Finding More Cash for Clunkers

By nearly a 2-to-1 margin, on Thursday night the Senate extended the "cash-for-clunkers" program with a fresh injection of $2 billion, the business press blared this morning. But the extension creates some problems still. Automakers are faced with a dilemma: Should they increase production or leave consumers to forage through lean car lots? As the Wall Street Journal puts it, "consumers who missed the first round of the program could have fewer choices and potentially pay more unless auto makers accelerate production." Another loser could be the fledgling alternative energy sector. As the New York Times points out, "The additional [$2 billion] is borrowed from another stimulus program, a loan program for green energy projects." The newspaper adds that lawmakers are keen to keep that funding alive, and "so the cash-for-clunkers extension spending will probably add to the federal deficit."

In Britain, the Bank of England dug deep yesterday to bail out a different kind of clunker—the country's sluggish economy. In a surprise move, the central bank there voted to inject another £50 billion ($84 million) into its so-called "quantitative easing" program of buying government and corporate bonds to jump-start the wider economy by easing credit, the Financial Times reports. "The decision came despite an array of brighter economic data this week, with upbeat survey results suggesting that the economy was emerging from recession. But the central bank said the 'recession appears to have been deeper than previously thought' in the UK," the newspaper writes.

Could troubled mortgage lenders Fannie Mae (FNM) and Freddie Mac (FRE) be picked apart by regulators only to have their toxic assets deposited into a "bad bank"? That was the story making the rounds on Thursday, one the White House was quick to downplay, the Washington Post reports. While the White House was denying the bad-bank scenario is on the cards, the Washington Post, alluding to an internal e-mail it obtained, points out the Treasury Department and the White House's National Economic Council are already deep into discussion on just such a proposal for the struggling lenders now under government control. Fannie Mae is not helping its case at all after reporting on Thursday yet another staggering loss—this time a $14.8 billion second-quarter loss. Fannie also acknowledged it needs another $10.7 billion from the Treasury, bringing its debts tally to Uncle Sam to $46 billion, the WSJ writes. The tab for taxpayers is likely to soar further for keeping Fannie and Freddie alive. "The Treasury has agreed to provide as much as $200 billion to keep Fannie Mae running, and it has pledged the same amount to its main rival, Freddie Mac," the newspaper writes.

For retailers, July was a brutal month. And the outlook appears fairly grim for the back-to-school season, too, the second biggest period for retailers after Christmas. Citing a survey of 30 major retailers by Thomson Reuters that says same-store sales fell 5.1 percent, the WSJ found casualties throughout the industry from youth-oriented clothing chains like Aeropostale (ARO) and Abercrombie & Fitch (ANF) to department stores J.C. Penney (JCP) and Target (TGT). "A large chunk of the American population has decided not to do any discretionary spending. They're going to the grocery stores and doing very little else," Stephen J. Hoch, a professor of marketing at the University of Pennsylvania's Wharton School of Business, told the newspaper. Analysts are blaming a host of factors for the gloomy July retail sales report, including "the postponement of state tax holidays from July to August and the federal 'cash for clunkers' program," the NYT reports.

Another potentially worrisome report due out today is the Labor Department's latest unemployment figures. Already, the markets are bracing for the worst. According to the Associated Press, Asian markets fell broadly as fears grew of a U.S. employment report that might show worse-than-forecast July job losses. Back home, there is slightly more optimism on the eve of the report. There's a glimmer of hope that the $787 billion stimulus plan passed in the spring "may blunt the downturn in limited but discernible ways," the NYT reports. Analysts expect the jobless numbers to tick upward from the June reading of 9.5 percent out of work—yes, even that would be seen as a small victory. "While there is a consensus that a fragile recovery is in the offing, the outlook remains murky. Still, analysts say the impact of the stimulus, while small, is discernible," the newspaper writes.

And finally, the results of a new study into what constitutes an effective board of directors could set off a heated debate around the water cooler this morning. The findings? "Having more women in the boardroom can hurt the financial performance of well-governed companies," the FT reports, citing the report published this week in the Journal of Financial Economics. On average, the report found, "companies with proportionally more women on their boards were less profitable and had a lower market value."