Sneaky

Sneaky 401(k)

A U.S. law passed in 2006 intended to increase workers’ retirement savings ended up doing the opposite, according to an analysis performed for The Wall Street Journal by the Employee Benefit Research Institute. Automatic enrollment in a 401(k) plan, with opt-out allowed, resulted in contributions of 3% or less of wages, compared with 5% to 10% chosen by employees when they manually sign up, researchers found.

26 dropouts

Moody’s Investors Service said it will identify 26 European banks that “have a heightened risk of needing extraordinary external support.” The credit rating agency said it doesn’t anticipate many rating changes based on ongoing stress tests of 91 banks.

On overdrive

Working behind the scenes, a small team of Treasury Department officials is studying how to prevent the U.S. from defaulting on its debt, sources said. Among options being studied is whether the Constitution allows President Barack Obama to ignore the debt limit set by Congress.

Wrong approach

The Basel Committee on Banking Supervision should focus on systemic risk tied to simultaneous failure of multiple banks, writes Charles Goodhart, a former member of the Bank of England Monetary Policy Committee.

Close to settling

U.S. state and federal officials and major banks reportedly are close to a deal to resolve claims about improper foreclosure. The settlement could cost banks and mortgage servicers $20 billion, sources said. Lenders involved include Bank of America, Citigroup, JPMorgan Chase and Wells Fargo.

Two sides of the same coin

The fiscal crises in the U.S. and Europe have much in common, and in both, democratic institutions seem incapable of dealing with them responsibly, according to The Economist. Meanwhile, China is on track to have the world’s biggest economy within 15 years. “The case for democracy is a moral one, not an economic one; but if democracies can’t handle responsible governance, either on economic or more general policy issues, then governance will gradually become less democratic, and the moral case will make little difference,” an Economist Democracy in America blogger writes.

Some progress

As the deadline approaches for raising the U.S. debt ceiling, House Majority Leader Eric Cantor, R-Va., said Republicans are prepared to eliminate some tax loopholes to make a deal. “If the president wants to talk loopholes, we’ll be glad to talk loopholes,” Cantor said. “We’ve said all along that preferences in the code aren’t something that helps economic growth overall.”

Cut

Analysts are cutting second-quarter earnings forecasts for the biggest U.S. investment banks. Fifteen of 22 analysts covering Goldman Sachs have reduced their forecasts since early June.

Goldman’s privilege

The Federal Reserve’s $15 billion loan to Goldman Sachs under its single-tranche open-market operation was the biggest loan made from the $80 billion emergency program. Details of the program were secret until the U.S. central bank was forced to release them under the Freedom of Information Act.

Up and up away

China’s central bank announced its third interest-rate increase this year as the government moves to slow inflation. Rates on one-year bank deposits and one-year bank loans were increased by 25 basis points.

Lehman borrowed a bunch

Three months before Lehman Brothers Holdings filed for the biggest bankruptcy in U.S. history, its brokerage borrowed as much as $18 billion in four loans from the Federal Reserve. The money came from a program that was kept secret until the U.S. central bank was forced to release details under the Freedom of Information Act. The brokerage paid off the loans the day before it went into liquidation, the Fed said.

Slow approach

German officials suggested that Europe take another look at a restructuring proposal that would allow Greece’s sovereign debt to be in technical default briefly. The move puts on the back burner a French proposal for a 30-year rollover of Greek debt, sweetened with incentives for bondholders.

Fewer managers

Financial advisers are using fewer asset managers, according to a Cerulli Associates research report. Scott Smith, head of Cerulli’s intermediary practice, said much of the shift can be attributed to the consolidation of asset managers and the savings they offer.

Stagnant feeling

Americans view their personal finances much as they did two years ago, according to a new McClatchy-Marist poll. Fifty-two percent of respondents said they thought their financial situations will not change, compared with 50% two years ago.

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