production capacity can find equilibrium. Both the iPad andiPhone 4 have been consistently sold out since each product launched last quarter.
- Boeing(BA) May Raise Plane Order Forecast. Boeing Co (BA) sees "pent-up demand" for planes in the airline industry and may raise its internal orders forecast this year, the chief executive of its commercial airplane division said on Wednesday.
Le Figaro:
- French Finance Minister Christine Lagarde said in an interview that she is "totally confident" about the results of stress tests on French banks to be published by the European Central Bank on July 23.
- Iran Intensifies Pressure to Ensure Iraqi Shiite Prime Minister - Sources. At the same time that leader of the Iraqiya bloc Iyad Allawi was preparing to meet his election rival, Iraqi Prime Minister and leader of the State of Law coalition Nouri al-Maliki yesterday, informed political sources told Asharq Al-Awsat that that Iran is intensifying pressure to ensure that the post of prime minister remains within the electoral alliance that was formed between the Iraqi National Alliance – State of Law coalition following the March elections. Sources within the Iraqiya bloc and the State of Law coalition described the meeting that took place yesterday between Allawi and al-Maliki – at the request of the outgoing Iraqi Prime Minister – as being "decisive."
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