Corporate executives have lost confidence in the economic recovery since the spring, according to a survey by The Business Council.

Confidence of chief executives dropped to their lowest levels since May 2009, with the sentiment gauge decreasing to 51.2 this month from a two-year high of 66.6 in May, the Council's report showed Friday. 

Only one-third of all CEOs expect their own industry to improve during the next six months, down from two-thirds in May, when they were last asked about the economy. Executives’ outlook for their own industry dropped to 54.6 from 66.4.

The group’s gauge of expectations for the economy for the next six months fell to 51.7, the lowest since February 2009. 

"After sharp and continuous improvements in business confidence during the past 18 months, the current survey indicates that members of The Business Council believe the acceleration phase of the recovery is over," said the group, which boasts 150 executives from the largest U.S. companies among its members. 

The global recession has caused indirect taxes, such as value-added taxes or sales taxes, to increase in 2010, and additional increases are expected as governments awash in red ink seek more revenue, according to a KPMG report released on Thursday. 

Banks repossessed a record number of properties during the past three months, an increase of 7 percent from the previous quarter and of 22 percent from the third quarter of 2009.

A record 288,345 properties were foreclosed on from July through September, up from nearly 270,000 in the second quarter, also an all-time high going back to 2005, according to a report released Thursday by RealtyTrac Inc., a foreclosure listing service. 

Foreclosures — which have reached 816,000 through September — are likely to slow down through the end of the year because of investigations under way by major banks and officials in all 50 states looking into problems with mortgage paperwork. 

"If the lenders can resolve the documentation issue quickly, then we would expect the temporary lull in foreclosure activity to be followed by a parallel spike in activity as many of the delayed foreclosures move forward in the foreclosure process,” said James Saccacio, chief executive of RealtyTrac. "However, if the documentation issue cannot be quickly resolved and expands to more lenders, we could see a chilling effect on the overall housing market as sales of pre-foreclosure and foreclosed properties, which account for nearly one-third of all sales, dry up and the shadow inventory of distressed properties grows, causing more uncertainty about home prices."

A new study by accounting firm PricewaterhouseCoopers found that nearly half (47 percent) of executives surveyed expect the new healthcare law to have a "notable financial impact on their businesses."

The trade deficit is running at an annual rate of $502.5 billion this year, up 34 percent from 2009.

A new Gallup poll shows that lower- and middle-income Americans spent an average of $48 per day in September, a $16 drop since July and the lowest level since the organization began tracking the issue in January 2008.

New claims for unemployment benefits rose unexpectedly for the first time in three weeks, a sign that employers are reluctant to hire during the slow economic recovery. 

Claims increased by 13,000 up to 462,000, the second increase in two months, from last week's revised 449,000 for the week ended Oct. 9, the Labor Department reported Thursday. 

The figures have hovered around 450,000 for most of the year, and hiring hasn't picked up enough pace to make a dent in the 9.6 percent unemployment rate. 

The economy needs jobless claims to drop into the low 400,000s or high 300,000s — a decrease of 50,000 to 70,000 a month — to reflect stronger job growth in the private sector and propel the recovery. 

The Obama administration's decision to increase ethanol limits for newer vehicles has prompted the Brazilian Sugarcane Industry Association (UNICA) to call for an end to tax credits used by domestic companies. 

"Many U.S. ethanol groups have argued recently that after 30 years of tax credits and trade protections they are ready to compete without subsidies provided the government grants them greater access to America's fuel pumps. With the EPA's decision to increase ethanol limits by 50 percent for newer vehicles that day has arrived," said UNICA chief representative in North America Joel Velasco, in prepared remarks. 

The Environmental Protection Agency on Wednesday announced that it would allow 15 percent ethanol blends for certain vehicles made in or after 2007, an increase from the current 10 percent blend already approved for all vehicles. How that decision will affect the marketplace is unknown since it affects a narrow type of vehicle.

Velasco urged Congress to allow the $6 billion in annual tax credits to expire and lower trade barriers so other ethanol products can enter the U.S. market. 

"Allowing other alternative fuels like sugarcane ethanol to compete fairly in the U.S. would save American consumers money at the pump, cut dependence on Middle East oil and improve the environment," he said. 

Brazil blends ethanol that is primarily sugarcane with gasoline at 25 percent concentrations. Velasco claims the fuel is less expensive and cuts greenhouse gases more sharply than other ethanol options.

Feds go with middle route on foreclosure fix — Even with a steady drip of stories on how lenders have made a mess of mortgage foreclosures, a key federal agency is resisting public pressure for a foreclosure freeze.

The Federal Housing Finance Agency decided Wednesday to press lenders to fix their faulty mortgage documents instead of moving toward a foreclosure moratorium, out of fear that the bolder move would hurt the broader economy.

WaPo: "Some consumer advocates and lawmakers said the policy was soft on banks and industry insiders and may have little effect, because many lenders are already taking such steps. ... The FHFA's policy statement, which officials said was developed in consultation with other federal agencies, underscores the Obama administration's opposition to a national freeze on the grounds that it could damage the economy. ... 'Delays in foreclosures add cost and other burdens for communities, investors and taxpayers,' the agency said. ... The policy statement tells lenders to make sure that documents used as part of the foreclosure were properly reviewed and signed. If they weren't, lenders must work with local lawyers on a fix. This could include filing new paperwork." http://goo.gl/pgE6

More stories on Thursday suggest that the latest housing problem could hurt banks and the economy, freeze or no freeze.

WaPo again: "Lack of proper mortgage paper trail could leave big banks reeling again "

"For more than a decade, big lenders sold millions of mortgages around the globe at lightning speed without properly transferring the physical documents that prove who legally owned the loans. ... Now, some of the pension systems, hedge funds and other investors that took big losses on the loans are seeking to use this flaw to force banks to compensate them or even invalidate the mortgage trades themselves. ... Their collective actions, if successful, could blow a hole through the balance sheets of big banks and raise fundamental questions about the financial system, financial analysts and a lawmaker said." http://goo.gl/bvlt

So who's to blame?

The case against banks: The lenders ignored the trouble for years, NYT finds: "Banks spent billions of dollars in the good times to build vast mortgage machines that made new loans, bundled them into securities and sold those investments worldwide. Lowly servicing became an afterthought. Even after the housing bubble began to burst, many of these operations languished with inadequate staffing and outmoded technology, despite warnings from regulators. ... When borrowers began to default in droves, banks found themselves in a never-ending game of catch-up, ... 'We waited and waited and waited for wide-scale loan modifications,' said Sheila C. Bair, the chairwoman of the Federal Deposit Insurance Corporation, ... 'They never owned up to all the problems leading to the mortgage crisis. They have always downplayed it.' " http://goo.gl/1yAD

The case against the borrowers: CNBC's John Carney says not to lionize the "foreclosure deadbeats," those living in homes they can't afford. "... [T]here is little evidence that banks are engaged in any systemic practice of throwing people who do not have mortgages or are current on their mortgages out of their homes. ... The typical person who is fighting foreclosure on 'show me the note' grounds is someone who has stopped making payments on their mortgage but refuses to surrender their house to the bank. Some of them may not even be suffering from financial hardship — other than having taken on debt that they cannot afford." http://goo.gl/qFu4

The case against mortgage law firms (and Frannie, who used them): Freddie Mac and Fannie Mae turned to law firms to manage their huge mortgage load, and those firms may have been unable to handle it, reports the WSJ. The "use of so-called foreclosure mills, law firms that specialize in quickly processing thousands of foreclosures on behalf of lenders, is dragging the companies into the latest crisis. ... Last Friday, Freddie told mortgage servicers to stop sending cases to the Law Offices of David J. Stern, of Plantation, Fla. Fannie followed suit on Monday. ... In the deposition, the [firm's] employee alleged the firm routinely forged notarized documents amid closed-door screaming matches that broke out because files weren't moved fast enough." http://goo.gl/0LTo

BAILOUT REPORT — Overseers of TARP said that much of the financial bailout work was contracted out and shielded from public view. WaPo: http://goo.gl/kw3M

The panel's report criticized the contracts with Frannie to manage bailouts. Reuters: http://goo.gl/WMUw

THURSDAY TREAT: MLB commish Bud Selig says that former President George W. Bush wanted to be commissioner back in the 1990s, before entering politics. (via NYT) http://goo.gl/w7yu

Democrats see the upcoming lame-duck Bush-era tax-cuts fight as a chance to narrow the income gap. WaPo's Lori Montgomery: "When Congress returns to Washington next month, a solid core of Democratic lawmakers says it will urge party leaders to seize a rare opportunity to reverse three decades of rising income inequality by resisting any effort to extend the cuts for the richest 2 percent of households." http://goo.gl/ADf4

WHERE THE CHILEAN MINERS AND U.S. MIDTERMS INTERSECT. WSJ's Daniel Henninger comes up with the metaphor of the campaign — U.S. voters are the Chilean miners in need of rescue. (So is the struggling economy the mine?)

"The U.S. has a government led by a mindset obsessed with 250K-a-year 'millionaires' and given to mocking "our blind faith in the market." In a fast-moving world filled with nations intent on catching up with or passing us, this policy path is a waste of time. ... The miners' rescue is a thrilling moment for Chile, an imprimatur on its rising status. But I'm thinking of that 74-person outfit in Berlin, Pa., whose high-tech drill bit opened the earth to free them. You know there are tens of thousands of stories like this in the U.S., as big as Google and small as Center Rock. I'm glad one of them helped save the Chileans. What's needed now is a new American economic model that lets our innovators rescue the rest of us." http://goo.gl/jzvU

ESTATE TAX AS CAMPAIGN ISSUE: WSJ sees GOP candidates taking a new hard-line stance that will affect future negotiations. "More than 250 current congressional candidates, mostly Republicans, have signed a pledge this year to support elimination of the tax. ... The estate tax has become a particularly hot issue in the West, including in Washington state's Senate contest, and some rural House districts where Democratic incumbents appear vulnerable. The tax tends to be a hotter issue in rural areas because it raises particular concerns among farmers and landowners." http://goo.gl/3Alv

BUBBLE ALERT — Mr. T follows in the footsteps of Beck and O'Reilly to tout gold as an investment. (Watch the YouTube clip to find out about the first time Mr. T bought gold, why he doesn't wear more than 45 lbs. in gold and a birth of Jesus reference.) Business Insider: http://goo.gl/206P

Ex-Obama car czar Steven Rattner will accept a multi-year securities trading ban and $5 million+ fine for his role in New York pension kickbacks. NYT: http://goo.gl/LMHC

Report finds no political motivation in SEC's Goldman suit. NYT: http://goo.gl/XCRs