After Detroit declares bankruptcy, legal fights expected
Recapping the day's news and newsmakers through the lens of CNBC.
In Detroit, worries for pensioners, investors
Bankruptcy may seem like a way out for Detroit, but a day after the city's Chapter 9 filing, the future is cloudy. With the city owing as much as $20 billion, there's sure to be a legal fight as creditors grab for whatever they can get. Among the unknowns is whether the city will cancel pension benefits for its legions of retirees.
Other cities with financial troubles will be watching the legal precedents, as many municipalities share Detroit's problems of high unemployment, rising costs and flat or declining revenue. Also watching nervously are investors, who wonder how the bankruptcy court will treat the city's municipal bondholders. Dan Gilbert, founder of Quicken Loans, Detroit's largest landowner, says the city, which has suffered a huge population decline, must clear abandoned property before it can rebuild.
"The seniority of general obligation bonds is supposed to be higher than a lot of other parts of the market. So what the judge does with regard to that is going to be very important for the way that people treat municipal debt across the country."—CNBC's Kelly Evans
"There's something like 128,000 buildings, commercial and residential, that need to be removed. And once that happens, there's going to be opportunity ... where developers and people can start making investments again."—Dan Gilbert, founder of Quicken Loans
Is the dollar hurting earnings?
A strong dollar is great if you're vacationing overseas this summer, but not so good if you need strong corporate earnings. A number of major U.S. corporations say the strong dollar weakened the most recent quarterly results, says Kathy Lien, managing director at BK Asset Management. In fact, U.S. firms that rely primarily on domestic revenues are doing better than ones that need lots of foreign sales.
Measured against a basket of other currencies, the dollar has appreciated by more than 4 percent this year. In effect, a can of Coke sold in Japan now goes for $1 instead of $1.15 in January. Companies are having trouble hedging this currency risk.
"As the dollar rises, some companies are trying to do the right thing—they're trying to hedge. But the problem is that the hedges are becoming more expensive because of the embedded expectations for greater volatility in the foreign exchange market."—Kathy Lien of BK Asset Management
"While it may be early in the earnings season there's still one clear trend catching the attention of Wall Street, and it's all about revenue. Companies with much of it coming from within the United States have grown revenue by 4.6 percent so far this quarter, while those with less than half have grown only 1.6 percent, according to Thomson Reuters."—CNBC's Seema Mody
A step toward freer markets
Tinkering again with its mix of capitalism and communism, China on Friday announced some long-awaited reforms by removing government controls on loan rates banks charge customers. The People's Bank of China (PBOC) said that, starting Saturday, banks will be allowed to cut rates as much as they like to attract borrowers.
The move should end what many experts have felt were artificially high-borrowing costs, a system that favored state institutions over private ones. Analysts say the change, long resisted by the country's largest lenders, will allow credit to be allocated more effectively.
"They have been clamoring for this for years. It was considered one of the failures of the last government in China. We know that ultimately the goal is to have complete liberalization."—CNBC's Michelle Caruso-Cabrera
What bugs bank customers?
Banks spend fortunes to lure new customers, then often do too little to keep them. A survey by cg42, a management consultant, finds that the 10 largest U.S. banks, while making progress on customer relations in recent years, still have a long way to go. About 15 percent of customers are actively looking to switch banks at any given time, cg42 managing partner Steven Beck says.
The biggest irritations? Being nickel-and-dimed, being charged too much and being hit with overdraft charges.
"Mostly, what we are seeing is that folks go from one bad relationship, unfortunately, to another similar relationship, and the frustration continues."—cg42 Managing Partner Steven Beck
—By Jeff Brown, Special to CNBC.com