Entries in Default (12)


US Postal Service to Default on $5.5 Billion Payment

Joe Raedle/Getty Images(WASHINGTON) -- In the 18 months the 112th Congress has been sworn in, the House has introduced 60 bills to rename post offices. Thirty-eight have passed the House and 26 have become law.

But not a single bill has come to the House floor aimed at reforming a Postal Service, which is bleeding billions of dollars because of Congressional mandates.

On Wednesday, the United States Postal Service will default on a Congressional mandate to pay $5.5 billion to “prefund” health benefits for future retirees.  On Friday, House of Representatives will leave town for a five-week summer vacation.  There is no plan to take up postal reform before that summer recess.

The Postal Service has attempted to enact an array of cost-cutting measures to pull itself out of a $22.5 billion budget shortfall.  Over the past five years, USPS has cut more than 110,000 employees.  The mail service, which takes no taxpayer money but is regulated by Congress, has announced plans to close or consolidate 230 mail processing centers, cutting 13,000 jobs and saving an estimated $1.2 billion annually.

The service attempted to close 3,700 post offices under a plan announced last year, but after public outcry decided to cut operating hours to between two and six hours per day at 13,000 locations.  USPS claims that move will save $500 million per year.

One of the largest cost-saving measures would be ending Saturday mail delivery, a move the Postal Service says will save $3.1 billion a year.  But USPS can’t cut delivery without Congressional approval, and partisan disagreements over whether Congress should take control of USPS’ operations until it is solvent again or if it should leave the decision making to the postmaster general have halted any action on Capitol Hill.

USPS claims that if Congress does not act, the mail service will default not only on the $5.5 billion payment due Wednesday, but also on another $5.6 billion payment for future retiree’s benefit due Sept. 30.

The Postal Service has pleaded with Congress for years to end the requirement that it pre-fund its retiree’s health benefits.  But many lawmakers claim that because USPS has such a massive workforce -- there are 614,000 Postal Service employees -- it will not be able to pay them in the future if it does not pre-fund retirement benefits.

And as long as these disagreements persist, it looks like naming post offices is the closest Congress will get to passing postal reform.

Copyright 2012 ABC News Radio


Greece Gets Enough Backing for Debt Swap Deal

Hemera/Thinkstock(ATHENS, Greece) -- Greece announced on Friday it has received enough support from investors to go forward with a debt swap deal that will spare the country from default.

Following weeks of negotiations, Greece's Finance Ministry says nearly 86 percent of private holders have agreed to the deal, which drastically cuts the value of their government bonds.

The agreement, which cuts the country's debt by about $140 billion, should help set up Greece for its second international bailout.

Copyright 2012 ABC News Radio


It May Be Easier to Score a New Credit Card in 2012

George Doyle/Thinkstock(NEW YORK) -- If you’re in the market for a new credit card, now is your time. There is a good chance that banks will increase their pace of opening new accounts in 2012 because of reports that consumer defaults have dropped so dramatically.

This means that even those with moderate credit scores should have an easier time getting approved for new credit cards.

Some of the top card companies have reported that their November defaults and late payments have remained below the levels that were typical before the recession hit.

According to Moody's credit agency, this means that banks will be more willing to lend to customers who may have had trouble making their payments on time in the past.

Copyright 2011 ABC News Radio


Foreclosure Filings Rise by 7% in October

iStockPhoto/Thinkstock(IRVINE, Calif.) -- The number of U.S. households that received a foreclosure notice rose again in October, hitting a seven month high, according to the latest report from RealtyTrac.

The foreclosure tracking firm said Thursday that 230,678 properties were hit with foreclosure filings last month, up seven percent from September.  The number of intial default notices also went up in October, jumping up 10 percent from the previous month.

The spike is largely due to the hold up in foreclosure proceedings that emerged last year, stemming from faulty paperwork and poor documentation.

"We've been in this kind of artificial lull in foreclosure activity over the last year honestly, but it's not because the market is improving, it's because the lenders haven't been able to process foreclosures as quickly," said RealtyTrac spokesman Daren Blomquist.  "We saw a lot of indications in the report that lenders are beginning to ramp up on foreclosure proceedings after being in a kind of extended period of delay."

Despite last month's increase, foreclosure activity is still down 31 percent from the same time period in 2010.

Copyright 2011 ABC News Radio


Italy’s Crisis: Why You Should Worry

Comstock/Thinkstock edit Delete caption

(NEW YORK) -- The ever-changing situation in Europe has left many feeling confused and distant.

However, the crisis may hit closer to home than you think, not just affecting the global economy, but the average American’s wallet as well.

Italian bond yields, a foreign term for most, pose a serious concern for us now. Those bond yields tell the U.S. what it costs Italy to raise money in order to pay its debts. Now those numbers are skyrocketing, making it harder for Italy to do so. Every uptick in the bond rating sends Italy closer to default.

So how does this affect the American wallet? Italy’s debt is five times the amount that Greece owes.  The effort to prevent Greece from defaulting on its debts has already been a messy process, so the prospect of Europe mustering the political will and cash to bail Italy is almost impossible to imagine.

If these economies do default and there is no bailout, the European economy is likely to collapse.

Italy makes up the world’s seventh-largest economy, and while Greece makes up two percent of the European Union’s GDP, Italy still makes up seventeen percent. An economy that large will not collapse in an orderly way and is likely too big for its European partners to bail out.

Europe is the number-one trading partner for U.S. businesses so a cold in Europe means a chill for the U.S. This would undoubtedly weaken the West’s economic clout and make easier China and India’s inextricable economic advance.

One could argue that the European crisis has already affected the U.S.  banking system. A new survey of loan officers by the U.S. Federal Reserve shows that credit conditions have tightened over the past three months, with only five domestic banks out of fifty saying that they relaxed their standards for lending to large companies.

There are still hopes that a coordinated effort between the Italian government and European Central Bank could do put up a strong enough firewall that would prevent the crisis from spreading.

However, the more time that goes by without a coordinated plan, the worse the problem gets. Global investors would respond well to some sense of political unity. But looking at Italy now, especially in the midsts of political upheaval, the markets see no signs of a willingness to make those tough decisions.

Copyright 2011 ABC News Radio


Foreclosure Filings Rise Slightly in Third Quarter; Default Notices Up 14%

ABC News(IRVINE, Calif.) -- The number of American households receiving a foreclosure notice inched up slightly in this year's third quarter, following three straight months of decreases.

RealtyTrac reported Thursday that 610,337 U.S. properties were hit with a foreclosure filing during the summer quarter, marking a 1 percent increase from the previous quarter.  The latest figure is down 34 percent from the same time period in 2010.

RealtyTrac CEO James Saccacio said the third quarter jump was fueled by a 14 percent increase in new default notices.

"We're going to start to see more foreclosures coming through the pipeline now that the paperwork and processing from the robo signing is getting cleared up," he said.

Saccacio is referring to the hold up in foreclosure proceedings that emerged last year, stemming from faulty paperwork and poor documentation.

Copyright 2011 ABC News Radio


Fourth Quarter Trading Kicks Off with Deficits

Hemera Technologies/Thinkstock(NEW YORK) -- Trading in the fourth quarter is set to kick off on a low Monday as worries over a possible Greek debt default persist.

U.S. stock futures are down ahead of Monday's opening bell after Greece’s Finance Ministry admitted on Sunday that it will not get its deficit down to the target originally agreed with international lenders.

Last week, Wall Street wrapped up its third quarter recording its worst quarter since the peak of the 2008 financial crisis.  The Dow Jones Industrial Average closed 241 points down on Friday, while the Nasdaq lost 65 and the S&P 500 shed 29.

Overseas, markets were also hit hard with the latest news out of Greece.  European stocks are trading lower on Monday and Asian ones ended the day with losses.  Hong Kong’s Hang Seng plunged 4.38 percent, Australia’s S&P/ASX 200 tumbled 2.78 percent, and Japan's Nikkei index fell 1.78 percent.

Copyright 2011 ABC News Radio


Foreclosure Filings Jump 7% in August, Default Notices Soar 33%

ABC News(IRVINE, Calif.) -- In what comes as more unwelcome news for the U.S. housing market, there appears to be a resurgence in the number of foreclosure filings.

According to the foreclosure tracking firm RealtyTrac, 228,098 households were hit with a foreclosure notice last month.  While the figure was down 33 percent from August of 2010, it did mark a 7 percent increase from July.

But what may be more alarming is the dramatic increase in the number of homeowners hit with an initial warning saying they're in default.

"The 33 percent increase [from July] in default notices was the biggest single monthly increase we've seen since August of 2007, 48 months ago," says Rick Sharga with RealtyTrac.

That increase could be a possible indication that banks are beginning to move forward with the long-delayed foreclosure clamp down after holding up foreclosure proceedings for months over faulty paperwork and poor documentation.

"There might be a break in the log jam that has been artificially slowing down foreclosure activity," says Sharga.

Copyright 2011 ABC News Radio


United States Postal Service Hopes for Federal Help as Debt Grows

PAUL J. RICHARDS/AFP/Getty Images(WASHINGTON) -- The United States Postal Service is in deep debt trouble and is counting on Congress to help out.

The USPS, which is not federally funded, has maxed out at its borrowing limit and will likely default on a $5.5 billion prepayment for employee health benefits, The New York Times reports.

The public shift of "snail mail" to email and online bill payments has caused mail handling to diminish, running debts to $9 billion this year with a $67 billion budget, according to the Times.

The USPS has appealed to Congress in the past to allow for the cutting of Saturday mail delivery.  But in spite of not receiving federal funds to support its service, the USPS' requests have been repeatedly rejected.

Now the Postal Service plans to make its request to eliminate Saturday delivery once again, and will seek to cut 220,000 over three years while looking into replacing 3,650 of its 32,000 offices with contracted retailers over the same amount of time, the Times reports.  Cutting Saturday delivery could save $40 billion over 10 years.

Despite the significant shift to online communication, Americans still want their mail delivered.  But this means Congress will have to pass a good amount of reforms.

Copyright 2011 ABC News Radio


Robert Reich: S&P Debt Warning is 'Height of Hubris'

Medioimages/Photodisc(WASHINGTON) -- It's the "height of hubris" for ratings agency Standard & Poor's to suggest it may cut the credit rating of the U.S. even if the debt crisis is solved, says Robert Reich, former labor secretary in the Clinton administration.

"No credit rating agency has gone as far as S&P," he told ABC News on Wednesday. "That's a highly political move. I'm surprised they are doing it."

Reich, who is a professor of public policy at the University of California, Berkeley and has also worked under Presidents Carter and Obama, called the credit rating agency's latest reports "irresponsible."

With just days to go until the Treasury estimates the U.S. could default on its sovereign debt, Reich said S&P has no business sharing its political opinions about U.S. economic policy. The U.S. currently has the highest AAA rating on its debt, which tops $14 trillion. A lower debt rating would mean higher borrowing costs for the U.S., adding billions more to the debt.

While ratings agencies testified Wednesday at a House financial services committee hearing on their role in the subprime mortgage market, Reich pointed out that Standard & Poor's contributed to the financial meltdown by giving AAA ratings to some of Wall Street's riskiest packages of mortgage-backed securities and collateralized debt obligations.

S&P's threat of a downgrade to the nation's credit rating goes one step further than Moody's and Fitch, the other two major credit rating agencies, by declaring even if Congress agrees to lift the $14.3 trillion debt limit, they and President Obama must also reduce the deficit by $4 trillion over 10 years.

In April, Standard & Poor's cut the U.S. ratings outlook to negative from stable and warned that its AAA rating is at risk unless lawmakers agree on a plan by 2013 to reduce the budget deficit and nation's debt.

On July 13, Moody's said it was reviewing the country's credit rating for a possible downgrade.

In one Standard & Poor's report on July 18, the agency stated it may lower the U.S. long-term rating "by one or more notches" into the "AA" category in the next three months if it concludes Congress and the White House "have not achieved a credible solution to the rising U.S. government debt burden and are not likely to achieve one in the foreseeable future."

On Wednesday, Fitch Ratings said U.S. treasuries would continue to be the "global benchmark security" in the long term because of the country's strong credit profile. Fitch's report said the $9.3 trillion in marketable U.S. Treasury securities is roughly five times the size of French ($1.9 trillion), UK ($1.8 trillion), and German ($1.6 trillion) government bond markets.

While there is no precedence for a downgrade on U.S. sovereign debt, Fitch said the most recent standard of comparison is Japan's downgrade to AA+ from AAA in September 1998, and in May, when Fitch gave Japan's current 'AA' rating a "Negative Outlook."

"Japanese government bond markets remain liquid despite losing AAA status, and the yen has retained its role as a major global currency," the report stated. David Stockman, former director of the Office of Management and Budget under President Ronald Reagan, told ABC News that the coast is not clear for financial markets.

"Bond fund managers are as clueless as the House GOP," Stockman said. "Without significant tax increases, the Federal budget is a financial doomsday machine -- but now even Obama and the Senate Dems have given up on taxes. So in substance, the default has already happened -- it's just a matter of time before bondageddon actually happens."

Copyright 2011 ABC News Radio

ABC News Radio