Financial Reviews

As we explained earlier this week, almost every possible outcome of the current debt talks debacle will most likely be bad for the fragile recovery. Macroeconomic Advisers, an economic forecasting firm, has now estimated how the leading proposals for fiscal consolidation — from the House speaker, John Boehner, a Republican, and the Senate majority leader, Harry Reid, a Democrat — would affect the economy over the next decade.

As you can see in the chart below, both legislators packages are expected to drag on economic growth, since cutting government spending has ripple effects throughout the economy.

Decline in economic growth, relative to March estimates from Congressional Budget Office.

The economic forecasts are based on the Congressional Budget Offices scoring of the two legislators proposals, including two different versions of Mr. Boehn

Full article…

Bank of America CEO Brian Moynihan has asked Congress to strike a debt deal this week.

The group pleads with Congress to act this week on a deal that will stave off default and a downgrade of U.S. debt, saying the alternative would bring about “grave” consequences.

Full article…

– Despite expectations for a slowdown in growth, the Reserve Bank of India decided to lift its key rates by a steeper-than-expected 50 basis points, as it felt that high inflation continues to warrant anti-inflationary stance.

The repo, the rate at which the RBI lends, was raised to 8.00 percent from 7.50 percent. The reverse repo, the rate at which the central bank borrows from banks, was adjusted to 7.00 percent from 6.50 percent.

This marks the eleventh rate increase since March 2010, signaling that inflation continues to be the dominant macroeconomic concern for the central bank. Economists had expected only a quarter point hike this month.

The latest decision is expected to reinforce the cumulative impact of past actions on demand.

Full article…

It’s time for my annual vacation. If something earth-shattering in the tax world happens while I’m relaxing, I’ll take time out to post on it. Otherwise, enjoy the fine bloggers listed in the blogroll on the right. I’ll be back on Tuesday, August 9th.

4:04 p.m. | Updated Gretchen Morgenson, the Fair Game columnist for Sunday Business, answered questions posed online today about her new book on the mortgage crisis, “Reckless Endangerment,” written with Joshua Rosner. The session was held on Quora, a site devoted to curating knowledge collaboratively by compiling questions and answers. It is the second of three weekly question-and-answer sessions on Quora featuring Times reporters.

Here are a few of the questions that she answered:

What did too big to fail mean, in the context of Freddie Mac and Fannie Mae? In the aftermath of the 2008 housing crisis, have we solved that problem now with new rules or systems?

Is the Dodd-Frank Act a good law? What impact will it have on the economy?

How much did we pay to bail out Freddie Mac and Fannie Mae? Are taxpayers getting that money back?

You can also read answers from last weeks session with Diana B. Hen

Full article…