Goldman Delayed in Attempt to Repay Buffet?(CNBC via Reuters) Goldman Sachs has apparently hit a snag with the Fed in its bid to repay Berkshire Hathaway's $5 billion investment. The delay may be related to the Fed's unwillingness to allow Goldman to make adjustments to its capital levels before allowing other banks the same opportunity. Goldman Sachs is paying a burdensome 10 percent annually on the debt — and would presumably wish to replace it with funding at a better rate, now that the debt markets have unfrozen and financing costs have dropped dramatically.
Sovereign Debt Issues in Europe Shake EU to its Core; Dissolution Fears Rise (Wall Street Journal) Reports surfaced today of the European Central Bank exerting pressure on the Irish government to accept a bailout arrangement. Ireland has resisted—and 'fiercely denied' that it was in bailout talks in the first place. This comes as the Portuguese finance minister openly made reference to ' a scenario of exit from the euro-zone' in order to put its finances in order.
QE2 Effects Being Seen in Futures Market (Bloomberg) Fixed income derivates have begun to price in the U.S. Federal Reserve's monetary easing: "As the central bank starts a second round of purchases of Treasuries through its so-called quantitative-easing policy, investors are paying eight times more than in April for options on interest-rate swaps that protect against rising yields relative to those that bet on them falling, according to Barclays Plc data. Bonds that compensate for higher consumer prices also show heightened inflation expectations." Remember, inflation is the goal of the asset purchases, which hope to forestall a deflationary spiral before it begins.
Europe Wrestles with the Financial Mechanics of Bank Defaults (CNBC via Reuters) Axel Weber, of the European Central Bank, is floating several proposals about the use of convertible bonds and other instruments to facilitate the orderly wind down of large banks. In Europe, as in the United States, 'moral hazard' is an issue that remains in the foreground in discussions about systemically important financial institutions.
Caterpillar Announces $8.6 Billion Deal to Buy Mining Equipment Manufacturer Bucyrus (CNBC via Reuters) The deal has been approved by the board of directors of both companies. (In recent months, Bucyrus has announced at least one deal related to the new business driven by the surging price of gold.)