Bernanke Promises More Fed Action on Economy
On Friday, Fed Chairman Ben Bernanke said that the Federal Open Market Committee, the Fed panel that Bernanke leads and which sets interest rates, could make additional purchases of longer-term securities in order to prevent deflation. In regards to the overall state of the economy, Bernanke said “the pre-conditions for a pickup of growth in 2011 appear to remain in place, as banks increase lending, worries over the European sovereign debt-crisis abate and consumers increase their savings.”
SEC Votes to Give Shareholders “Proxy Access”
On Wednesday, the SEC Commissioners voted along party lines 3-2 to give shareholders what is commonly known as “proxy access,” which requires companies to include the names of all board nominees, even those not backed by the company, directly on the standard corporate ballots distributed before shareholder annual meetings. To win the right to nominate, an investor or group of investors must own at least 3% of a company’s stock and have held the shares for a minimum of three years.
Currently, shareholders who want to oust board members must pay for mailing separate ballots, as well as wage a separate campaign to win shareholder support. The new rule will be in place in time for the 2011 annual meeting season next spring.
However, the final rule did address concerns from the business community. Smaller companies will be exempt from complying with the rule for three years. Investors will be prevented from borrowing stock to meet the 3% threshold and will be restricted to nominating directors for no more than a quarter of a company’s board.
Commerce Department Revises Q2 GDP Growth Down
On Friday, the Commerce Department released its revised second quarter GDP report showing the economy grew at a sluggish 1.6% rate. In July, the Department estimated the growth rate slowed to 2.4% after a 3.7% expansion in the first quarter. However, the report also showed consumer spending rose 2.0 %, above the initial second-quarter estimate of 1.6%. The overall price index for personal consumption expenditures registered no gain in the second quarter, rather than the initial estimate for a 0.1% increase. The price index’s flat rate marked a sharp decline from the 2.1% growth rate during the first three months of the year. Business spending on equipment and software also remained solid, though the second-quarter gain was trimmed to 17.6% from an initial estimate of 21.9% in the second quarter. First-quarter spending was revised down to a 7.8% rise from 20.4%.
July Home Sales Drop
On Wednesday, the Commerce Department released its July home sales report showing new homes sold at an annual rate of 276,000, down 12.4 percent from June’s pace, while plummeting 32.4 percent from a year earlier. Housing experts attributed the weak results to the expiration of the home buyers’ tax credit in April. There were however regional disparities in the report showing that the Northeast led all regions by a 35 percent drop, followed by a decline of 25.5 percent in the Midwest, 15.1 percent in the South and 9.8 percent in the West. The Department also reported that the average price of a new home dropped to $253,300, the lowest reading since early 2003.
If you have any questions regarding any of these issues, please contact:
Matt Jessee, Policy Advisor
Patricia Ross, Policy Assistant