Morgan Stanley Cuts Outlook, Cites Threat Of Recession (Reuters)
Morgan Stanley slashed its global growth forecast for 2011 and 2012, saying the U.S. and the euro zone were "dangerously close to a recession", and criticized policymakers in Washington and Europe for not acting more decisively to contain the sovereign debt crisis. The bank cut its global gross domestic product growth forecast to 3.9 percent from 4.2 percent for 2011, and to 3.8 percent from 4.5 percent for 2012.

Fed Eyes European Banks (WSJ)
The New York Fed recently has been holding extensive meetings with the lenders to gauge their vulnerability to escalating financial pressures. The Fed is demanding more information from the banks about whether they have reliable access to the funds needed to operate on a day-to-day basis in the U.S. and, in some cases, pushing the banks to overhaul their U.S. structures, the people familiar with the matter say. Officials at the New York Fed "are very concerned" about European banks facing funding difficulties in the U.S., said a senior executive at a major European bank who has participated in the talks.

S&P Backs French Triple-A Rating (WSJ)
"We're confident in the triple-A rating, stable. We have confirmed it, we confirm it today," said Carol Sirou, the head of S&P in France, in an interview on French radio. "There are several rumors, but we never comment on them."

Lawyer: SEC Files Were Illegally Destroyed (NYT)
An enforcement lawyer at the Securities and Exchange Commission says that the agency illegally destroyed files and documents related to thousands of early-stage investigations over the last 20 years, according to information released Wednesday by Congressional investigators. The destroyed files comprise records of at least 9,000 preliminary inquiries into matters involving notorious individuals like Bernard L. Madoff, as well as several major Wall Street firms that later were the subject of scrutiny after the 2008 financial crisis, including Goldman, Lehman, Citi and Bank of America...The agency’s records were routinely destroyed under an S.E.C. policy, since changed, that called for the disposal of records of a preliminary inquiry that was closed if it did not get upgraded to a formal investigation, according to Congressional records and people involved in inquiries into the matter.

Grassley Questions SEC Over Records Claims (Bloomberg)
U.S. Senator Charles Grassley asked the Securities and Exchange Commission to answer allegations that the agency destroyed files from initial investigations of firms including Goldman Sachs Group, SAC Capital and Bernard Madoff Investment Securities LLC. Grassley, the top Republican on the Senate Judiciary Committee, made the request in a letter to SEC Chairman Mary Schapiro dated yesterday, citing claims by an agency employee that more than 9,000 such files have been purged. The Iowa lawmaker asked Schapiro to explain whether the SEC routinely destroys documents related to so-called matters under investigation that are dropped in their initial phases. “It doesn’t make sense that an agency responsible for investigations would want to get rid of potential evidence,” Grassley said in a statement. “If these charges are true, the agency needs to explain why it destroyed documents, how many documents it destroyed over what timeframe, and to what extent its actions were consistent with the law.”

Pope Demands Greater Ethics In Economic Policy (AP)
He said: "Man must be at the center of the economy, and the economy cannot be measured only by maximization of profit but rather according to the common good." "The economy doesn't function with market self-regulation but needs an ethical reason to work for mankind," he told reporters traveling aboard the papal plane. He said the current crisis shows that a moral dimension isn't "exterior" to economic problems but "interior and fundamental."

In Shades Of Panic Past, A Dash To Cash (WSJ)
Investors yanked a whopping $30 billion from equity mutual funds last week, according to the Investment Company Institute. That isn't just the biggest weekly outflow since October 2008, it is also larger than any outflows for a whole month since that time. This flight to cash—both by households and institutions—is a warning sign for growth. Such recurring risk aversion was a key reason the stock market crash of 1929 begat the Great Depression, as none other than current Fed Chairman Ben Bernanke argued in a 1983 research paper.

US Inquiry Eyes S&P Ratings Of Mortgages (NYT)
In the mortgage inquiry, the Justice Department has been asking about instances in which the company’s analysts wanted to award lower ratings on mortgage bonds but may have been overruled by other S.& P. business managers, according to the people with knowledge of the interviews.

Fed May Have Bullets Left, But Are They Blanks? (Reuters)
Y/N/maybe?

BofA Mortgage Risk May Rise in MBIA Case (Bloomberg)
If New York Supreme Court Justice Eileen Bransten and judges in similar cases across the country rule that the issue of “causation” doesn’t apply -- meaning it’s enough to show that the loan was improperly made -- it “could significantly impact” Bank of America’s potential costs, the bank said in a regulatory filing this month. Such court defeats may add as much as $9 billion to what Bank of America owes bond insurers, according to hedge fund Branch Hill Capital, which is betting against its stock and has invested in MBIA. A victory for Armonk, New York-based MBIA may also strengthen claims by mortgage-securities investors that want the Charlotte, North Carolina-based bank to pay more than the $8.5 billion it’s offered them as a settlement.

A Bid To Rename Homo Sapiens (LS)
For about 250 years, our species has been known as Homo sapiens, a scientific name in Latin that means "wise man." Given the havoc humans are wreaking on natural systems, putting ourselves and so many other living things in peril, we don't deserve this name, contends Julian Cribb, an Australian science writer and book author. In a letter published in the Aug. 18 issue of the journal Nature, Cribb makes a proposal. "Changing our species name might risk infringing some of the hallowed rules of nomenclature, but it would send an important signal about our present collective behavior," he writes. Cribb has no suggestion for a new name, "because I want humanity at large to discuss this issue — not just scientists," he said.