Thursday PM December 18th, 2008
by: Ed Mayberry, December 18, 2008 5:12:49 pm
Initial claims for unemployment benefits dropped more than expected last week but remain near a 26-year high. The Labor Department says that new applications for jobless benefits fell to a seasonally adjusted 554,000 from an upwardly revised figure of 575,000 the previous week. That's slightly below economists' expectations of 558,000 claims. A Labor Department analyst says one likely reason for the decline is that the figure was inflated two weeks ago by applicants who delayed filing their claims during the Thanksgiving holiday week. Still, the four-week moving average, which smoothes out fluctuations, increased slightly last week to 543,750, the highest since December 1982. The labor force has grown by about half since then.
The Speaker of the House says grim new unemployment data heighten the urgency for the Bush administration to act to prevent “the imminent insolvency of the domestic auto industry.” California Democrat Nancy Pelosi says the news that 544,000 Americans filed for jobless claims last week shows that workers are struggling. She says two million U.S. jobs are riding on whether Bush helps the beleaguered auto industry. Pelosi says the administration should tie the auto aid to the same accountability requirements included in a House-passed carmaker bailout that died in the Senate. That White House-backed plan would have given the government veto power over major business decisions at any car company that received federal loans.
The White house says a managed bankruptcy for automakers is one option being considered to help save the troubled industry. White House Press Secretary Dana Perino told reporters that “we're going to do something.” The Bush administration wants to avoid what it calls a “disorderly collapse” of car companies that would result in devastating job losses and sweeping economic problems. Perino says the White House is very close to a decision. But she did not put a timetable on when an announcement would be made, or even whether it would come this week. Setting up a so-called managed bankruptcy would be complicated, involving talks with not just automakers but unions and other stakeholders.
General Motors says a Wall Street Journal report that it and Chrysler have restarted merger talks is not true. The report, citing people familiar with the discussions, said that talks about a combination were rekindled after the majority owner of Chrysler said it was willing to reduce its stake in the company. But a GM spokesman says the company's stance on merger talks hasn't changed since it suspended them last month when it announced its third-quarter earnings. Meanwhile, as Detroit's Big Three wait to see what kind of financial assistance will be coming from Washington, they've each announced new steps to help them survive. Chrysler's move is the most dramatic. It's closing all its North American manufacturing plants for at least a month, beginning with a previously scheduled two-week shutdown starting tomorrow. Ford says it will shut down ten plants for an extra week in January because of sluggish sales. And GM says it's halting construction of a plant tied to production of its Chevy Volt, a plug-in electric car.
Federal regulators have adopted new rules for the credit card industry intended to protect consumers from arbitrary hikes in interest rates or unfair time constraints for paying. The rules will allow credit card companies to raise interest rates only on new credit cards, future purchases or advances and not on existing account balances. They also restrict certain lender practices, such as allocating all payments to balances with lower interest rates when a borrower has balances with different rates. However, some experts say the changes could make it more difficult for people with bad credit to get cards. The rules would take effect in July 2010.
A private research group's measure of the economy's health fell again in November and its six-month rate of decline hit the worst level since 1991. The New York-based Conference Board's index of leading economic indicators fell for the second straight month, dropping 0.4 per cent in November. That was slightly better than the 0.5 per cent decline economists surveyed by Thomson Reuters had expected. The index is designed to forecast economic activity in the next three to six months based on ten economic components, including stock prices, building permits and initial claims for unemployment benefits.
Texas gasoline prices slipped about two cents this week to settle at $1.55 per gallon as travelers prepare to hit the road for the holidays. AAA Texas reports gasoline in some parts of the state edged upward after weeks of declines as crude oil prices fell. The nationwide average retail price per gallon was $1.67, up one penny. El Paso had the highest average price for gasoline, at $1.61. The least expensive gasoline was in Houston, at $1.50. AAA Texas reports gasoline prices in Amarillo, Corpus Christi and Texarkana rose this week. Association spokeswoman Sarah Schimmer says Texas is one of only seven states with gasoline prices averaging $1.55 or less. Meanwhile, AAA Texas is projecting a two per cent decline in the number of Texans traveling during the Christmas through New Years holiday periods. About 5.1 million Texans are expected to travel, down 110,000 from last year.
President-elect Barack Obama has chosen three top financial regulators to see the country through unprecedented market turmoil. At a news conference, Obama named Gary Gensler to head the Commodity Futures Trading Commission, Daniel Tarullo to aFederal Reserve seat and Mary Schapiro to chair the Securities and Exchange Commission.
A Democratic official says president-elect Barack Obama intends to name Ron Kirk as the United States trade representative. Kirk is a former mayor of Dallas, and was the first black to hold that post. The official spoke on the condition of anonymity because Obama has not made the selection public. He's expected to make the announcement in coming days. Currently, Kirk is a partner in the Dallas office of the Houston-based law and lobbying firm Vinson & Elkins.
A labor official says Representative Hilda Solis of California will be nominated as Labor Secretary by Obama. The Democratic Congresswoman was just elected to her fifth term representing heavily Hispanic portions of eastern Los Angeles County and East L.A. She is the daughter of Mexican and Nicaraguan immigrants and has been the only member of Congress of Central American descent. The official spoke on conditions of anonymity because an announcement has not been made yet. Solis, 51, has focused on immigration and environment issues while in the House.
President-elect Barack Obama says the government has been “asleep at the switch” when it comes to overseeing the nation's financial system. He says Americans are “feeling frustrated that there's not a lot of adult supervision.” Obama spoke in Chicago as he announced appointments to head the SEC and to other regulatory agencies. Obama called for a “shift in ethics” on Wall Street. He says everyone involved — from CEOs to shareholders to investors — needs to consider not only whether what they're doing will make them money, but also whether it's right, and whether it conforms to “higher standards.” Obama mentioned Wall Street money manager Bernard Madoff, saying that the latest investment scandal “has reminded us yet again of how badly reform is needed.” The president-elect said his new team will help put in place new rules designed to “crack down on the culture of greed and scheming.”
The top government watchdog overseeing the nation's financial bailout says she's frustrated by the Treasury Department's refusal to explain how it's doling out billions in taxpayer money. Harvard professor Elizabeth Warren, the chairwoman of a Congressional oversight panel, traveled to Washington to get answers on how the Treasury is managing the unprecedented bailout. In an interview with the Associated Press, the Democratic-appointee said she doesn't understand why it's taken so long for the Bush administration to explain its plan. She says she doesn't want to believe it's because there never was a plan for spending $700 billion in taxpayer money to rescue banks. Warren says the American people deserve to know how their money is being spent.
Rates on 30-year-fixed mortgages dropped this week to their lowest levels in at least 37 years. The decline came as the Federal Reserve pledged to pour money into the mortgage market in an effort to pump life into the U.S. housing market. Freddie Mac says the average rate on 30-year fixed-rate mortgages dropped to 5.19 per cent from 5.47 per cent last week. The rate is the lowest since April 1971. Rates on 15-year fixed-rate mortgages dropped this week to an average of 4.92 per cent from 5.2 per cent last week. Mortgage rates started falling after the Fed launched a new effort in late November to aid the housing market by purchasing up to $600 billion of mortgage-related securities and other debt issued by Fannie Mae, Freddie Mac and the federal home loan banks.
Houston has dropped female business owners from its minority subcontracting goals. It’s an agreement that’s part of a lawsuit challenging Houston’s affirmative action program. The program was intended to encourage the awarding of a percentage of city contracts to businesses owned by minorities and women. Prior to the agreement, 14 per cent of contract work was for minority-owned businesses, with three per cent for women and five per cent for small businesses. Besides eliminating the category for women, the goal for small business subcontractors is increasing to eight per cent.
A prominent citizens' panel is reporting to the Texas Department of Transportation that there are $313 billion in road and bridge needs in the state between now and 2030. The so-called 2030 Committee says the biggest items are urban transportation projects totaling an estimated $171 billion over that time period, with most of the money expected to come from the state. The report said other major projects are pavement improvements amounting to $89 billion before 2030; bridge repair and replacement amounting to $36 billion; and rural mobility items totaling $17 billion. Committee members made their report to the Texas Transportation Commission, just in time for the start of the state legislative session on January 13th. Commission chair Deirdre Delisi appointed the committee earlier this year.
The Border Patrol has hired 6,000 new agents over the past two years. Border patrol areas in Texas gained about 3,100 agents to push its total to about 8,400 agents. Arizona added nearly 800 agents, to about 4,100. California gained about 1,000 agents, to about 3,400. The Border Patrol says the combination of terrain, unmanned surveillance aircraft and new fencing on half the Arizona border justified adding fewer new agents. The border patrol this week announced it's met its Congressionally-mandated 18,000-agent target. Homeland Security Secretary Michael Chertoff last week acknowledged his agency has fallen 170 miles short of its goal to fence off 670 miles of Mexico's border by the New Year. His nominated successor, Arizona Governor Janet Napolitano, said she wants to redeploy National Guard units to the border.
The United Nations says 33 countries are in need of food aid as a result of war, floods, crop failures or high domestic food prices. The U.S. Food and Agriculture Organization says the majority of those countries—20 — are in Africa, ten in Asia and three in Ltin America. The Rome-based agency said in a report that an estimated 5.1 million people in Zimbabwe may need assistance as the country grapples with worsening economic conditions and an outbreak of cholera. In North Korea an estimated 8.7 million people, or around 40 per cent of the population, urgently need food assistance. The agency has put the overall number of needy at almost one billion.