Credit agencies warn GOP of ‘death spiral’ (Politico)
House Republicans were cautioned Thursday in a closed door meeting with credit rating agency officials that a “death spiral” in the bond market was one of the possible outcomes in the event of default. One official warned of a worst-case scenario in which a default on the nation’s credit could result in a rapid drop in bond values, sparking chaos in the markets — a dramatic warning as Washington worked on a possible deal on deficit reduction and an increase in the debt limit.

Main rating agencies set to signal default (FT)
Strategists expect all three main rating agencies to determine that Greece has defaulted, because bondholders will suffer losses whatever plan policymakers decide to adopt involving private creditors. The options are debt exchanges, rollovers or buy-backs. Although all three rating agencies were not commenting on Thursday, strategists say Standard & Poor’s is likely to put Greece on selective default, while Fitch will follow a similar route and put the country on restricted default, which is the same thing…Many strategists say a default may not have a big effect on the market as Greece would only default on a temporary basis. Both Standard & Poor’s and Fitch are likely to upgrade the country’s rating back to triple C, a low junk-grade status, once the debt exchange, rollover or buy-back has been initiated to reflect a forward-looking view of Athens, with its reduced debt burden.

Euro Leaders May Avoid Debt-Swap Trigger as They Weigh Default (Bloomberg)
A credit event enabling buyers of protection to seek compensation from swaps sellers wouldn’t occur if changes to the terms of Greece’s government bonds are voluntary. Politicians grappling with the Greek crisis have opposed any move that would trigger insurance payouts or a default rating on concern it would spread contagion.

AIG picks BofA, Citi, JPM for ILFC IPO (Reuters)
American International Group Inc (AIG.N) has picked banks to lead the initial public offering of its aircraft leasing unit and is now waiting for the U.S. Treasury to confirm the choice, a source familiar with the situation said. Bank of America Merrill Lynch (BAC.N), Citigroup Inc (C.N) and JPMorgan (JPM.N) are the banks that have been tentatively identified as the lead underwriters, the source said. The IPO could raise about $1.5 billion and value the aircraft leasing unit, ILFC, at $8 billion to $10 billion, the source said.

Wall Street Mind-Meld: Obama Still Gets Edge (Morning Money)
M.M. has been making the rounds of banks and private equity shops lately and talking to senior bankers about how they see the 2012 presidential campaign playing out given the perilous state of the economy and the likelihood of 8-percent-plus unemployment next fall. … Somewhat surprisingly, even those who strongly oppose the Administration’s policies still think the odds very much favor Obama’s re-election. The main reason cited is the fact that Obama could raise a billion dollars (with or without much Wall Street help) which would wipe out a lot of perceived problems …Other reasons often cited include the perceived weaknesses of all the leading GOP candidates and fact that Obama’s poll numbers are not much WORSE given the flood of bad economic news. “If you’d asked me earlier this year, I would have said no question Obama wins, and probably pretty easy,” one senior executive who is not a supporter of the President said. “I still think he wins, but it’s a lot closer to maybe 55-45 odds.” Read more »