The Financial Landscape: Sovereign Debt Woes, QE3, and New Hedge Fund Regs

Greek opposition leader Antonis Samaras
Greek opposition leader Antonis Samaras

Funding Fights:

There's potential bad news for two governments trying to close budgetary gaps -- namely, those of the United State and Greece. The Wall Street Journal reports that Vice President Joe Biden's behind-the-scenes bipartisan deficit reduction talks "grew more contentious Wednesday as Democrats and Republicans became increasingly entrenched on key issues." The real purpose of the talks is to facilitate a vote on raising the debt ceiling before Aug. 2, which is when the Treasury says it will no longer be able to pay the country's bills.

In Greece, opposition leader Antonis Samaras (pictured) told the Financial Times he will not support Prime Minister George Papandreou's austerity measures, which are necessary preconditions for further support from the European Union. Compounding Greece's problems, the International Monetary Fund is holding back 12 billion euros in aid -- scheduled to have been paid within weeks -- saying the funds cannot go through until the EU agrees to pay its bailout money. Samaras, who leads the conservative New Democracy party, told the FT he agrees with the overall goal of eliminating the budget deficit, but wants to do it by stimulating the economy through tax cuts and reductions in employers' social insurance contributions. Eurozone finance ministers reject his proposals as insufficient and unrealistic. Default looms.

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A QE2 Redo?: Following Wednesday's grim appraisal of the state of the U.S. economy, Fed Chairman Ben Bernanke has indicated he is open to further monetary stimulus -- i.e., a third round of quantitative easing -- especially in the event of a disruptive event such as a default by Greece, which Bernanke says could "roil financial markets globally." QE2, which will end on June 30, has been deemed a mixed success, at best.

Getting a Handle on Hedge Funds: DealBook reports that the SEC will start to regulate hedge funds for the first time, requiring registration and disclosures from firms with more than $150 million under management. Such firms will have to "disclose the size of their funds and the type of clients who invest in them," as well as "name their 'gatekeepers' -- the auditors, prime brokers and marketers that service the funds." SEC Chair Mary L. Schapiro says these rules "will fill a key gap in the regulatory landscape." One former SEC counsel who is now a lawyer to investment advisers says the added rules "at the end of the day are not enormously onerous." The SEC was split 3-2 over whether to adopt the new requirements.