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Morning Market Roundup: Coal Scandal Rocks India, Treasury Tweaks Fannie/Freddie Bailout Deal


Here’s what’s important in the business world this morning:

India: India's national auditor said Friday the government lost huge sums of money by selling coal fields to private companies without competitive bidding and in a deal for Delhi's international airport, adding to massive losses from dubious auctions of other state assets.

Three reports by the Comptroller and Auditor General sparked a new storm of criticism of a government that has been floundering under a crush of scams and corruption accusations and has been unable to push through critical economic reforms.

The auditor's coal field report to Parliament estimated that private companies got a windfall profit of $34 billion because of the low prices they paid for the fields. The report said an auction would have given the government some of that money.

It revealed that 142 coal fields were sold since July 2004 to private and state-run companies. Some of the coalfields bought by private companies in 2004 did not begin production till 2011, while some companies later made enormous profits by selling the coal mines.

The report criticized the sales procedure that was followed and said the allocation of coal fields "lacked transparency and objectivity."

The auditors said the allocations were made on the recommendation of state governments. They exonerated Prime Minister Manmohan Singh even though he was running the coal ministry part of that period under review.

Spanish Loan Rate: The Bank of Spain says the country's bad loan rate shot up to a record of 9.42 percent in June, with more than €164 billion ($201.38 billion) in loans to households and businesses at least three months behind in their payments.

Spain announced in June that its banking sector, hit hard by a collapsed real estate bubble, needed a bailout. Up to €100 billion in money has been made available by the other members of the 17-country group that uses the euro, but has yet to be disbursed.

The increase from May was more than €8 billion, the second biggest monthly increase on record.

Spain is in its second recession in three years and the jobless rate is almost 25 percent. Many think it will end up requesting a full-blown sovereign bailout because of the government's soaring borrowing costs.

Fannie/Freddie Bailout: The government is changing the terms of its bailout agreement with Fannie Mae and Freddie Mac in a way that will shrink the holdings of the two mortgage giants more quickly and will require payment to the government of all quarterly profits the companies earn.

The Treasury Department announced the changes in an effort to deal with concerns that the companies could at some point exhaust the federal support they were guaranteed when they were taken over by the government in September 2008 during the financial crisis.

Under the change, the two firms will have to turn over all profits they earn every quarter. They will also have to accelerate the reduction of their mortgage holdings to hit a cap of $250 million by 2018, four years earlier than planned.

U.S. Futures: Stock futures were relatively flat ahead of the release of the latest data on consumer sentiment Friday amid a mixed bag of earnings from retailers.

Dow Jones industrial futures are down 3 points to 13,222. The broader S&P futures have given up 0.90 points to 1,412.20. Nasdaq futures are up 4.75 points to 2,768.25.

The University of Michigan releases its monthly consumer sentiment index just before 10 a.m. Eastern time Friday. Economists expect a slight decline.

The Associated Press contributed to this report.

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