Tuesday PM December 9th, 2008
by: Ed Mayberry, December 9, 2008 9:12:14 pm
Pending U.S. home sales fell slightly in October, despite a spate of bad economic news and turmoil in the stock markets. The National Association of Realtors' seasonally adjusted index of pending sales for existing homes fell 0.7 per cent from September to a reading of 88.9. The index was one per cent below October a year ago. Home sales are considered pending when the seller has accepted an offer, but the deal has not yet closed. Typically there is a one- to two-month lag before a sale is completed. An index reading of 100 is equal to the average level of sales activity in 2001, when the index started.
Documents released by a House committee indicate that top executives at mortgage finance companies Fannie Mae and Freddie Mac ignored warnings that they were taking on too many risky loans long before the housing market plunged. E-mails and other internal documents released by the House Oversight and Government Reform Committee show that former Fannie CEO Daniel Mudd and former Freddie Mac CEO Richard Syron disregarded recommendations that they stay away from riskier types of loans. Panel members grilled the former heads of the two lending agencies for more than four hours and appeared to be frustrated by their apparent refusal to accept any blame. Panel Chairman Henry Waxman, a California Democrat, charged that "irresponsible decisions are now costing the taxpayers billions of dollars." The two companies were seized by government regulators in September. A month later, Freddie Mac asked for an injection of $13.8 billion in government aid after posting a massive quarterly loss. Fannie Mae has yet to request any government aid but has warned it may need to do so soon.
The White House and Congress continue to move toward the finish line on a bailout package for the big three automakers. However, the Bush administration still wants tougher consequences than Democratic leaders are looking for, if carmakers fail to control costs. White House spokesman Tony Fratto says while moving quickly is a key, "it's important that we get the policy right." Among the ideas included in the $15 billion bill is the creation of a so-called "car czar" who could force the car companies into bankruptcy if they don't institute enough changes. House Speaker Nancy Pelosi said on morning television today she supports having a federal overseer, because she doesn't think the heads of the big three could solve their problems if "left to their own devices." General Motors doesn't seem likely to raise a fuss. On CBS' "The Early Show," one GM executive called federal oversight of the big three "a reasonable thing to expect." Meanwhile it's unclear if the autoworkers' union is demanding a seat on GM's board of directors in exchange for more contract concessions. But the union president does say workers should hold a greater stake in the industry if they're going to have to give up more.
Sony is slashing 8,000 electronics jobs around the world, or five per cent of its global work force in that sector. It's trying to boost the profitability of its core business amid a global downturn. Sony says it will cut the jobs from its electronics operations, which employ about 160,000 workers, by the end of March, 2010. It did not give a country breakdown for the planned reductions. Sony has been trying to adjust production and lower inventories to cope with the global economic downturn but it says more efforts are needed.
Advantage Rent a Car is seeking Chapter 11 bankruptcy protection and is laying off 440 people nationally, according to the Houston Business Journal. The company's location at Bush Intercontinental will remain open, as well as other airport locations in Austin and seven other cities. Advantage's corporate offices are in San Antonio. The company will employ 460 people at its remaining locations.
The latest survey of employers by the temporary hiring agency Manpower finds that a majority of them, 67 per cent, plan to keep staffing levels steady in the first quarter of the new year. Some 16 per cent plan to increase their staffing, while 13 per cent expect a reduction in payrolls. Five per cent were uncertain about their hiring plans for the January-March quarter. Manpower North America President Jonas Prising says "the situation in the labor market is continuing to be very tough," with no noticeable change in the first three months of the year.
Most Houston television stations will conduct analog shut-off tests tomorrow to help determine if area TV sets are ready for the federally-mandated digital transition that takes effect on February 17th. At exactly 6:22 a.m., 5:22 p.m. and 10:22 p.m., the stations will simultaneously replace programming on their analog signals for five minutes with instructions on how to prepare for the DTV conversion, for those who have not installed a set-top converter box or replaced older sets with digital televisions. Viewers who watch free, over-the-air broadcasts on older analog sets using antennas are the target audience for the test, according to the Texas Association of Broadcasters. The TAB says about 467,000 Houston households watch TV exclusively with antennas.
The first settlement payments from the Exxon Valdez lawsuit filed nearly 20 years are hitting bank accounts this week. Some commercial fisherman who were part of the lawsuit against Irving-based ExxonMobil began getting direct deposits Monday. Paper checks will start going out next week. It's the beginning of the process to pay out $383 million to nearly 33,000 commercial fishermen and others. An Anchorage, Alaska, jury in 1994 decided Exxon owed $5 billion to the plaintiffs. That has since been reduced to $383 million. Still being debated is whether Exxon owes interest. If a court finds it does, the payments claimants are receiving now could be doubled.
House Speaker Nancy Pelosi says the House of Representatives is ready and committed to having an economic stimulus bill ready by early January. Pelosi says members of the House are "working on that right now." And she also said that a major part of the discussion is what elements are needed to both restart the economy and stabilize the job market. Pelosi told NBC's "Today" show that "this is a priority" for Democrats and said that "we have been begging" for over a year to do this. The California Democrat did not put a price tag on such a stimulus bill, but she did say it would have to be larger than initially envisioned because of the deterioration in the health of the economy. Congress passed a $168 billion stimulus plan last year and President Bush signed it into law.
The Senate has confirmed a New York prosecutor as watchdog of the $700 billion rescue program for the nation's financial sector. Neil M. Barofsky will become a special inspector general within the Treasury Department to audit and investigate spending by the so-called troubled asset relief program. President George W. Bush nominated Barofsky to the position last month. His confirmation had been held up anonymously by one Senator. The opposition was lifted last week. The financial bailout program has come under criticism in Congress. A Congressional audit last week found that the two-month-old program did not have safeguards to make sure financial institutions receiving taxpayer money were living up to their end of the bargain.
Oil prices are little changed amid new reports that the anemic global economy will lead to an even sharper falloff in energy consumption through 2009. A new government said home heating costs should be lower this winter than last, and gasoline prices continued to tumble. Pump prices are at their lowest levels in nearly four years. In its new short-term outlook, the Energy Information Administration said it expects global oil consumption to decline by 50,000 barrels a day this year and by 450,000 barrels a day in 2009, well below earlier forecasts on both counts.
The government has further lowered its projections for winter heating costs because of the dramatic drop in crude oil prices. The Energy Department said that fuel oil for heating this winter will be nearly a fourth of what it cost last winter. It put the average seasonal heating costs for households using oil at $1,570, or $383 less than last winter. Households using natural gas are expected to pay an average of $860 this heating season, about the same as last year. The report projects oil prices to average $51 a barrel next year as global demand will decline for the second straight year. Gasoline prices are expected to average $2.03 a gallon nationwide. Last week, gasoline cost an average of $1.70 a gallon.
New census data show that small and medium-sized cities in the midwest were hit the hardest in the mid-decade economic downtown, with unemployment rates doubling or tripling in communities throughout Michigan, Ohio, Indiana and Illinois. But no region was spared. The information was collected over three years from 2005 through 2007 in every community with at least 20,000 residents. That was before the financial industry imploded and housing collapsed. Among the findings in an Associated Press analysis: median household income dropped in 79 per cent of the communities. Incomes dropped by 4.3 per cent and the poverty rate grew in 70 per cent of the cities and towns. The jobless rate climbed to 6.6. per cent. It had been only four per cent in 2000. Incomes dropped as home prices escalated. The result was an unsustainable housing market that contributed to the current economic crisis.
Southwest Airlines trimmed its schedule Tuesday, eliminating 32 roundtrip flights and adding 19 new ones starting next May. For Idaho, the changes mean daily flights between Boise and Portland, Oregon, will be cut to two each way, down from three. The Dallas-based carrier released its schedule for May 9th through June 26th. Chief Executive Gary Kelly said the schedule attempted to maximize the use of aircraft on the best routes. Among markets adding new nonstop flights in May are Nashville, Tennessee and Oakland, California, and Nashville and Seattle. Southwest serves 64 U.S. cities and plans to add flights to Minneapolis in March. The airline carries more domestic passengers than any other, on more than 3,300 daily flights.
An international airlines association says the industry globally will lose $2.5 billion in 2009. The International Air Transport Association says all regions except the United States are expected to report larger losses next year than in 2008. IATA chief executive Giovanni Bisignani says "the outlook is bleak" but U.S. carriers will benefit from lower oil prices and cutbacks made this year to post a modest $300 million profit in 2009. He says the global airline industry faces the worst revenue environment in 50 years.
Twenty conventions, trade shows and other events have been booked by the Greater Houston Convention and Visitors Bureau for January. More than 22,290 attendees will spend an estimated $21.7 million in Houston during the month. The Americas Classic holds its 18th annual Swing Dance Championships January 15th through the 18th at the Hilton North Houston. The Chevron Houston Marathon holds its annual 26.2, 13.1 and 3.1 mile run in downtown Houston on January 18th. And buyers of Halloween products have their own expo at the George R. Brown Convention Center January 24th through the 27th.
The head of a House global warming panel says Congress should grant a waiver to allow California and other states to impose stricter emission rules than the federal standard. A provision of a bill being developed by Congressional leaders would require carmakers to drop their legal challenges to California's tougher approach to curbing greenhouse gas emissions. During a hearing, Representative Ed Markey said that "any recovery of these companies will require more than just fresh cash." The Massachusetts Democrat said that it will also require "a change of culture, a culture that answers challenges with innovation rather than lobbying and litigation."
Natural grocer Whole Foods Markets is suing the Federal Trade Commission, saying the regulator violated its due process rights in an antitrust dispute. Whole Foods acquired Wild Oats Markets in 2007 but has been in legal battle with the FTC since then over the deal. An administrative hearing on the case was scheduled to be held in February. Whole Foods says in a lawsuit filed in U.S. District Court Monday that the FTC is pre-judging the facts and rushing the case to trial. Lawyers for Whole Foods say it is the first case of its kind against the FTC in nearly 50 years. Whole Foods CEO John Mackey said that the FTC's pursuit of antitrust claims over his company's acquisition of a rival is "almost a vendetta." He calls the probe a waste of federal time and money. The FTC won't comment on the case but insists the acquisition of Whole Foods former Boulder, Colorado-based rival could hurt consumers. It also says it's treating the Whole Foods case like any other case. The debate over the deal is garnering attention because the commission is seeking to unwind two companies that have already merged — and because Whole Foods is calling into question the larger system that handles antitrust cases.
Kroger reports its third-quarter profit fell six per cent — mainly because of damages and disruption from Hurricane Ike. Ike hit southeast Texas on September 13th. Ohio-based Kroger also indicated that it expects slow holiday spending to hurt fourth-quarter results. The nation's largest traditional grocery store chain did manage to boost sales during the recession, as people cut restaurant spending. Kroger earned $237.7 million in the third quarter — down from $253.8 million a year earlier. The company says results were hurt by an after-tax charge related to its $25 million insurance deductible for Ike. The storm damaged stores, forced some to shut down temporarily and caused outage-spoiled food in September, mainly in Texas.