Monday PM November 24th, 2008
by: Ed Mayberry, November 24, 2008 5:11:40 pm
President-elect Barack Obama is calling on the next Congress to act quickly in passing a stimulus package to create jobs. Obama said that experts believe the economy could “lose millions of jobs next year.” He urged the newly elected Congress to act quickly on his plans after opening its session on January 6th. At a news conference, Obama was critical of the big three automakers, saying he was surprised they did not have a better-thought-out plan for their future before asking Congress to approve $25 billion in emergency loans. He said once he sees a plan, he expects “we're going to be able to shape a rescue.” Obama declined to say how large a stimulus package he wants from Congress. Democratic lawmakers speculated over the weekend that the price tag could reach $700 billion over two years as the nation struggles to emerge from a recession compounded by a credit crunch.
President-elect Obama has chosen Timothy Geithner to be his treasury secretary. Geithner is president of the New York Federal Reserve Bank, and has been working with the Bush administration on ways to solve the credit crisis. Obama says Geithner brings a “unique insight” into the failures of the markets, and the steps that need to be taken to fix them. Obama today unveiled an economic team that also includes Lawrence Summers as head of the National Economic Council, making him Obama's chief economic adviser. Summers is a former treasury secretary.
President George W. Bush says his administration is ready to help other institutions like it is helping Citigroup. Following a meeting with Treasury Secretary Henry Paulson, Bush said the Citigroup rescue was deemed necessary to “safeguard the financial system.” And he added he'll make similar decisions in the future, if need be. The Citigroup deal, which Bush says President-elect Barack Obama was told about, gives the financial institution another $20 billion. The government also agrees to guarantee over $300 billion worth of Citigroup's risky assets. The White House won't say what other firms or institutions the government might help. President Bush says this is a tough situation, but adds “we will recover from it.”
Further deterioration was seen in home sales and prices last month. The National Association of Realtors says sales of previously-owned homes dropped 3.1 per cent to a seasonally-adjusted annual rate of 4.98 million units. That is compared to a downwardly revised pace of 5.14 million in September. The trade group says sales of distressed properties made up 45 per cent of all sales in October. The median sales price plunged 11.3 per cent from a year ago to $183,000. It’s the largest year-over-year drop on records going back to 1968.
A national survey shows gas prices across the nation have dropped to less than $2 a gallon for the first time since March 2005. The average price of a gallon of regular gasoline at self-serve stations was $1.97 Friday, falling 33 cents over the last two weeks. Mid-grade was at $2.12 and premium was at $2.24. That's according to the Lundberg Survey of 5,000 gas stations nationwide, released Sunday. Diesel was at $2.93, the first time it fell below $3 per gallon since September 2007. Gas was cheapest in St. Louis, at $1.61 for a gallon of regular. It was most expensive in Honolulu, at $2.81.
Texas manufacturers are painting a bleak picture of current and future factory activity in the nation's number two state for production. A Federal Reserve Bank of Dallas survey says Texas businesses are reporting sharp drops in most indicators of current activity. And nearly two thirds of the 101 firms responding to the November Texas Manufacturing Outlook Survey said their evaluation of general business activity had worsened. Several indexes for future production fell to their lowest levels since the survey started four years ago. The volume of new orders sunk to a record low, with more than half of those surveyed reporting decreases. Data for the latest survey were collected November 10th through the 19th. Firms are asked whether output, employment, orders, prices and other indicators increased, decreased or were unchanged over the previous month. Texas produces more than eight per cent of manufactured goods in the U.S., behind only California.
British Treasury chief Alistair Darling has announced a temporary cut in the national sales tax to promote an economic recovery he expects to begin next year. Darling says the VAT, or value-added tax would be cut from 17.5 per cent to 15 per cent for 13 months to put more money in consumers' pockets as a key part of a 20 billion pound ($30 billion) economic stimulus plan. He predicts that the British economy will shrink by as much as 1.25 per cent next year although he expects a recovery to begin in the second half. As expected, he also proposed that the top tax rate go up from 40 per cent to 45 per cent in 2011.
As the U.S. economic crisis worsens, the money that Mexicans living here send home to their families has declined. Mexico prepared for the scenario with programs to solidify ties to its citizens abroad, especially with the U.S.-born children of Mexican immigrants whose allegiance to their homeland weakens with each new generation. Carlos Gonzalez Gutierrez is executive director of the Institute of Mexicans Abroad in Mexico City. The Mexican government formed the organization in 2003 to institutionalize immigrant relationship efforts that he says started in the early 1980s. Gutierrez says that's when the Mexican government's once-disdainful attitude toward its ex-pats started to change. The institute supports education and cultural programs for Mexican immigrants and their families in the United States. Those include Spanish classes, a program that sends Mexican teachers to U.S. districts with a shortage of bilingual educators, donations of Spanish language materials to U.S. schools and libraries, and literacy initiatives for adult immigrants in the U.S. Other programs are aimed at the children of immigrants, many whom may have been to Mexico. Those programs include sponsoring soccer tournaments, cultural programs, youth exchanges and academic scholarships.
Mexico's inflation has hit a seven-year high of 6.2 per cent. Mexico's central bank says rising food and utility prices helped drive the increase in the first two weeks of November. The bank said the inflation figure was the highest since hitting 6.7 in June 2001. October's inflation was reported at 5.8 per cent. The Bank of Mexico expects inflation to close the year at no higher than six per cent. Next year's inflation is expected to be four per cent or lower. Mexico's economy has been hit hard by the global economic crisis. The peso has lost more than 30 per cent of its value since August. It was trading at 13.5 to the dollar on Monday. Mexico's benchmark IPC Index, however, was up more than five per cent to 19,184.
A South Korean court cleared two former officials today in a case related to the acquisition of a local bank by Dallas-based Lone Star Funds. The decision by the Seoul Central District Court could be a boon to the buyout group's troubled efforts to sell the lender. The court absolved former finance ministry official Byeon Yang-Ho and former Korea Exchange Bank Chief Lee Kang-Won of breach of trust charges. The charges center on allegations they conspired to understate the lender's value. Lone Star took over KEB in late 2003 by purchasing a controlling stake. The fund has long battled allegations that it was able to acquire the then distressed lender at a bargain price.