Student-Loan
Defaults Rise in U.S. as Borrowers Struggle - (www.bloomberg.com) About
one in seven borrowers defaulted on their federal student
loans,
showing how former students are buckling under higher-education costs in a weak
economy. The default rate, for the first three years that students are required
to make payments, was 14.7 percent, up from 13.4 percent the year before, the
U.S. Education Department said today. Based on a related measure, defaults are
at the highest level since 1995. The fresh data follows the announcement by Barack Obama’s administration that it would seek to
restrain skyrocketing college expenses by tying federal financial aid to a new
government rating of costs and educational outcomes. The rising number of
defaults shows the pain of borrowers, said Rory O’Sullivan, policy and research
director at Young Invincibles, a Washington nonprofit group. “Our generation is
behind in the economic recovery and not recovering as fast as we need to,” said
O’Sullivan, whose group represents the interests of people ages 18 to 34. “It’s
financial disaster for borrowers. Defaults can dramatically affect their credit
rating and
make it harder to borrow in the future.”
Fed's
Fisher: Govt, Mega Banks Should Be Whittled Down to Size - (www.moneynews.com) Richard
Fisher, outspoken president of the Federal Reserve Bank of Dallas, believes
government and mega banks both should be whittled down to size, and that the
Texas model of encouraging small business growth is what the rest of America
should get behind. In a wide-ranging interview with Euromoney,
Fisher kept his mantle as a tireless advocate of taking a scalpel to the
investment activities of "too big to fail" banks. Don't count Fisher
among fans of the Dodd-Frank Act. "They did what they could in the
crucible of a crisis, but over 9,000 pages of regulation are too much. And now
there is more concentrated power in fewer hands than before the crisis,"
he maintained. Fisher's solution is not so much to break up the mega banks like
Bank of America and JPMorgan Chase as it is to put a firewall between their
banking activities and their investment activities. According to his thinking,
federal deposit insurance and access to the Fed discount window should only be
available to the commercial banking arms of the big banks, while any
transaction involving any other segment of their businesses, including their
investment arms, "be accompanied with a clear agreement between
counterparties that it will never, ever be bailed out by government or the taxpayers."
Postal
Service defaults on $5.6 billion payment - (money.cnn.com) The
U.S. Postal Service has defaulted on a $5.6 billion payment for retiree health
benefits that was due on Monday, just as the Postmaster General had warned it
would. "We have not made the required $5.6 billion Retiree Health Benefits
prefunding payment due Sept. 30, 2013," wrote USPS spokeswomen Patricia
Licata in an email to CNNMoney. She added that the default has absolutely
nothing to do with the federal government shutdown. "We have been saying for several months
that we will be defaulting on this payment. This is the third time we have
[done so]," Licata wrote. Postmaster General Patrick Donahue told the
Senate Committee on Homeland Security and Government Affairs that the default
was going to happen on Sept. 19. At the time, he said the Postal Service was
"in the midst of a financial disaster" and that it is "burdened
by an outdated and inflexible business model" that prevents it from making
payments.
OGX
Misses Debt Payment as Record Regional Default Looms - (www.bloomberg.com) OGX
Petroleo & Gas Participacoes SA defaulted on $1 billion of bonds after
missing an interest payment, accelerating former billionaire Eike Batista’s slide toward Latin America’s largest-ever
corporate debt debacle. The oil company missed a $45 million payment on dollar
notes due 2022, Rio de Janeiro-based OGX said in a regulatory filing today. The
decision prompted Standard & Poor’s to assign its default rating to the
company and the bonds while Moody’s Investors Service and Fitch Ratings said
they’d give OGX the 30-day grace period before calling it a default. Batista,
once Brazil’s richest person, is seeking to renegotiate debt and avoid
bankruptcy after some offshore deposits he’d valued at $1 trillion turned out
to be duds. That triggered a selloff that wiped out $30 billion of his fortune
and pushed down bond prices to 16.5 cents on the dollar. “We do not expect the
company to pay the interest due within the five-business-day cure period
established by our criteria, and we believe this indicates a general default
and that the company will restructure its debt,” S&P analysts Renata Lofti
and Luciano Gremone said in a statement today. “This is based on OGX’s
virtually null cash flow.”
Weidmann
in sovereign debt warning - (www.ft.com) Jens
Weidmann, president of the Bundesbank, has risked angering Europe’s crisis-hit
governments by warning of the dangers posed by high levels of sovereign debt on
banks’ balance sheets. Writing in the Financial Times, Mr Weidmann demands that lenders cut their holdings of
government bonds and
set aside more capital to reflect their riskiness. “The time is ripe to address
the regulatory treatment of sovereign exposures,” he writes. His intervention
comes as the European Central Bank considers whether to offer another set of
cheap multi-year loans, known as long term refinancing operations or LTROs, as
its first two LTROs, deployed in 2011 and 2012, approach maturity. Anecdotal
evidence suggests a great part of the €1tn the ECB pumped into the
banking system in
LTROs was invested in sovereign debt.
Government
Shutdown Begins as Deadlocked Congress Flails - (www.bloomberg.com)
Government Nears Shutdown as Parties Reject Budget Plans - (www.bloomberg.com)
Government Nears Shutdown as Parties Reject Budget Plans - (www.bloomberg.com)
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