OVERNIGHT MONEY: A decision for the Fed

There is some chatter that the Fed may wait until its September meeting and one of the final jobs report before the election to take action. Bernanke has frequently expressed concern about the nation’s unemployment rate and said he would do something if the rate remains high.

But, right now, the prevailing argument among economists seems to be that the economy hasn’t quite slowed down enough to warrant more action — yet.

{mosads}The question of whether the Fed will act now, later or never is one issue, while the other is just what the Fed has in store to promote economic growth.

There have been two rounds of quantitative easing, in which the Fed buys up Treasury bonds and mortgage-backed securities to help reduce interest rates and push up borrowing and spending. 

Last month, the Fed announced a six-month extension of “Operation Twist” to reduce borrowing rates and boost the economy, which is struggling amid a European debt crisis.

At that time, Bernanke said a third round of quantitative easing remained an option for the central bank.

“I don’t think they should be launched lightly,” he said at the time. “There should be some conviction that they’re needed.”

WHAT ELSE TO WATCH FOR 

Business regs: Consumer Financial Protection Bureau Director Richard Cordray will chat with the House Small Business Committee about his agencies process in determining rulemaking for small businesses that provide consumer financial products and services. Cordray is expected to update lawmakers on how the process is going on getting input from small businesses about how to move forward. 

More tax reform: On Wednesday, the Senate Finance Committee will continue its long-running discussion on tax reform, debating how an overhaul should treat business entities. Academics and tax experts will talk to the committee. 

Can you say, momentum: Retailers certainly think so. A Senate panel is holding a Wednesday hearing on a proposal to allow states to collect sales taxes on Internet purchases made within their borders from out-of-state retailers — the second hearing in as many weeks on that sort of legislation. 

Supporters of the bill say it will even the playing field for brick-and-mortar shops with online outlets, and that consumers already owe taxes on all Internet purchases, even if they rarely pay them. But even so, it’s remains to be seen whether something can get worked out on the issue this Congress, given opposition in conservative quarters and the compressed calendar. 

Looking into the future: The Senate Agriculture Committee will examine the futures markets and why firms such as MF Global and Peregrine Financial Group failed. Headling is Gary Gensler, chairman of the Commodity Futures Trading Commission; Jill Sommers, commissioner of the CFTC; James Giddens, trustee for the Securities Investment Protection Act Liquidation of MF Global; and Ira Bodenstein, Chapter 7 Trustee for Peregrine Financial Group.

BREAKING NEWS

Budget deal: Senate Majority Leader Harry Reid (D-Nev.) and Speaker John Boehner (R-Ohio) announced on Tuesday that there is an agreement to avoid a government shutdown, which will extend government funding until April 1. The government will be funded at $1.047 trillion, the top-line spending level for 2012.

Plowed under: House Republicans on Tuesday won’t vote on a one-year farm bill. The extension bill was set to come up before House Rules on Tuesday night but it was removed from the agenda just before the meeting.

The House GOP is planning to take up a standalone drought bill under suspension of rules later this week, according to Rule Committee Chairman David Dreier (R-Calif.).

Sanctioning Iran: President Obama announced new sanctions on Iran on Tuesday just as lawmakers of both parties in the House and Senate ran out of patience and introduced their own legislation.

In his first action, Obama signed an executive order that imposes new sanctions on the Iranian energy and petrochemical sectors to block the country from circumventing existing sanctions. The order also expands sanctions on Iran’s petrochemical industry by making the purchase or acquisition of Iranian petrochemical products sanctionable.

Through rain, snow, sleet and budget default: Lawmakers appear ready to let the cash-strapped U.S. Postal Service default for the first time on Wednesday, when a required payment to the federal government of more than $5 billion is due. 

USPS said in a statement this week that it would not make the $5.5 billion prepayment for retiree healthcare due on Aug. 1, or a second payment of a similar size due at the end of September. 

Forgive and forget: Not so much. A top housing regulator on Tuesday spurned a proposal from President Obama and Democrats to let homeowners write down the principal on their mortgages.

Edward DeMarco, the acting director of the federal agency that oversees Fannie Mae and Freddie Mac, said the risk to taxpayers from the mortgage aid would far outweigh the benefits.

ECONOMIC INDICATORS 

ADP National Employment Report: Automatic Data Processing (ADP) will release its July report for private-sector job growth. 

MBA Mortgage Index: The Mortgage Bankers Association releases its weekly report on mortgage application volume. 

ISM Index: The Institute for Supply Management will release its July index that measures the pace of growth of the manufacturing sector. 

Construction Spending: The Commerce Department releases its June report on spending that is broken down between residential, non-residential and public expenditures on new construction. The monthly changes are volatile and subject to huge revisions and rarely have a market impact.

WHAT YOU MIGHT HAVE MISSED

— Reid knocks GOP’s sequester road trip

— OMB tells agencies it will begin consulting on sequester

— Consumer confidence increases, still ‘historically low’

— Poll: Public looks down on lobbyists, but OK with firms using them

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