Washington News Brief

Washington

· The US faces one of the steepest budget crunches in the world; over the next few years, governments around the world will have to cut $4T from their budgets; the US has one of the steepest reductions of all to make.  Under the current projections, the US debt-to-GDP will climb to >100% by ’15, a far steeper increase than is being forecast in many other countries.  The US has one of the lowest average maturities in the world also.  London Telegraph.  http://blogs.telegraph.co.uk/finance/edmundconway/100005702/us-faces-one-of-biggest-budget-crunches-in-western-world-imf/

· Opposition rising among fellow Dems and Wall St execs to the Lincoln Blanche derivatives ban provision - http://www.nytimes.com/2010/05/16/us/politics/16derivatives.html?partner=rss&emc=rss

· Gulf oil spill – signs of hope after BP says it was successful in inserting a tube into the broken pipe spilling oil into the gulf; increasing chances that BP will be able to siphon off much of the oil that is now gushing into the sea – WSJ   http://online.wsj.com/article/SB10001424052748704614204575245810666495600.html?mod=WSJ_hps_MIDDLETopStories

· Gulf oil spill – “giant plumes of oil” found beneath surface of the water, raising worries the magnitude of the spill is many times worse than feared – the Times says there is a “shocking amount” of oil beneath the water that isn’t visible from the surface.  NYT  The crude could be rushing out at a rate of 25-80K barrels per day vs. the official flow rate of only 5K barrels – NYT  http://www.nytimes.com/2010/05/16/us/16oil.html?hp

· SEC case against Goldman a career defining decision for Schapiro; despite two commissioners being against the case, Schapiro voted to proceed w/the charges; while the case is far from airtight, the SEC appears to have Goldman on the defensive and settlement talks between the two parties started last week; complaints about Goldman had been sent to the SEC as far back as ‘08 – WSJ   http://online.wsj.com/article/SB10001424052748704250104575238170222303084.html?mod=WSJ_hps_LEFTTopStories

· Fed update – WSJ interview w/Hoenig, who has been sole FOMC dissenter for the last few meetings; he has objected to the “extended period” language and doesn’t think low rates should be promised.  Hoenig says the output gap argument has flaws and that there were large gaps in the ‘70s yet stagflation ensued.  WSJ  http://online.wsj.com/article/SB10001424052748703460404575244050343571436.html#mod=todays_us_opinion

· Fed Update – long profile of Bernanke in the NYT – overall the article doesn’t really break any new ground – NYT  http://www.nytimes.com/2010/05/16/business/16ben.html?partner=rss&emc=rss

· NY Fed chief Dudley looks to repair his institution’s reputation; he has been under fire as the Washington Fed assumes certain powers formally held at the regional level; the Dodd bill would have the president appoint the NY Fed head w/Senate confirmation, a change from the current practice.  WSJ  http://online.wsj.com/article/SB10001424052748704414504575244733500441298.html?mod=WSJ_hps_SECONDTopStories

· Robert Shiller in the NYT – “fears of a double dip recession may wind up causing one” – NYT   http://www.nytimes.com/2010/05/16/business/16view.html

· California –the state’s budget shortfall was raised $500MM to $19.1B as a result of few tax collections and legal challenges to some proposed cost cuts (WSJ)  

· PA politics - U.S. Rep Joe Sestak predicts he'll win Pennsylvania's hotly contested Democratic primary for U.S. Senate (AP)  

· Kagan confirmation process to kick off this week; key Senators will decide when to start hearings; objective is to have confirmed by the summer (AP