Monday Morning Cup of Coffee
A look at stories across HousingWire's weekend desk, with more coverage to come on bigger issues: President Barack Obama announced Sunday night leaders of both parties reached an agreement to raise the debt ceiling by well over $2 trillion while implementing strategic deficit cuts of approximately $2.4 trillion over a period of 10 years. "A default … would have had a devastating effect on our economy," the president said in a statement after announcing party leaders had reached an agreement. He added the "first part of this agreement will cut about $1 trillion in spending over the next 10 years, cuts that both parties had agreed to early on in the process." Obama's announcement came moments after House Majority Leader John Boehner issued a statement saying, "There is a framework in place that would cut spending by a larger amount than we raise the debt limit, and cap future spending to limit the growth of government. It would do so without any job-killing tax hikes." Lawmakers were down to the wire Sunday night after wrangling for days over a way in which they could raise the nation's $14-plus trillion debt ceiling to satisfy each party's agenda and meet the Treasury's Aug. 2 deadline. While economists have said meeting the debt ceiling deadline and hitting an actual default are two different issues and not necessarily entwined, bankers and representatives in the mortgage finance space sent a warning letter to Congress and the president saying a deal should be reached to preserve the nation's triple-A debt rating to prevent soaring interest rates at a time when the housing market is already stalling due to foreclosure issues, excess inventory, job concerns and weak demand. Behind the scenes, Republican House Majority Leader John Boehner (R-Ohio) presented members of his party with a debt ceiling-deficit reduction plan Sunday that aims to raise the debt ceiling in two stages while implementing strategic deficit cuts. The first, more immediate stage of the blueprint includes a proposal to cut and cap discretionary federal spending by $917 billion over a period of 10 years and raise the debt ceiling by $900 billion to avoid default in the near-term, according to congressional sources. The plan also would require Congress to complete more spending cuts over the course of the next few months before authorizing the president to request a second debt ceiling increase in the $1.5 trillion-range. The plan, which was discussed by Republicans in closed door sessions Sunday, would only authorize the president to raise the debt limit another $1.5 trillion in the months to come if a balanced budget amendment is sent to the states or if spending cuts are authorized in an amount that exceeds the debt limit hike. The plan leaves tax hikes off the table. The plan he presented, believed to be the one agreed to by congressional leaders Sunday evening, would require Congress and the Senate to have a balanced budget amendment vote sometime between Oct. 1 and the end of 2011. The plan also would create a joint committee that would be in charge of delivering legislation by late November to cut the deficit by $1.5 trillion over the next 10 years. However, if spending cuts equal to the debt ceiling raise are not made, the deal includes an automatic trigger that would mandate $1.2 trillion in immediate cuts if the president moves on the second phase of the debt ceiling increase without an appropriate deficit reduction plan in place. In that case, the president would be limited to a ceiling of $1.2 trillion. Those automatic cuts would include a combination of reductions in defense spending, Medicare and other nondefense programs, impacting fiscal years stretching from 2013 through 2021. Programs such as Social Security, Medicaid and civilian and military pay are off the table and not included in the proposal discussed by congressional sources. Boehner said he hopes to have the plan on the floor as soon as possible for a vote Monday. Paul Krugman, the Keynesian economist who drew praise and criticism for suggesting a third round of fiscal stimulus with a focus on investing in corporations and small businesses, could be seeing a version of his plan across the pond in the United Kingdom. Mark Hoban, financial secretary to the Treasury in England, announced two directives that will allow businesses to access additional financing by doubling the amount of equity they can raise from 2.5 million pounds to 5 million pounds without having to produce a costly prospectus. The plan also allows businesses to target a larger pool of investors, raising the participant ceiling from 100 to 150 investors. It's estimated the proposal will save small businesses around 12 million pounds per year by not having them jump through the same regulatory burdens. President Obama's nominee for the Consumer Financial Protection Bureau director post, Richard Cordray, is due in front of the U.S. Senate this Thursday. On Aug. 4, Cordray, a former Ohio attorney general with a reputation for criticizing the performance of mortgage servicers, is due in front of the Senate Banking Committee. Cordray is filling the director-nominee role that many believed would go to the Bureau's architect Elizabeth Warren. Warren has stepped down from the bureau, effective Aug. 1, and is heading back to her post at Harvard Law School. Federal regulators closed down three banks late last week. Two of which were located in the Southeastern United States. BankMeridian in South Carolina was closed last week by federal and state banking regulators. To protect the banks' assets, the FDIC entered into a purchase and assumption agreement with SCBT in Orangeburg, S.C., to assume all of the bank's deposits. BankMeridian's three branches will open Monday as branches of SCBT, National Association. Richmond, Va.-based Virginia Business Bank also was shut down late last week. All deposits were transferred to Xenith Bank, a bank also located in Richmond. On Friday, regulators also closed Integra Bank in Evansville, Ind., transferring all deposits to Old National Bank in Evansville, Ind. Write to Kerri Panchuk.