KeNo's Housing and Economic Portal: Thursday July 21 Housing and Economic stories

Wednesday, July 20, 2011

Thursday July 21 Housing and Economic stories

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TOP STORIES:

Europe lashes out over downgrades - (www.ft.com) Senior European officials lashed out at Moody’s on Wednesday, questioning the timing of the debt rating agency’s downgrade of Portuguese bonds this week and threatening new regulatory action against all three major rating agencies. The high-profile criticism follows long-simmering European complaints about Moody’s and its two competitors, Standard & Poor’s and Fitch, centring on whether they have improperly attempted to influence policy-making in the ongoing debt crisis. The Portuguese downgrade – four notches to “junk” status – comes amidst a heated debate over how hard to push private owners of Greek debt to delay repayments from Athens. José Manuel Barroso, president of the European Commission, questioned the timing, and said Moody’s was guilty of “mistakes and exaggerations”.

Exclusive: Treasury secretly weighs options to avert default - (www.reuters.com) A small team of Treasury officials is discussing options to stave off default if Congress fails to raise the country's borrowing limit by an August 2 deadline, sources familiar with the matter said on Wednesday. Senior officials, including Treasury Secretary Timothy Geithner, have repeatedly said there are no contingency plans if lawmakers do not give the U.S. government the authority to borrow more money. But behind the scenes, top Treasury officials have been exploring ways to prevent a financial meltdown that would be triggered if the government were unable to pay its bills on time, sources told Reuters. Treasury has studied the following issues:

- Whether the administration can delay payments to try to manage cash flows after August 2

- If the U.S. Constitution allows President Barack Obama to ignore Congress and the government to continue to issue debt

- Whether a 1985 finding by a government watchdog gives the government legal authority to prioritize payments.

Heavy selling hits eurozone bonds - (www.ft.com) Eurozone bond markets suffered heavy selling on Wednesday after Portugal’s downgrade to “junk” knocked investor confidence in the region and raised fears the debt crisis would intensify. The action by Moody’s, the US rating agency, sent Portuguese and Irish government bond yields to euro-era highs and led to one big European company pulling a debt deal. Shares in a number of European banks tumbled. Suki Mann, credit strategist at Société Générale, said: “The action on Portugal has put the brakes on any recovery hopes we may have had for eurozone government bonds for the moment.” The biggest move was a leap in two-year Portuguese bond yields, which have an inverse relationship with prices. Two-year yields jumped 3.8 percentage points to 16.74 per cent, one of the biggest daily moves of the year.

Democrats Break With Obama, Oppose Entitlement Cuts In Debt Ceiling Deal - (www.businessinsider.com) House Minority Leader Nancy Pelosi (D-CA) says Democrats will not support any entitlement benefit cuts as part of a deficit reduction package. "We do not support cuts in benefits to Social Security or Medicare," she said after today's meeting at the White House. Pelosi is the most prominent Democrat to raise objection to cuts endorsed by Obama as part of a "big" deficit deal proposal — as large as $4 trillion in cuts over 10 years — echoing comments from Sen. Chuck Schumer (D-NY) and Sen. Barbara Mikulski (D-MD) expressing surprise that steep entitlement cuts are under consideration. Democratic lawmakers said they first learned of the $4 trillion proposal through media reports. "Good politics starts with good communication, and I think they should have come and talked to us about the direction, particularly when it’s the social contract and we feel so strongly about it,” Mikulski told National Journal.