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STORIES:
Panicking
Spaniards Pull Out Cash, Leave Country - (www.cnbc.com)
It is, Julio Vildosola
concedes, a very big bet. After working six years as a
senior executive for a multinational payroll-processing company in Barcelona,
Spain, Mr. Vildosola is cutting his professional and financial ties with his
troubled homeland. He has moved his family to a village near Cambridge, England,
where he will take the reins at a small software company, and he has
transferred his savings from Spanish banks to British banks. “The macro
situation in Spain is getting worse and worse,” Mr. Vildosola, 38, said last
week just hours before boarding a plane to London with his wife and two small
children. “There is just too much risk. Spain is going to be next after Greece,
and I just don’t want to end up holding devalued pesetas.” Mr. Vildosola is
among many who worry that Spain’s economic tailspin could eventually force the
country’s withdrawal from the euro and a return to its former currency, the
peseta.
Food-Stamp Use Climbed to Record 46.7 Million in June, U.S.
Says - (www.bloomberg.com) Food-stamp use reached a record 46.7
million people in June, the government said, as Democrats prepare to nominate
President Barack Obama for a second term with
the economy as a chief issue in the campaign. Participation was up 0.4 percent
from May and 3.3 percent higher than a year earlier and has remained greater
than 46 million all year as the unemployment rate stayed higher than 8
percent. New jobless numbers will be released Sept. 7. “Too many middle-class families who have
fallen on hard times are still struggling,” Agriculture Secretary Tom Vilsack
said in an e-mailed statement today. “Our goal is to get these families the
temporary assistance they need so they are able to get through these tough
times and back on their feet as soon as possible.”
Assessing Fannie's Past and Future - (online.wsj.com) The man with the keys to the
White House on Nov. 7 will face a major piece of unfinished business from the
financial crisis: What to do with Fannie Mae and Freddie Mac, the two
government-backed providers of money for home mortgages? Four years ago almost
to the day, the Bush administration seized control of the two companies amid
staggering losses on millions of mortgages they owned or guaranteed. So far,
the Treasury has pumped about $142 billion into Fannie and Freddie to prop them
up. Despite their financial woes, they remain the nation's biggest suppliers of
funding for home loans. With the help of Uncle Sam's credit rating, they borrow
money in the bond market and use it to buy mortgages from lenders or guarantee
mortgage-backed securities against the risks of default. That effectively
subsidizes consumer borrowing costs.
Breaking Up Banks Is Hard With Traders Hooked on Deposits -
(www.bloomberg.com) Shareholders of Wall Street
banks who agree with former Citigroup Inc. (C) Chief
Executive Officer Sanford “Sandy” Weill that the companies should be broken up
face an obstacle: bondholders. That’s because trading on Wall Street relies on
borrowed money, or leverage, that can be obtained cheaply as long as the
traders belong to a conglomerate such as Bank of America Corp., JPMorgan Chase & Co. (JPM) or
Citigroup that gets federally insured deposits. Jefferies Group Inc. (JEF), a securities
firm that isn’t part of a bank and can’t turn to the Federal Reserve for help,
currently is charged more to borrow in the credit markets. “If you divorce them from the mother ship,
you’d also be divorcing them from the government at the same time, and that’s
where the subsidy is,” Cornelius
Hurley, director of the Morin Center for Banking and Financial Law
at Boston University, said in a telephone interview. “The funding advantage is
the key.”
Young and without a future - (www.washingtonpost.com) Enea Gjoni is sitting silently
with some of his friends at an outdoor cafe that has become a gathering place
for the Greek capital’s unemployed youth. No one is talking. They have
been here for hours, as they have every other day for the past few months, and
have pretty much run out of things to say. A year ago, Gjoni, 19, graduated
from a technical high school in the city with modest life goals: He wanted to
be an auto mechanic. But in a country that is entering its fifth year of
recession, he has been unable to find any work. “There’s no future here,” he
said as he idly stirred his coffee. More than 5.5 million young people across
Europe are unemployed, the European Commission reports, part of what scholars
are dubbing a lost generation.
ECB Braces For a Difficult September - (online.wsj.com) August was a good month for
Mario Draghi. September may not be so kind. The
European Central Bank president managed this summer to reduce Spanish and
Italian bond yields without spending a euro, by saying he will do
"whatever it takes" to preserve the currency, while dangling the
prospect of big-time bond buys. This month, a
number of events—starting with Thursday's monthly ECB meeting—threaten to derail
Europe's hopes for a quick resolution to its debt crisis. More muddling through
seems increasingly likely. Financial markets hope
Mr. Draghi adds detail to a plan outlined last month to revamp the ECB's
dormant bond-buying program and reduce borrowing costs for euro-bloc
stragglers. He could announce whether the bank plans informal yield objectives
for shorter-maturity bonds, and how it will communicate what it buys, and when,
to markets.
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