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politico.com — With a Senate vote slated for Monday evening, the White House shows signs of a late-breaking push behind a $26.1 billion aid package to help state and local governments cope with revenue shortfalls due to the continuing housing crisis and slow economic recovery.

Last year’s giant Recovery Act helped fill this gap, but as these stimulus funds run out, Democrats fear more state layoffs, beginning with teachers just months before November elections. Cash-strapped governors are promised $16.1 billion to pay Medicaid bills next year and ease their budget situation; another $10 billion in education assistance would go to school boards to help with teacher hiring—a top priority for Education Secretary Arne Duncan.

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nytimes.com — Even as political pressure grows to reduce the federal budget deficit, a blue-ribbon board led by former top national security officials called on Thursday for more spending on weapons systems.

The panel warned that efforts by the defense secretary, Robert M. Gates, to cut waste would not free enough money to modernize aging ships and planes and close a “growing gap” between the size of the military and its missions.

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inthesetimes.com — Through the blare of screeching feedback from portable translation headsets and microphones, unionized bank workers from Brazil, England, Chile, Germany, and Uruguay are encouraging American workers to undertake an unprecedented campaign against a common enemy: Grupo Santander, the global banking giant which last year took control of Sovereign Bank.

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washingtonpost.com — Citigroup, one of the nation's largest banks, agreed Thursday to pay $75 million to settle a Securities and Exchange Commission complaint that it misled investors about $40 billion of its holdings in subprime mortgage investments.

The SEC's resolution of the case with Citigroup, following a $550 million settlement with Goldman Sachs this month, represents the third time this year that a major bank has agreed to regulatory sanctions for behavior that fueled the financial crisis. The other was a $150 million settlement with Bank of America.

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washingtonpost.com — The U.S. financial system remains under stress, with small and midsize banks in particular potentially needing to raise more capital, according to a new report from the International Monetary Fund that shows the continuing strains facing the U.S. economy.

The IMF found that U.S. banks need to raise about $45 billion in new capital -- most of it by regional and small banks -- to ride out an "adverse" economic scenario that amounts to a dip back into recession while maintaining the fund's recommended capital ratio. The banking system will be in relatively solid shape if the U.S. economy continues to grow steadily, which the IMF thinks is likely.

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bloomberg.com — President Barack Obama flies to the heart of the U.S. auto industry today on a mission to convince taxpayers that their investment in the bailouts of General Motors Co. and Chrysler Group LLC will bring a return.

Heading into a congressional election season in which polls show the public skeptical about the $84.8 billion rescue and anxious about economy, Obama is using the backdrop of Detroit- area plants owned by GM and Chrysler to promote what he says is an industry revival that has saved more than a million jobs.

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nytimes.com — When President Obama steps into a General Motors plant on Friday morning — as the majority shareholder surveying the government’s investment in a company the White House called “moribund” just 18 months ago — he will be doing more than just examining the first models of the all-electric Volt that began rolling off the production line this week.

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washingtonpost.com — A top Federal Reserve official warned Thursday that the nation faces the risk of an extended period of falling prices known as deflation, such as that experienced by Japan over the past two decades.

James Bullard, president of the Federal Reserve Bank of St. Louis, argues in a new paper that large-scale quantitative easing -- or purchases of government bonds and other assets by the central bank -- would be the best policy tool to prevent that possibility, though he doesn't endorse making such a move now.

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nytimes.com — A subtle but significant shift appears to be occurring within the Federal Reserve over the course of monetary policy as the economic recovery is weakening.

On Thursday, James Bullard, president of the Federal Reserve Bank of St. Louis, warned that the Fed’s policies were putting the economy at risk of becoming “enmeshed in a Japanese-style deflationary outcome within the next several years.”

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mcclatchydc.com — More than three years into the housing crisis that helped trigger a worldwide recession, the torrid pace of home foreclosures continues to tear at the core of the American dream.

New figures Thursday from Realty-Trac showed that foreclosure activity declined over the first six months of the year in nine of the 10 large metropolitan areas with the highest foreclosure rates.

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