The news at a glance
Fed: A ‘Twist’ aimed at stimulating growth; Euro crisis: New worries about a Greek default; Internet: Google in the antitrust hot seat; Bankruptcy: Alabama county cuts deal on debt; Companies: Netflix divides its business in two
Fed: A ‘Twist’ aimed at stimulating growthThe Federal Reserve this week launched “Operation Twist,” an attempt to breathe life into a stagnant U.S. economy by driving down longer-term interest rates, said Scott Lanman in Bloomberg.com. The central bank announced it would change the balance of its portfolio of U.S. Treasurys, an effort it said would lower the overall cost of borrowing across the U.S. economy. Over the next nine months, the Fed will sell $400 billion worth of short-term Treasurys and use the proceeds to buy longer-term government bonds. The Fed believes the action, modeled on one it took in 1961, will create a credit climate that encourages businesses to expand operations and hire more workers, and consumers to refinance mortgages and increase spending.
This is just the latest in the Fed’s “campaign of novel efforts to shake the economy from its torpor,” said Binyamin Appelbaum in The New York Times. This operation will not expand the central bank’s portfolio, but that doesn’t allay the concerns of some Fed critics that it could spark inflation nevertheless. Republican congressional leaders this week took the unusual measure of sending Federal Reserve Chairman Ben Bernanke a letter warning him that efforts to engage in new stimulus could “exacerbate current problems or further harm the U.S. economy.”
Euro crisis: New worries about a Greek defaultGreece continues to teeter perilously close to default, said Ben Rooney in CNNMoney.com. The country’s leaders conferred with European and international authorities this week to convince them that Greece would make more painful budget cuts and tax increases in order to receive a much-needed 8-billion-euro bailout installment next month. More negotiations are scheduled for next week. If the bailout funds are denied, Greece could default on its debt, putting enormous pressure on European banks and other struggling EU economies.
Internet: Google in the antitrust hot seatGoogle Chairman Eric Schmidt testified this week on antitrust issues before a Senate panel, where he sought to counter rivals’ claims that the search giant “abuses its dominance on the Web,” said Amir Efrati and Thomas Catan in The Wall Street Journal. Executives from Internet companies Nextag, Yelp, and Expedia—sites that help Internet users search for consumer goods, local businesses, and travel deals, respectively—also appeared before the panel. They allege that Google unfairly discriminates against them in search results and ad placement in order to steer users away from their offerings.
Bankruptcy: Alabama county cuts deal on debtJefferson County, Ala., has avoided “what could have been the biggest municipal bankruptcy filing in American history,” said Mary Williams Walsh in The New York Times. Officials in the county, which includes Birmingham, have reached a deal to restructure $3 billion in debt, which grew out of a sewer system revamp plagued by flawed accounting and corruption. Under the proposal, the county’s Wall Street creditors would forgive about $1 billion of the debt, but residents would face higher bills for sewer service.
Companies: Netflix divides its business in twoNetflix’s decision this week to spin off its DVD-by-mail business is a “risky bet” that could further alienate customers, said Barbara Ortutay in the Associated Press. The DVD business will be renamed Qwikster, and will operate independently from the online streaming service. Netflix has shed subscribers and nearly half its stock value since July, when it started charging separately for DVDs and online access, raising many subscribers’ monthly bills. “I messed up” by not explaining the price hike earlier, CEO Reed Hastings wrote in an e-mail to customers.