LightSquared, the wireless broadband company backed by Harbinger Capital founder Phil Falcone, is battling with creditors over control of the firm's bankruptcy, according to Bloomberg. LightSquared has asked a judge to extend a deadline to file a Chapter 11 plan; the creditors say, "Having nothing to lose, Mr. Falcone wants to pursue a high-risk, high-return strategy."

Facebook shares may get a bump when the stock is added to the Nasdaq 100, an index of the exchange's non-financial firms. It may not be enough to make up for Nasdaq's botched handling of the Facebook IPO, but every little bit helps...

Commodities giant Glencore upped its offer for Xstrata, the mining company, in hopes of completing a long-anticipated merger. It remains to be seen whether Qatar Holding, the sovereign wealth fund of the Middle Eastern nation, which holds a 12 percent stake in Xstrata, sign off on the new deal. Qatar's hesitance lead Business Insider to wonder if we are seeing the rise of a new kind of activist investor.

The head of the JPMorgan's chief investment office hopes his new gig is a "boring job.

After Dewey & Laboeuf folded, the law firm's softball team lived on.

A predecessor to SunTrust Banks invested in Coca-Cola in 1919, according to Bloomberg. What was worth $100,000 then is worth more than $2 billion now, and the firm is cashing most of the shares to cover bad loans and other costs associated with the financial crisis.

On Goldman Sachs, Morgan Stanley and Wall Street's courtship of fixed-income investors (now with conference calls!).

Sub-par returns from brand-name private equity firms are dragging on public-employee pension funds.

French President Francoise Hollande is said to be backing down on a proposed 75 percent tax on million-euro wage earners. A revised plan would reportedly lower the top tax rate to 67 percent, and raise the threshold for couples to 2 million euros.

Andrew Ross Sorkin says the Facebook executive most responsible for the company's failed initial public offering has largely escaped blame.

A former partner at Dewey & LaBoeuf is suing Citigroup, charging that the lender helped hide the law firm's financial problems.

An Argentinean judge issues an arrest warrant for Credit Suisse exec David Mulford, who's wanted for failing to testify in a probe of the country's 2001 debt default.

Multinationals such as American Express and Spanish bank BBVA are dabbling in venture capital, according to The Times.

Jim Cramer gets better ratings when Mad Money re-airs at 3 a.m. The Post figures drunken traders may be the target audience.

European Central Bank President Mario Draghi, speaking at a closed session of the E.U. parliament, suggested that central bank may start buying government debt maturing inside of three years.

Spain's bank bailout fund will inject $5.7 billion in Bankia.

The French government stepped in to bail out Paris-based Credit Immobilier de France over the weekend; now it says the deal can work without costing the taxpayer.

U.S. firms are planning for a Grexit, according to The Times: "Bank of America Merrill Lynch has looked into filling trucks with cash and sending them over the Greek border so clients can continue to pay local employees and suppliers in the event money is unavailable."

Muni-rigging trial: Three former UBS employees go on trial today on charges they fixed bids on municipal bond investment contracts. Three employees of GE Capital were convicted on similar charges in May, though those defendants have asked the trial judge to toss out that verdict; banks have paid more than $700 million to settle charges arising from the probe that lands the former UBS bankers in court today.

Rapid rise: Matt Zames, the JPMorgan executive elevated by CEO Jamie Dimon to staunch losses on positions amassed by the trader known as the London Whale, is a "mathematician and a poet," apparently. The 41-year-old graduate of MIT's Sloan School of Business took charge of the firm's chief investment office in May to wind down positions that led the bank to billions in losses. Last week, Mr. Zames was named co-chief operating officer, placing him in charge of more experienced executives such as chief financial officer Doug Braunstein and head of regulatory affairs Barry Zubrow.

Whither Europe: European Central Bank president Mario Draghi has gone on the offensive, first signaling that the ECB would not allow the euro to fail, then working to build consensus for a plan to ease the region's sovereign debt woes. Count Paul Krugman as among the doubters. CEOs in London for the Summer Olympics are privately voicing concern about the state of the British economy, according to The Financial Times.

Hard to do: Bank of American explored a possible breakup in 2010 and 2011, The Wall Street Journal reports, but decided against splitting off Merrill Lynch or Countrywide units.

Drink up: Funds that invest in tangible assets such as wine, art and classic cars are attracting investors amid fears that the world's currencies are unstable.

Not so fast: The Securities and Exchange Commission froze the accounts of traders who allegedly made $13 million illegally trading ahead of the Chinese offshore oil explorer Cnooc's $15 billion acquisition of Calgary-based Nexen last week.

Provisions: HSBC set aside $700 million to cover U.S. regulatory matters after the bank was scolded by Congress for lax anti-money laundering standards and amid ongoing inquiries into Libor-rigging at banks worldwide.

At a gathering of the Frankfurt Banking Conference, German Bundesbank president and European Central Bank Governing Council member Jens Weidmann said on Friday that “the economic costs of any form of monetary financing of public debts and deficits outweigh its benefits so clearly that it will not help to stabilize the current situation.”

Sam Chandan.

Dr. Weidmann declined to comment when asked if the bank had furtively adopted limits on its weekly purchases of eurozone members’ government bonds. The meeting’s air of ambivalence in addressing the continent’s crisis coincided with concessions on the growth outlook. In his first public address as ECB president, Mario Draghi opened his remarks by stating that “downside risks to the economic outlook have increased.”

The positions emerging from their most recent meeting suggest that Europe’s leadership is ultimately unwilling to install a credible backstop should the crisis engulf other nations. The significance of the European threat for the global outlook is reflected in the reactivity of equity indices in the United States, where markets have been whipsawed by daily shifts in the tenor of news emerging from across the pond. After resuming a measure of normalcy, the VIX spiked during the 11th hour of the summer’s budget debate in Washington and has been elevated ever since.

Somewhat brighter economic data have not mollified investor skittishness. Over the next days and weeks, attention will also be focused on domestic affairs and the seeming incapacity of congressional leaders to achieve compromise. While debt talks remain fluid and the true state of discussions remain wittingly hidden from the voting public, it is increasingly likely that the goals set for the Joint Select Committee on Deficit Reduction in August will be abandoned.

The utter failure of America’s divided leadership is unconscionable, as is the continuing pretense of well-functioning democratic institutions. And yet, while the domestic scenario bears an uncomfortable resemblance to diegeses in the nations we condescend to instruct in governance, the market mechanisms that are critical to disciplining the latter are loathe to rebuke the United States for its shockingly myopic behavior. As the relatively safest harbor during a time of exaggerated risk and risk aversion, our markets have seen an influx of capital even though some of the most far-reaching sources of instability are rooted here. The 10-year Treasury closed the week at a yield of just over 2 percent. Meanwhile, the TED spread, which proxies for risk aversion, has risen to its highest level since mid-2010.

The desirability of American assets is not limited to the practically risk-free obligations of the Treasury. In the shadow of macro developments, core property investment and credit flows are rather robust. Investors’ determination that current prices reflect a discount on long-term cash flow and appreciation has been readily apparent over just the past two weeks. The Wall Street Journal reported last Wednesday that Equity Residential had taken the pole position in bidding for a majority stake in Archstone. The former’s $2.5 bid values Archstone at $4.7 billion—just $61,250 per unit—in a reflection of corporate structure and debt encumbrance issues that weigh on the underlying real estate. On a smaller and more idiosyncratic scale, Equity Group and Hilton’s Waldorf Astoria were reported last week to have acquired Chicago’s Elysian Hotel for approximately $95 million.

Apart from the recent litany of transactions priced above $100 million, a broader range of sales and development activity is supported by commercial mortgage lenders eager to see their resources deployed. At the extreme, Simon Property Group this month offered $1.2 billion in senior unsecured notes. The notes due in 2017 carry a $2.8 percent coupon, less than 200 basis points over the comparably termed 5-year Treasury and barely 80 basis points over the 10-year rate. The secured debt market trends are reflected in several recent originations, including a $360 million, 4.6 percent refinancing by MetLife for the Park Meadows shopping center just outside Dallas. Favorable financing is not the sole purview of the largest assets. The retired debt carried an interest rate of just less than 6 percent. In Cambridge, Mass., Marcone Capital arranged Cambridge Savings Bank’s $16 million financing for the Porter Square Galleria at just 4 percent. At 4.25 percent, JP Morgan Chase provided $6.5 million to refinance a four-building industrial asset in Burbank, in greater Los Angeles.

Property investors and lenders are necessarily assuming a degree of risk in their current activities. These risks relate to the interest rate environment and potential for inflation. While the latter may be internalized by properties with healthy fundamentals, the debt market will struggle to cope with higher interest rates should global or domestic conditions require higher baseline yields on U.S. debt. In the multifamily sector in particular, going-in spreads are no longer wide by historical standards. Apart from these capital and credit market issues, the broader threats to the economic recovery cannot be ruled out as challenges to still-fragile absorption trends. That should be cause for concern among credit risk officers and cycle-minded investment strategists, since an acceleration of fundamentals underpin the renewed tolerance for risk-taking and investors’ increasingly frequent fits of bravado.
dsc@chandan.com

Sam Chandan, Ph.D., is president and chief economist of Chandan Economics and an adjunct professor at the Wharton School.