Today's Headlines

Bloomberg:

• Small Business Can't Get Loans From Bailed-Out Banks in U.S. Chip Besse figured he could hire a dozen people once he got a $1.1 million small-business loan. Wells Fargo & Co. turned him down. U.S. taxpayers helped the San Francisco-based bank weather the 2008 financial crisis with a $25 billion loan and $9.5 billion of debt guarantees. By July 2009, when Besse wanted to buy and expand a Colorado snowmobile-rental business, Wells Fargo wasn’t sharing the wealth, he said.
• U.S. Home Seizures Reach Record for Third Time in Five Months. U.S. home seizures reached a record for the third time in five months in August as lenders completed the foreclosure process for thousands of delinquent owners, according to RealtyTrac Inc. Bank repossessions climbed 25 percent from a year earlier to 95,364, the most since the Irvine, California-based data provider began keeping records in 2005. Foreclosure filings, including default and auction notices, fell 5 percent to 338,836. One out of every 381 U.S. households received a filing, RealtyTrac said today in a statement. “We’re on track for a record year for homes in foreclosure and repossessions,” Rick Sharga, RealtyTrac’s senior vice president, said in a telephone interview. “There is no improvement in the underlying economic conditions.” Foreclosures are contributing to a growing housing supply that may add as many as 12 million homes to the U.S. market. Demand is crumbling amid high unemployment and following the expiration of a federal homebuyer tax credit in April.
• FedEx(FDX) Forecast Trails Estimates; 1,700 Jobs to Be Cut. FedEx Corp., the second-largest U.S. package-shipping company, forecast earnings for the current quarter that fell short of analysts’ estimates, and said it will eliminate 1,700 jobs. Net income for the three months ending in November will be $1.15 to $1.35 a share, the Memphis, Tennessee-based company said today in a statement. Analysts projected $1.37 a share, the average of 19 forecasts compiled by Bloomberg. FedEx fell as much as 3.7 percent in New York trading as results indicate an uneven global recovery, with U.S. shipments trailing growth in more-profitable international express packages.
• Portugal Slips Behind Spain, Ireland on Deficit, JPMorgan Says. Portugal may be slipping behind Spain and Ireland in the dash to cut budget deficits, and credit conditions in the economy are the tightest since the height of the global financial crisis in 2008, JPMorgan Chase & Co. said. While Greece has shown “some slippage,” in Portugal “the situation looks more worrisome, with the lack of budgetary progress reflecting faster expenditure growth than would be consistent with the fiscal objective.” Portugal, Spain and Ireland are trying to convince investors they can avoid the fate of Greece, which was forced to ask for a European Union-led bailout this year after its budget deficit spiraled out of control. The extra yield that investors demand to hold Portuguese 10-year bonds over German counterparts jumped to a euro-era high of 372 basis points on Sept. 8 and was at 348 basis points today. The Irish spread is at 353 points, the Spanish spread is at 173 points and Greece’s spread is 906 points. Portuguese government spending, excluding interest payments, rose 5.7 percent in the first seven months of the year, while total income increased 3.6 percent, the Finance Ministry said last month. Portugal posted a deficit of 9.3 percent of gross domestic product in 2009, the fourth-highest in the 16-country euro region. Some euro-region economies may be threatened by more restrictive lending practices as financial institutions’ reliance on European Central Bank funding shortens the time horizon of the loans they are prepared to make, Mackie said. Credit conditions in Portugal are the tightest in two years, Mackie said. In Ireland, they could worsen if its banks “significantly” increased ECB borrowing, he said. In Spain, tightening has been “very modest.”
• CFTC's Gensler Says More Than 200 Financial Firms May Get Swap Dealer Tag. More than 200 global financial firms may qualify as swap dealers under new over-the-counter derivatives regulations being crafted by the Commodity Futures Trading Commission, according to Chairman Gary Gensler. The designation would impose prescribed capital requirements to back trades, mandate the use of clearinghouses for most transactions and require a higher level of oversight than other market users.
• OPEC will reduce shipments by 1.2% this month as the global economy slows and refiners in the U.S. and Europe finish maintenance, Oil Movements said, the ninth weekly decline reported by the tanker-tracker.
• Wheat Extends Slide as U.S. Says Export Sales Declined to a Nine-Week Low. Wheat fell for a third straight day, touching the lowest price in a week, after a government report showed a slump in export sales from the U.S., the world’s largest shipper. U.S. exporters sold 319,599 metric tons in the week ended Sept. 9, the lowest total since July 8, the U.S. Department of Agriculture said today in a report.
• Crude Oil Declines as Enbridge Says Midwest Pipeline Will Restart Tomorrow. Oil fell the most this month in New York as Enbridge Energy Partners LP prepared to start a pipeline that supplies Canadian crude to refineries in the U.S. Midwest. Futures dropped as much as 2.5 percent after Enbridge said it plans to send oil through the pipeline early tomorrow after repairing a leak in Romeoville, Illinois, that was discovered last week.
• Gold Rises to Record on Increased Demand for Wealth Protection. Gold rose to a record in New York and London as investors sought protection against turmoil in the global economy and financial markets. Silver rose to the highest price since March 2008. Bullion futures climbed as high as $1,279.50 an ounce.
• Global Economy Is Poised to Skirt Second Recession, Fidelity's Bolton Says.
• Manufacturing in Philadelphia Area Shrank This Month. Manufacturing in the Philadelphia region unexpectedly contracted in September for a second month as orders and sales declined. The Federal Reserve Bank of Philadelphia’s general economic index rose to minus 0.7 this month from minus 7.7 in August. The number of Americans filing unemployment insurance claims dropped to 450,000 last week, the lowest level in two months, data from the Labor Department showed. The agency also reported that wholesale costs climbed 0.4 percent, the second consecutive gain. The Philadelphia Fed bank’s shipments gauge fell to minus 7.1 from minus 4.5 in August. The new orders measure decreased to minus 8.1, the third straight contraction and the lowest level since June 2009. The employment index climbed to 1.8 from minus 2.7. The Philadelphia Fed’s index of prices paid fell to 9.8 from 11.8 while the gauge of prices received dropped to minus 13.9 from minus 12.5.
• China Stocks Drop Most in Three Weeks Amid Bank Loan Restriction Concerns. The Shanghai Composite Index slid 50.04, or 1.9 percent, to close at 2,602.47. That’s the biggest loss since Aug. 25. The gauge fell 1.3 percent yesterday amid concern government curbs on the property market and energy consumption will slow growth in the economy and earnings.

Wall Street Journal:

• Money Funds Try Risk Again. Two years after a big money-market mutual fund "broke the buck," some funds are making new bets on risky securities—raising the chances for problems despite a raft of new rules designed to make the market safer.
• Louisiana Files Suit Against Transocean(RIG). The state of Louisiana filed a lawsuit against Transocean Ltd., asking a New Orleans federal judge to rule that it was broadly liable for damages from the Gulf oil spill.
• Brazil's Petrobras(PBR): Tupi Oil Field Pilot to Start in October. Brazilian oil and gas firm Petroleo Brasileiro SA (PBR), or Petrobras, aims to start pilot production from its mammoth Tupi oil find in October, a company official said Thursday.
• China's Yuan Gesture Could Backfire. The sudden rise in the Chinese yuan—which on Thursday hit a new high against the dollar for the fifth straight trading session—has fueled widespread speculation that China's government is trying to head off a political backlash in the U.S. But China's approach to managing its exchange rate risks aggravating anger in Washington instead.

CNBC:

• Estate Taxes Deter Hiring: Economist. Reinstating federal estate taxes at the 65 percent rate will result in some 1.6 million jobs lost, Douglas Holtz-Eakin, president of the think tank the American Action Forum, told CNBC Thursday. “Congress and the administration ought to be focusing on growth consequences of every policy, and that would include estate taxes,” added Holtz-Eakin.

Business Insider:

• Meet The 16 California City Managers Who Earn Over $300,000.
• Chanos, Roubini, And Scaramucci All Told Stone To Change Wall Street 2's Villain to Goldman Sachs(GS).
• Don't Look Now, But Greece is Sounding More and More Lehman-Like.
• Small Business Spending Plans Spell Doom in the Next Year(graph).
  

Zero Hedge:

• Calpers Prepares to LBO California, Or At Least Create the Scariest Too Big To Fail Monster Ever Conceived.

Washington Post:

• An American Innovation in Light Bulbs, But Will Manufacturing Stay in the U.S.?

LA Times:

• Losses From Fannie Mae, Freddie Mac Seizures May Near $400 Billion. Federal Housing Finance Agency is seeking billions in repayment from banks that sold bad loans to the mortgage giants to help offset taxpayer losses, but some financial institutions are balking.

Forbes:

• Best Buy CEO: iPad Is Cannibalizing Laptop Sales By A Shocking 50%. The CEO of Best Buy(BBY) just said the iPad is cannibalizing 50% of the company’s laptop sales, the Wall Street Journal reports. When consumers walk into Best Buy now, they don’t look at or want laptops, instead they’re drawn to the iPad. “People are willing to disproportionately spend for these devices because they are becoming so important to their lives,” says CEO Brian Dun. Bad news for Dell, HP, Acer, and Microsoft.
• Bullish Sentiment Soars. Bullish sentiment, expectations that stock prices will rise over the next six months, rose 7.0 percentage points to 50.9% in the latest AAII Sentiment Survey. This is the highest level of optimism since August 13, 2009. The historical average is 39%. Bearish sentiment, expectations that stock prices will fall over the next six months, fell 7.4 percentage points to 24.3%. This is the lowest level of pessimism since December 31, 2009.

CBS News:

• Record Gains for U.S. Poverty as Elections Loom. Ranks of Working-Age Poor Approaching 1960s Levels; Increase Would Be Blow to Democrats Trying to Sway Voters. The number of people in the U.S. who are in poverty is on track for a record increase on President Barack Obama's watch, with the ranks of working-age poor approaching 1960s levels that led to the national war on poverty. It's unfortunate timing for Obama and his party just seven weeks before important elections when control of Congress is at stake. The anticipated poverty rate increase - from 13.2 percent to about 15 percent - would be another blow to Democrats struggling to persuade voters to keep them in power.
  

DavisPolk Client Newsletter:

• Impact of the Dodd-Frank Act on Private Equity Funds, Hedge Funds and Their Investment Advisers.

The Hill:

• Tough For-Profit Education Loan Rules Cause Democratic Party Rift. The White House’s push to rein in student loan defaults at for-profit schools has divided Democrats and generated a new roster of clients for some of Washington’s top lobbying firms. Breaking with a number of their Democratic colleagues, critics of the effort — including an odd mix of liberals, Blue Dogs, Congressional Black Caucus members and committee chairmen — are urging the Obama administration to delay the changes pending further study. They say the reforms would cripple college enrollment among lower-income students, who disproportionately attend for-profit schools.

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Thursday shows that 27% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-four percent (44%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -17 (see trends).

Politico:

• Democrats Spend on Anti-Health-Reform Ads. Democratic candidates are spending three times more advertising against the health reform law than they are in support of it. Since the beginning of Congress’s August recess, Democratic candidates have poured $930,000 into ads deriding the health overhaul but just $300,000 in pro-reform spots, according to Evan Tracey at Kantar Media.

AP:

• Iraq Approves Settlement for Saddam's US Victims. The Iraqi Cabinet unanimously approved a $400 million settlement for Americans who say they were abused by Saddam Hussein's regime, the government spokesman said Thursday. The agreement represents a significant step forward for Iraq and could bring an end to years of legal battles by Americans who claim to have been tortured or traumatized under Saddam's regime dating back to the 1990 Iraqi invasion of Kuwait.

Reuters:

• Extending SoFFin Would Be Wrong Signal - Ministerial Source. Extending the lifespan of Germany's national bank rescue fund, SoFFin, beyond its planned expiry at the end of this year would send the wrong signal to markets, a ministerial source said on Thursday. The comments followed coalition sources saying the ruling coalition was considering an extension. The fund, which offers 400 billion euros in guarantees and 80 billion in various forms of equity injection, has been used to bail out Hypo Real Estate and to shore up Commerzbank, Germany's second-biggest lender.
• Q+A What is Causing Tension Between U.S. and China?
  

Caijing:

• China may not raise interest rates at present because they are concerned about the effect it would have on local government's outstanding loans, Liu Yuhui, a researcher with the Chinese Academy of Social Sciences, wrote. Local governments' outstanding debt may top 10 trillion yuan this year, Liu said.

Xinhua:

• China's state-owned banks should be empowered to supervise microfinance companies, to which they lend, citing Liu Kegu, a consultant to the China Development Bank. China had more than 1,300 microfinance companies at the end of 2009. They are proving difficult for the government to supervise.

KUNA:

• Iraq lacks the infrastructure and technical capability to produce 11 million barrels a day of crude oil, citing OPEC Secretary-General Abdalla El-Badri. "Iraqi plans to reach an oil production capacity of 11 million barrels are unrealistic" given the country's exceptional circumstances, El-Badri said. Iraq is capable of increasing production by "reasonable amounts" and it's unlikely it "will soon join the quota system applied" to other members of OPEC, he said. Iraq currently pumps 2.345 million barrels a day.