The value of CIT Group’s bonds plunged on July 13, as the struggling lender tried to convince customers, investors, and regulators that it can work its way out of a deepening liquidity crunch. Moody’s Investor Service downgraded CIT’s credit rating four notches, placing it deeper into junk status. A collapse of the New York-based institution, which had $75.7 billion in assets and $68.2 billion in liabilities as of the end of the first quarter, would rank as the biggest bank failure since regulators seized Washington Mutual in September. And there would be plenty of collateral damage: According to internal CIT documents, its demise would place 760 manufacturing clients at risk of failure, and cause problems for as many as 300,000 retailers.

CIT has been trying to persuade the Federal Deposit Insurance Guarantee to allow it to participate in a bond-guarantee program launched last year, but without success. The bank needs to raise fresh funds in order to meet debt obligations coming due next year. Speaking at a press conference in London today, Treasury Secretary Timothy Geithner said the government has both “the authority and the ability” to deal with the problems at CIT, but did not specify what measures Washington might take to defuse the crisis.

Source: Bloomberg, Reuters

Qatar Makes Investment in Porsche

Shares of Porsche closed up more than 9% on July 13, after the German new magazine Der Spiegel reported that Qatar had offered $9.7 billion for a stake in the German automaker. Porsche is reeling under a huge debt load and facing possible absorption by Volkswagen. Under the terms of the deal, which have not been confirmed, The Qatar Investment Authority would buy a bit more than 25% of Porsche. Qatar would also gain Porsche’s options on shares in Volkswagen, which would total about a 20% to 25% stake if exercised.

Source: BusinessWeek

Russian Investment in Facebook Values Company at $6.5 billion

Russian investment firm Digital Sky Technologies has committed to buying as much as $100 million worth of Facebook common stock. Under the agreement, employees that tender their stock will get $14.77 a share, an offer that puts the company’s total value at $6.5 billion. Digital Sky Technologies made an earlier investment in Facebook in May, paying $200 million for the equivalent of a 2% stake.

Source: Bloomberg

Western Gas Pipeline Project Inches Forward

Representatives from the governments of Turkey, Hungary, Austria, Bulgaria and Romania met in Ankara on July 13 to ink a transit agreement for a natural-gas pipeline stretching 2,000 miles from the Caspian Sea to Austria. The Nabucco pipeline is aimed at curbing Europe’s reliance on Russian gas. But the project has been stuck in the blue-print stage for years and several obstacles remain before it can get off the ground.

Source: New York Times

UBS and U.S. Authorities Pursue Settlement

Swiss financial giant UBS and the U.S. government are seeking to delay a major U.S. tax trial set to start on July 13 so they can find a negotiated settlement. U.S. authorities have been trying to force the bank to reveal the identities of 52,000 rich Americans suspected of using secret Swiss bank accounts to evade taxes. A judge in Miami granted a postponement on an evidentiary hearing while both sides are in talks. Yet even if a settlement is reached, the assertiveness of American authorities marks a more aggressive global stance taken by the U.S. and other countries against tax evasion and offshore havens such as the Cayman Islands and Liechtenstein.

Source: Reuters, BusinessWeek

Obama Focuses Bailout Money on Small Businesses

U.S. President Barack Obama’s administration wants to take money from the $700 billion rescue program for the banking system and make it available to millions of small businesses — a move officials say is essential to the domestic economic recovery because the firms employ so many people. The plan represents a shift from the original mandate. It would direct billions of dollars toward saving jobs, not at reforming the financial system.

Source: Washington Post

Belgium’s RHJ International Close to Buying GM’s Opel

Belgian company RHJ International said on July 13 it was in advanced talks to buy a majority stake in General Motors’s European unit Opel. The bid represents a rival offer to leading Opel contender Magna International, a Canadian auto parts group which has said it wants to agree a preliminary deal for Opel with its U.S. parent this week.

Source: Reuters

Emerging Markets: Too Expensive for Investors

Global investors are paying too much for shares from emerging giants, such as China, India, and Brazil. The last time stocks in developing countries were this expensive was in October 2007. According to Bloomberg data, the MSCI Emerging Markets Index currently trades at 15.4 times reported earnings, compared with 14 for the Standard & Poor’s 500 Index.

Source: Bloomberg

Japanese PM Calls August Election

Taro Aso, Japan’s long-suffering prime minister, has agreed to call a general election for August 30, according to local media reports. Aso’s decision follows a heavy defeat for his Liberal Democratic party in voting for the Tokyo Municipal Assembly, and is intended to stave off possible challenges to his leadership from party colleagues.

Source: Financial Times

Chinese Central Bank to Control Credit Bubble

China’s central bank has pledged to do more to control loan growth as a record expansion in credit raises concerns over a financial bubble. New loans rose almost fivefold in June as the credit boom revived growth in the world’s third-biggest economy. The jump in credit has helped the Shanghai Composite Index to climb more than 80% from last year’s low.

Source: Bloomberg

Investors Rattled over Exec Allegations in China

Allegations in China surrounding executives from Anglo-Australian miner Rio Tinto are rattling investors. The issue, which may be rooted in a pricing dispute over iron ore, has rocked the global iron ore industry, strained China-Australia relations, and could have a chilling effect on foreign businesses doing deals in China. Companies with operations here have been closely watching the case.

Source: New York Times

Microsoft Fights Google over Online Software

Microsoft will broaden its battle with Google this week as it pushes ahead with online versions of some of its core software. The software company’s latest moves into internet services, due to be revealed at its annual partner conference in New Orleans starting on July 13, is part of Microsoft’s “software plus services” strategy that it has pursued for three years.

Source: Financial Times

Retailers Attack Wal-Mart over Healthcare

The National Retail Federation, the U.S. retail industry’s biggest trade group, is launching an attack against Wal-Mart for supporting congressional proposals requiring employers to help pay for health insurance. The idea has gained political momentum thanks, in part, to the backing of the nation’s largest private employer.

Source: Wall Street Journal