Entries in United States (31)


Treasury Secretary Tim Geithner: US Banks Reduce Risk over Europe Economies

Darren McCollester/Getty Images(WASHINGTON) -- Treasury Secretary Timothy Geithner told Congress Thursday that while a severe economic crisis in Europe could cause harm in the U.S., major banks here have reduced their risk over problems in the European economy.

“U.S. financial institutions, including our major banks, the money market funds as a group, have substantially reduced their exposure to the economies of Europe that have been under the most pressure,” Geithner told the Senate Banking Committee. “Our direct financial exposure to these governments and their institutions is quite small, but it’s important to recognize that Europe is so large and so closely integrated with the U.S. and the world economies that a severe crisis in Europe could cause significant damage to growth here and around the world.”

The Obama administration has urged European leaders to deal more forcefully with a debt crisis that could significantly damage the U.S. and global economy.

“Developments in Europe can have big effects on the United States economy, big effects on confidence, big effects on financial markets and we’re living with the pressures today,” he said. “And they have hurt growth here, and they have reduced expectations about future growth.”

Geithner told the committee the U.S. needed to take action to stimulate growth and called for the passage of the president’s American Jobs Act.

“Now, in the face of situation in Europe and the general slowdown in growth around the world, the most important thing we can do here in the United States is to act to strengthen our economy,” he said.

Geithner also told the senators he expected the housing crisis would not end anytime soon.

“Things are still terrible. And this is going to take years still,” he said. “And what you see now is two things: You see the broader weakness in the economy, unemployment above nine percent, income growth slower.”

The treasury secretary said that puts additional pressure on the housing market. “It’s all hurting housing demand, slowing the pace, making more people vulnerable to losing their homes,” he said. “But even apart from that, we still have a foreclosure process essentially broken, a servicing framework that is not doing a good enough job at helping people stay in their home or transition to other forms of housing.”

Copyright 2011 ABC News Radio


SEC Subpoenas Firms on Possible Insider Trading before US Downgrade

Ryan McVay/Thinkstock(WASHINGTON) -- Federal financial regulators have reportedly stepped up their investigation into cases of possible insider trading before the U.S. government's credit rating was downgraded last month.

Citing people familiar with the matter, The Wall Street Journal says the Securities and Exchange Commission wants to know more about traders who bet the stock market would tumble just before Standard and Poor's downgraded the U.S. from its triple-A rating on Aug. 5.  Those trades could have been hugely profitable.

SEC regulators have issued subpoenas, demanding more information from hedge funds, specialized trading shops and other firms, according to the Journal.  But it may be difficult to prove wrongdoing -- the downgrade was rumored for weeks, especially in the hours before the announcement was made.

Copyright 2011 ABC News Radio


How Did Most Desperate US Cities Fall into Bankruptcy?

Comstock/Thinkstock(VALLEJO, Calif.) -- The city of Vallejo, Calif., knows what it's like to go through desperate times -- a distinction it shares with similarly-blighted towns and counties around the U.S., including Central Falls, R.I., Harrisburg, Pa., Boise County, Idaho, and Jefferson County, Ala.

All these municipalities are either facing bankruptcy, have already declared it, or, like Vallejo, are now emerging from it painfully.

Few cities get so desperate as to seek bankruptcy protection.  Since 1937, when Chapter 9 filings first became an option for municipalities, there have been only 625 filings, says Chicago attorney James Spiotto, who has written books on the subject.  Only five communities this year have filed for bankruptcy, while six filed in 2010.

For some towns, bad times arrived slowly by a variety of roads.  For others, a single event tipped them into darkness.

The closing in the 1990s of a U.S. Navy base pulled the financial rug out from under Vallejo.

Boise was the victim of bad legal luck: A jury ruled in 2010 that the county had wrongly prohibited a developer from building a teen treatment center.  The developer won a $4 million judgment, which Boise has been hard-pressed to pay.

Harrisburg fell victim to the "incinerator from hell" -- a waste-to-energy incinerator whose renovation caused the town to go $310 million into debt, five times as much money as the city has in its general fund, according to the Stateline newspaper.  Pennsylvania in December declared the city -- its capital -- financially distressed.

Jefferson County in Alabama, home to Birmingham, has been suffering for three years from the collapse of a sewer bond refinancing.  As of mid-August, it stood poised to file the largest municipal bankruptcy in U.S. history, according to Bloomberg News.  It has since delayed filing to continue negotiating with its creditors.

Central Falls' economy declined over many years, starting in the 1970s, when local textile makers began moving plants overseas.  Some 1,400 jobs ultimately were lost, according to the National Council of Textile Organizations.  Crime increased to the point that Central Falls in 1986 was crowned the cocaine capital of New England by Rolling Stone magazine.

According to court papers, Central Falls ran out of money to pay its bills on Aug. 31.  It has a structural budget deficit of $5.6 million and an unfunded liability of about $80 million for retirement benefits and pensions.

To stave off bankruptcy, Central Falls now is trying to wrest back from its police and firemen some $2.5 million in promised pension benefits.  It has eliminated funding for its library, laid off staff, and has closed a community center.

All this pales, however, in comparison to what Vallejo has been through. Since filing for bankruptcy in 2008, the town has become overrun by crime and prostitution in the wake of budget cuts that have reduced the city's police force by almost half.  Prostitutes and pimps can be seeing plying their trade in the middle of residential areas.

In response, residents have taken matters into their own hands, instituting a neighborhood watch program, The Kentucky Street Watch Owls -- or, unofficially, the "Ho Patrol."

Copyright 2011 ABC News Radio


Biden to Chinese: ‘You Have Nothing to Worry About’ Regarding US Debt

Official White House Photo by Pete Souza(SHANGHAI) -- Vice President Joe Biden offered bold reassurances on the strength of the economy and safety of U.S. Treasuries in his first direct meetings with Chinese leaders since the debt ceiling crisis and U.S. credit downgrade.

Biden said China, the U.S.’s largest foreign creditor, has “nothing to worry about” with respect to its holdings of U.S. debt, despite recent concerns aired by some Chinese that American politicians are “dangerously irresponsible” and “addicted to debt.”

“No one has ever won betting against the U.S. economy,” Biden said during a joint statement with Chinese Premier Wen Jiabao.  “I point out U.S. treasuries, we’re going to -- we’re going to take care of very closely not merely because China owns 8 percent of them, but because the Americans own 85 percent,” Biden said.

“Very sincerely, I want to make clear that you have nothing to worry about in terms of their -- their viability,” he added.  

Wen directly acknowledged the U.S. debt crisis and recent brinkmanship over an effort to raise the debt ceiling, but expressed confidence the U.S. would overcome the “difficulties.”

“It’s particularly important that you sent a very clear message to the Chinese public that the United States will keep its word or -- and its obligations with regard to its government debt,” Wen said. “It will preserve the safety, liquidity and value of U.S. treasuries.”

Earlier this month China’s state-run Xinhua News Agency issued a scathing response to the S&P credit downgrade, chastising the U.S. and further rattling investors’ nerves.

“The U.S. government has to come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone,” the wire service said. “China…has every right now to demand the United States to address its structural debt problems and ensure the safety of China’s dollar assets.”

Biden is visiting China as part of a week-long mission to East Asia. He heads next to Mongolia and Japan.  

Copyright 2011 ABC News Radio


US Debt: Fitch Reaffirms AAA Credit Rating

Comstock Images/Thinkstock(WASHINGTON) -- Fitch Ratings says it is keeping the United States’ debt at a AAA rating, citing the country’s "flexible, diversified and wealthy economy.”

Fitch also said that its long-term outlook on the U.S. rating is stable.

The group’s more positive outlook comes on the heels of a U.S. downgrade from Standard and Poor’s to AA.

“This does tend to -- I think -- to some extent, mitigate the bad news of the downgrade of Standard and Poor's,” economist Hugh Johnson said of the Fitch announcement on Tuesday.

“I think it's far more accurate and much more sensible.”

Copyright 2011 ABC News Radio


Uncle Sam, Landlord, Looking for Help

ABC News(WASHINGTON) -- Uncle Sam serves as landlord for at least 90,000 homes that owners lost to foreclosure, and tens of thousands more in the pipeline as families are evicted and properties are appraised.

And now Uncle Sam is looking for help.

On Wednesday, the Federal Housing Finance Agency (FHFA) is asking for information from industry and the public on what might be done with the inventory currently held by mortgage giants Fannie Mae, Freddie Mac, and the Federal Housing Administration. 

FHFA is also trying to find out how to help neighborhoods where too many homes are in foreclosure, sometimes empty and unkempt, lowering values on the whole block.

One option: turning foreclosures held by the government into rental homes. That way, cheap foreclosures would not compete with other houses on the sales market.  Local companies would probably be asked to manage any government rentals.

Copyright 2011 ABC News Radio


Downgrade Backlash Puts S&P Under Microscope

Scott Eells/Bloomberg via Getty Images(DETROIT) -- First, Standard & Poor's downgraded U.S. debt from AAA to AA+.  Now, critics in and out of government are returning fire -- downgrading the credit rating company rhetorically and perhaps soon putting it under a more official microscope.

Even as S&P issued new rating downgrades from AAA to AA+ against municipal entities backed by federal leases in Miami, Atlanta and Tacoma, Washington, according to Bloomberg, the Senate Banking Committee was looking at S&P, ABC News has learned.

A committee aide said the Democrat-controlled body "is looking into the issue and gathering more information" but emphasized that so far there was no official committee probe or investigation.

In Detroit Monday, as homeowners about to lose their houses to foreclosure tried to restructure their toxic mortgages once rated AAA by S&P, a populist backlash was forming against one of the most powerful economic voices in this country.

"What credibility does S&P have as a credit agency when they did such a terrible job?" asked Peter Lawler, a homeowner.

ABC News has received angry emails from the outraged, who've called the S&P downgrade "ridiculous," "unpatriotic," saying the company should be ashamed.

"Credits agencies are a scam," wrote Judy from Georgetown, Texas.

So who are these guys who make the decisions some Americans seem so angry about?

Standards & Poor's Rating Service has been grading corporate bonds for 90 years.  Today, it has 1,226 employees and does $75 million in business every year in more than 20 countries.

But Jules Kroll, one of its main critics, who started his own, smaller rating service, says S&P is not big enough to judge 100 countries because it has only about 100 actual analysts.

"Doing analysis of the economy of the United States and its likelihood of default is something that requires enormous resources that go far beyond the resources of S&P," Kroll said.

S&P missed the Enron crisis, giving the failed company high ratings until the day it went bankrupt.  In 2008, it gave a AAA rating to toxic waste mortgages.  Then, it gave an A rating to Lehman Brothers just before the investment bank went under.  It also failed to sound the warning about the serious economic troubles in Ireland, Spain and Greece.

Despite the anger at S&P, critics have argued that it is merely the messenger, and that the government is to blame for not getting its fiscal house in order sooner.

Copyright 2011 ABC News Radio


US Mint: Wasting Money by Making Money

DC Productions/Thinkstock(BALTIMORE) -- The U.S. Mint in Philadelphia is a big, noisy, busy operation, capable of minting nearly 2 million presidential dollar coins daily. But most of those coins go into storage, never seeing the light of day. Costing 32 cents apiece to produce, these manganese brass dollars have proven unpopular with a public that prefers paper.

ABC News went to one such storage facility, the Federal Reserve in Baltimore, where the coins are in plastics bags and cardboard boxes, stacked one on top of another, creating several aisles of presidential coinage worth millions of dollars.

In their most recent annual report to Congress, the Federal Reserve says the coins are piling up so quickly they will need to spend $650,000 to build a new vault in Dallas to hold them. Shipping the coins to the new secure facility will cost an additional $3 million.

Passed by Congress in 2005, the Presidential $1 Coin Act ordered the mint to make millions of coins to honor every dead president, but not even Sen. Jack Reed, D-R.I., one of the co-sponsors of the original bill, uses the legal tender.

"Do you use these things? Do you have any of these things in your pocket?" Reed was asked by ABC News' Jonathan Karl while holding the dollar coins. "I don't I tell you, but I like everyone else repeatedly use nickels, dimes, quarters. In fact I have a little jar in my car for the traffic meters."

Reed and other senators sent a letter this week to Fed Chairman Ben Bernanke and Mint Acting Director Richard Peterson asking for help in improving the program while eliminating waste of taxpayer resources.

Meanwhile, the coins keep coming off the production lines, already more than a billion made and counting. The Fed's report estimates that they could have more than $2 billion in excess $1 coins by the time the program is expected to end five years from now.

Copyright 2011 ABC News Radio


Debt Debate: Moody's Puts US on Review for Downgrade YORK) -- It has happened. Moody's had said it would put the United States on review for downgrade if there is not substantial progress on a debt deal by mid-July. They did just that Wednesday afternoon.

"Moody's considers the probability of a default on interest payments to be low but no longer to be de minimis," reads a press release from the credit rating agency. "An actual default, regardless of duration, would fundamentally alter Moody's assessment of the timeliness of future payments, and a AAA rating would likely no longer be appropriate."

Of great interest here -- Moody’s says that even if the debt ceiling is raised, the agency will likely downgrade the outlook for U.S. ratings to negative unless a “substantial and credible” deal is struck to put the nation’s future borrowing and spending ways on a more sustainable path.

Financial markets are already reacting to this news even as negotiators in Washington seek a deal behind closed-doors.

The U.S. Treasury Department quickly reacted with its own statement.

“Moody’s assessment is a timely reminder of the need for Congress to move quickly to avoid defaulting on the country's obligations and agree upon a substantial deficit reduction package," said Under Secretary for Domestic Finance Jeffrey A. Goldstein.

Copyright 2011 ABC News Radio


US and Mexico End Decades-Long Trucking Dispute, Boost Trade

Digital Vision/Thinkstock(MEXICO CITY) -- The United States and Mexico reached an agreement Wednesday to end a ban on Mexican trucks entering the U.S., which lasted nearly two decades.  Putting an end to the measure will cut punitive tariffs by half within the next 10 days and remove the rest on about $2.4 billion worth of U.S. products by the end of this summer, according to the Los Angeles Times.

Transportation Secretary Ray LaHood and Mexican Communications and Transportation Minister Dionisio Perez-Jacome signed the agreement in Mexico City Wednesday.  LaHood's outlook on trade was a positive one.

"The agreements signed today are a win for roadway safety and they are a win for trade," he said in a statement Wednesday.

The expectation is that road safety will improve under the terms of the agreement.  The pact requires that Mexican trucks carry monitoring systems that will track hours of service and routes; drivers partake in tests of their ability to read and understand English and U.S. traffic signs; drivers take drug test on a regular basis and that they allow for reviews of driving records.  U.S. drivers and trucks will comply under the same terms in Mexico.

The U.S. Chamber of Commerce Wednesday lauded the agreement to end the ban and boost exports to Mexico.

"This is a vital step toward a more efficient U.S.-Mexico border," said Chamber president and CEO, Thomas J. Donahue.  "We urge Congress to support this agreement and let this dispute be brought to an end."

Copyright 2011 ABC News Radio

ABC News Radio