- Lew Vow Not to Shift on Debt Frustrates Incredulous Republicans. He’s “an implacable negotiator” who is “ideologically committed to protecting every big-government gain,” Senator Jeff Sessions, an Alabama Republican, said in an interview. Administration officials “can all go and play a round of golf, and they know he’s not going to agree to anything.” Lew’s approach to the debt limit has focused on a few basic ideas. He has scrapped, temporarily, the traditional Treasury secretary role of cheering up financial markets and is making it clear he thinks investors should be worried about the possibility the U.S. won’t make all its payments on time. “The calm out there,” he said in a discussion with Bloomberg View’s Al Hunt on Sept. 24, “is a bit greater than it should be.” Senator Ron Johnson, a Wisconsin Republican, said at an Oct. 11 Bloomberg breakfast that the administration should try “to calm the markets, not scare them.” “Responsible leadership wouldn’t be going out there going, ‘There’s going to be catastrophe coming,’” Johnson said, referring to comments by Obama and Lew warning of dire consequences if the U.S. can’t make all its payments.
- India Inflation Reaching Seven-Month High Adds Rate Pressure. Indian inflation unexpectedly accelerated to a seven-month high in September, adding to the case for a further increase in the benchmark interest rate. The wholesale-price index rose 6.46 percent from a year earlier, compared with a 6.1 percent advance in August, the Commerce Ministry said in New Delhi today. The median of 33 estimates in a Bloomberg News survey was for a 6 percent climb. Governor Raghuram Rajan, who took over at the Reserve Bank of India last month, raised the repurchase rate to 7.5 percent after vowing to tame inflation, which was almost 10 percent in September based on a separate gauge of consumer prices released today. The cost of living is jumping even as economic growth slows, stoked by food prices and weakness in the rupee that makes imports more expensive.
- China-to-India Price Jump Risks Growth as World Outlook Dims. Higher food costs from China to India are raising prices for a third of the world’s people, adding to the challenge of sustaining the global economic recovery as the growth outlook dims. Consumer prices in China rose 3.1 percent last month as food costs advanced the most since May 2012, statistics bureau figures showed today in Beijing, while India’s Commerce Ministry said inflation unexpectedly accelerated to a seven-month high. Both gauges increased more than economists had estimated.
- Senate Talks Intensify as Obama Sets Meeting. Reid Say He Hopes to Have a Deal by Time of White House Meeting Monday Afternoon.
- Rollback of cuts fuels claims that government inflated impact of partial shutdown. Two weeks into the partial government shutdown, the Obama administration is increasingly easing off some of its most painful cuts -- fueling the perception among critics that the government initially imposed visible, but ultimately unnecessary, cutbacks as a way to pressure Republicans. The Department of the Interior late last week agreed to let states use their own money to reopen some national parks. Defense Secretary Chuck Hagel also determined football and other sports could continue at service academies through October. Following outrage from military groups, the Pentagon contracted with a charity to provide death benefits to the families of fallen soldiers, before President Obama abruptly signed legislation to do just that. Earlier, the Pentagon also announced most of its 350,000 furloughed civilian military personnel would return to their jobs. And CIA Director John Brennan said he would begin bringing back employees deemed necessary to the agency's core missions.
- DC wants Dow to drop 1,000: Bove. Financial analyst Dick Bove thinks gridlocked politicians are asking for a market sell-off. "What do they think will convince the American public that they as our leaders must act? It is becoming very clear that what they want is panic in the equity markets. They want to see the Dow drop 1,000 points," Bove wrote in a note to Rafferty Capital Markets clients Monday.
- Thursday debt deadline a 'soft date,' says Bowles. (video) Erskine Bowles, former co-chair of President Barack Obama's debt commission, indicated on CNBC that Thursday's deadline set by the Treasury to increase the debt ceiling may be flexible.
Business Insider:
Reuters:
- Franco-German divisions cloud efforts to fix broken banks. The euro zone debated on Monday how to prop up banks likely to be declared unstable next year, but France's blunt criticism of Germany before the meeting laid bare the tensions surrounding the far-reaching financial reform. Bank health checks by the European Central Bank are a critical step in establishing a single banking framework for the euro zone, giving credibility to ECB supervision and paving the way for the bloc to cooperate on saving bust banks.
- Time to take bets on Frexit and the French franc? We have a minor earthquake in France. A party committed to withdrawal from the euro, the restoration of French franc, and the complete destruction of monetary union has just defeated the establishment in the Brignoles run-off election. It is threatening Frexit as well, which rather alters the political chemistry of Britain's EU referendum.
- Italy, France, Germany Push For Easier Bank Tests. Countries pushing to soften the criteria of ECB bank stress tests, citing people familiar with the matter. Germany and France are pressurizing ECB and other institutions so that the criteria of stress tests least damaging as possible for interests of their banks. Italy wants to avoid shareholders and junior debtholders being hit if a bank needs to be recapitalized with public funds, citing a minister in euro group.
Echoing fears that
European policymakers remain in a state of cognitive dissonance –
recognizing the need for root-and-branch overhaul of peripheral banks,
but backtracking on joint liability plans – Christopher Flowers, the
legendary FIG investor who now runs the £2.3 billion ($3.5 billion)
private equity group JC Flowers, sounded the alarm over the negative
sovereign-bank feedback loop.
In a shot across the bows of market bulls, who cite the return of
capital flows to weaker eurozone states, Flowers issued a stark warning:
"There is a scenario where we have a Lehman-type event: we wake up some
Thursday and a big country is in trouble.
"And the ECB will have to decide to support banks x, y, z. And then the
ECB will, in fact, decide to own bank x, y, z.
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