Portugal Slump to Deepen as Austerity Bites (Bloomberg)
Portugal’s economy will shrink more than forecast this year and contract in 2012 as the austerity measures that were required for an international bailout take hold, the country’s central bank said. Gross domestic product will shrink 2 percent this year and 1.8 percent in 2012 after expanding 1.3 percent in 2010, the Bank of Portugal said in its summer economic bulletin today. In March, before Portugal sought a rescue, the estimates were a 1.4 percent contraction this year and 0.3 percent growth in 2012.

European debt crisis: stock markets tumble as Italy fears mount (Guardian)
World stock markets accelerated their falls on Tuesday as Italy struggled to avoid being sucked into the escalating European debt crisis, and Greece moved closer to a default…The FTSE 100 index slumped by 133 points at one point in early trading in London, down more than 2.25%…Losses were also heavy across Europe. The German DAX was down 2.1% at noon, with France’s CAC 2.3% lower. In the bond markets, the yield – or interest rate – on Italian 10-year bonds approached 6%, the highest in at least a decade. Spanish yields hit 6.2%. Economists have warned that these borrowing costs are approaching unsustainable levels.

George Soros: Greek Default May Be ‘Inevitable’ (Reuters)
Greece is heading for default, or at least a devaluation, and European Union (EU) leaders have to adopt a “plan B” to stem contagion to the rest of the bloc, billionaire investor George Soros said on Tuesday. “Greece is heading towards disorderly default and/or devaluation … A Greek default may be inevitable but it need not be disorderly,” he wrote in an editorial for the Financial Times. “While some contagion … will be unavoidable, the rest of the euro zone needs to be ringfenced.

U.S. Tackles Housing Slump (WSJ)
The Obama administration is ramping up talks on how to revive the housing market, which is weighing on the economic recovery—and possibly the president’s re-election in 2012…Policy ideas include having taxpayer-owned mortgage giants Fannie Mae and Freddie Mac relax their rules for loans to investors, allowing those buyers to vacuum up excess housing inventory. In certain markets, Fannie and Freddie could hold some foreclosed homes off the market and rent them out to ease the property glut. Officials also could sweeten incentives for banks to reduce loan balances for borrowers who are underwater, or owe more than their homes are worth.

Bank’s Deal Means More Will Lose Their Homes (NYT)
Tens of thousands of Bank of America’s most distressed borrowers could be evicted and lose their homes more quickly as a result of a proposed settlement between the bank, which is the country’s largest mortgage servicer, and investors in its troubled mortgage securities. For struggling borrowers in better financial shape, the outcome could be more positive: the deal would include incentives for mortgage servicers to help homeowners who have fallen behind on their payments and whose homes are worth less than they borrowed.

Using Clawbacks to Punish Bank Executives (DealBook)
A common complaint has been the absence of prosecution of financial executives for their role in the economic crisis in 2008, but what is equally striking is the large compensation those executives received while their companies pursued increasingly risky policies that led to the crisis. The Federal Deposit Insurance Corporation has taken small steps to address this issue. It is pursuing claims for damages against former top executives at Washington Mutual, which became the largest bank failure in history.

Paul Pierce eliminated from main event (ESPN)
With only 20 minutes to go in Level 9, Paul Pierce made his exit from the WSOP main event…Players eliminated during Level 9 included ESPN.com’s Bernard Lee who lost his second critical race of the day, two-time WSOP main event champion Johnny Chan, Andy Bloch, Yevgeniy Timoshenko and Barry Shulman. David Einhorn’s hopes of a second deep main event run were also dismissed early in the level. Continue reading »

$$$ Italy Evolves Into E.U.’s Next Weak Link (NYT)

$$$ Obama Urges ‘Largest Possible Deal’ on Debt (Bloomberg)

$$$ California’s June Revenue Is $440 Million Above Estimates, Controller Says (Bloomberg)

$$$ Bank of America, Morgan Stanley Touch Crisis Lows (Deal Journal)

$$$ Ex-Goldman Director Can Pursue Case Against SEC (WSJ)

$$$ Moody’s Raises ‘Red Flags’ at 61 Chinese Firms (WSJ) Continue reading »