Thursday PM January 29th, 2009
by: Ed Mayberry, January 29, 2009 3:01:33 pm
Sales of new homes plunged 14.7 per cent in December to the slowest monthly pace on record, as the hobbled homebuilding industry posted its worst annual sales results in more than two decades. The Commerce Department said Thursday that new home sales fell in December to a seasonally adjusted annual rate of 331,000, from a downwardly revised November figure of 388,000. December's sales pace was the lowest on records dating back to 1963. Economists surveyed by Thomson Reuters had expected sales would fall to a rate of 400,000 homes. For 2008, builders sold 482,000, the weakest results since 1982, when 412,000 homes were sold.
Houston-based Metrostudy says government numbers don’t tell the whole story of housing problem, according to the Houston Business Journal. The statistics ignore cancellations of contracts by reluctant homeowners or buyers unable to close.
JPMorgan Chase is closing 36 of 75 Houston-area branches operated by Washington Mutual beginning in March. Chase acquired WaMu in 2008 after the Seattle financial services company filed for bankruptcy protection and announced a national consolidation. Chase already has 145 branches in the Houston area. The remaining WaMu branches are being rebranded as Chase branches. Chase says virtually all WaMu employees are being retained.
President Barack Obama's economic stimulus bill is headed for the Senate, after splitting the House along party lines for the most part. Republicans united in opposition against the bill and were joined by 11 mostly conservative Democrats. The 244-188 House vote passing the legislation registered 177 Republicans unanimous in opposition. But in the Senate next week, the $819 billion measure is expected to pick up some GOP support. Republicans criticize the legislation for spending billions on Democratic favorites like education despite questions as to whether that would really put people to work. Tens of billions of dollars would go to the states, which confront deep budget cuts. There's also money for housing weatherization, school construction and road building. After the House's vote, Obama said he hopes to work with lawmakers to “continue to strengthen” the plan before it reaches his desk.
House Speaker Nancy Pelosi says that while critics may quibble with some elements of spending in the $819 billion economic rescue plan, Democrats were willing to act--and Republicans were not. Discussing the plan that the House approved on a strictly party line vote, Pelosi acknowledged Republican criticism that large sums of money are set aside for favored Democratic programs such as aid to education and Medicare. But she said “we are definitely stepping up to the plate to say we'll be accountable.” The California Democrat also said that Republicans are failing on the policy aspects of reviving the struggling economy. In an interview broadcast on CBS's The Early Show, Pelosi said Republicans “have had their chance. They decided to oppose. That's their choice.”
White House press secretary Robert Gibbs says President Barack Obama is going to continue to work with Republicans to craft a stimulus package supported on both sides of the aisle. Gibbs said Obama understands “it's going to take longer than a few days to change the ways Washington works.” Appearing on NBC's Today Show, Gibbs said he worries about “the people who work for Boeing or Home Depot or Starbucks, who are going to be losing their jobs.'' When asked whether House Speaker Nancy Pelosi had failed the president by crafting a bill that Republicans refused to back, Gibbs replied: “If people stop looking through the partisan lens and through the economic lens, they'll see it was put together with Democrats and Republicans and economists who supported us.”
The government says the number of people receiving unemployment benefits has reached an all-time high as layoffs spread throughout the economy. The Labor Department says the number of laid-off workers continuing to claim unemployment insurance for the week ending January 17th was a seasonally adjusted 4.78 million, the highest since records began in 1967. The department also says the number of Americans filing new jobless benefit claims rose slightly to a seasonally adjusted 588,000 last week, from a downwardly revised figure of 585,000 the previous week. Both results were worse than analysts expected.
Eastman Kodak plans to cut up to 4,500 jobs, or up to 18 per cent of its work force. The news comes as the Rochester, N.Y.-based company posted a $137 million fourth-quarter loss on plunging sales of both digital and film-based photography products. The latest cuts that the 129-year-old photography giant aims to complete this year could trim its ranks to below 20,000. That’s a level not reached since the 1930s Depression era. Its payroll peaked at 145,300 in 1988.
The Port of Houston enjoyed its ninth consecutive year of growth in 2008 with a four per cent gain to $196.5 million. Total tonnage was six per cent more than in 2007, hitting nearly 43 million tons. Container operations gained only one per cent for the year, with some 1.8 million containers handled. The port authority reported that it has awarded nearly $239 million, or 37 per cent, of eligible contracts to registered small businesses since 2002. A special meeting is set for Friday to discuss the replacement for retiring PHA Executive Director Tom Kornegay.
Orders to U.S. factories for big-ticket manufactured goods have fallen for the fifth straight month in December, closing out a dismal year in which demand dropped by the largest amount since the recession year of 2001. Given the severity of the current recession, analysts say manufacturers face bleak prospects this year as well. The Commerce Department said that new orders for durable goods dropped by 2.6 per cent last month, an even bigger decline than the two per cent decline that had been expected. For the year, the government says orders fell 5.7 per cent, the second biggest drop on record, exceeded only by a 10.7 per cent plunge in 2001.
In a draft report, the Congressional Oversight Panel for the troubled Asset Relief Program has spelled out eight urgent needs that it said could help avoid the mistakes that led to the credit crisis at the center of the tanking economy. They include identifying and regulating institutions considered “too big to fail” because of their far-flung impact on the economy, increasing supervision of “shadow” markets such as hedge funds and over-the-counter derivatives, and a new system of federal and state regulations of consumer credit products. It also urges the government to make a diplomatic priority out of establishing global regulatory standards. And it recommends restrictions on executive pay so top company officials are discouraged from taking unnecessary financial risks.
Federal regulators have moved to guarantee tens of billions of dollars in uninsured deposits at institutions that provide wholesale financing for U.S. credit unions. It's the latest in a series of actions to shore them up in the face of financial stress. The National Credit Union Administration announced the move, saying it was intended “to add stability to and strengthen corporate credit unions.” Corporate credit unions provide wholesale financing and investment services to retail credit unions. Some of the 28 corporate credit unions in the U.S. have sustained steep losses on paper from the depressed value of the mortgage-backed securities they hold. The majority of credit unions, which are cooperatives owned by their members, are financially strong.
Some banks are changing course and turning down millions in government bailout money. About 20 banks have reversed course and refused to take the money, concerned about hidden strings and government interference. The combined $1 billion those banks would have received is just a fraction of the hundreds of billions the government has already spent. But it shows that taxpayers aren't the only ones anxious about the financial bailout. For Fidelity Bank in Dearborn, Michigan, taking the money would mean the government would have owned about 25 per cent of its outstanding stock. But bank president Michael Ross says Congress and the White House could then start calling the shots. He says he could only think about the government's failure overseeing Freddie Mac and Fannie Mae. The banks that turned down the money say they're comfortable their own finances will allow them to weather the storm.
Austin's municipal electric utility wants to set aside 300 acres for a solar panel array to be built and owned by San Francisco-based Gemini Solar Development. Austin Energy would be the exclusive client and pay $10 million a year for 25 years for the power it generates. The Austin American-Statesman reports the solar project would be one of the largest of its kind in the world if the Austin City Council gives the go-ahead. The proposed plan would open in late 2010 and would produce enough energy annually to power up to 5,000 homes. The city has already decided to reduce its dependence on fossil fuels. Austin Energy says the plant would put it on pace to meet its goal of getting 30 per cent of its power from renewable power sources by 2020. But it would also raise the monthly electric bill for the average Austin homeowner by an average of 60 cents. And it has generated some concern among Austin's large manufacturers, particularly high-technology companies, who worry their bills could see big increases.
Peanut Corporation says it has expanded its recall in the salmonella outbreak into one of the largest in the nation's history out of an abundance of caution. The company says the recall includes all peanut products dating back to January 1st, 2007 produced in its Georgia plant. The company is relatively small but its peanut paste is an ingredient in hundreds of food products. Inspectors found roaches, mold, a leaking roof and other sanitary problems at the Georgia plant, which continued to ship products anyway, even after they were found to contain salmonella. A senior member of Congress and Georgia's agriculture commissioner have called for a criminal investigation, but the Food and Drug Administration says that's premature while its own probe continues. More than 500 people have gotten sick and at least eight may have died as a result of salmonella infection. The plant has stopped all production.
Former President Bill Clinton is expressing some surprise and perhaps some skepticism about the latest advocate for the free market: Russian Prime Minister Vladimir Putin. At the World Economic Forum in Davos, Switzerland, Putin warned that too much government involvement in the economy could be “dangerous.” And he cautioned against “blind faith in the state's omnipotence.” Putin has often been criticized for exerting state control over key Russian industries such as oil and gas. Clinton told the same audience that Putin “coming out for free enterprise” was a “first,” adding “I hope it works for him.” The remark drew chuckles, after which Clinton turned more serious. Saying the world is “in so much trouble,” he praised President Barack Obama's efforts to push through an $819 billion stimulus package.
A judge has sided with Governor Arnold Schwarzenegger in his bid to save money by forcing state workers to take days off without pay. The furloughs — two days a month — are scheduled to start next week. Two state employee unions had challenged Schwarzenegger's executive order, saying he did not have authority to order furloughs. A Sacramento County superior court judge disagreed. He also cited the state's financial condition. California will be forced to make billions of dollars in cuts to close a deficit projected to hit $42 billion through June 2010. In his temporary order, Judge Patrick Marlette said: “the current circumstances constitute an emergency.”
The Department of Justice says an online system allowing consumers to track a vehicle's detailed history, including whether it was stolen, will go live on Friday. The National Motor Vehicle Title Information System will be accessible for a fee through third-party Web sites. The department says the system will help consumers and law enforcement to track brand history, odometer data and other background about a vehicle to ensure it's not stolen and prevent fraud. The department has enlisted 27 states to provide data for the system and is working to bring the rest on board by January 1st. The department will disclose sites where consumers can access data Friday.
Wyoming has reached a settlement with Dell over accusations the computer company made misleading financing and service offers to PC buyers. Attorney General Bruce Salzburg said that the Round Rock company has agreed to pay a total of $25,000 to Wyoming residents who experienced problems with the company's practices. Wyoming's agreement mirrors those reached earlier this month between Dell and 34 attorneys general from other states. Consumers accused Dell of failing to honor rebates or financing promotions, and charging consumers extraneous fees on incorrectly invoiced or damaged products. Wyoming consumers may be eligible for restitution if they had problems with a Dell purchase between April 2005 and January 12th this year. Claims are due to the Wyoming attorney general's office by April 13th.
Venezuela's Citgo Petroleum has resumed shipments of free heating oil to poor Americans, making its first delivery since the program's rumored end. Citgo President Alejandro Granado says the Houston-based company is “making a huge effort” to maintain donations despite falling oil prices and the world economic crisis. Citgo delivered free fuel to a shelter in Washington D.C. on Thursday. The initiative, a partnership with the Boston-based nonprofit Citizens Energy Corporation, says it has provided more 200,000 households in 23 states with free oil since 2005. Citizens Chairman Joseph Kennedy said January 5th that shipments had been suspended. But five days later, President Hugo Chavez said the donations would continue.
Continental Airlines lost $266 million in the fourth quarter as the recession bit into traffic, and fuel and labor costs increased. Excluding net charges of $170 million, Continental's loss would have been $96 million. Revenue slipped 1.5 per cent to $3.47 billion.
Ford says it lost $5.9 billion in the fourth quarter, but it has no plans to seek federal aid unless economic conditions worsen. The second-largest U.S. automaker says it burned through $5.5 billion in cash during the quarter. Revenue fell to $29.2 billion, down from $45.5 billion for the fourth quarter of 2007. The Dearborn, Michigan, company also announced that its credit arm would cut 20 per cent of its work force, or 1,200 jobs, and it has reached agreement with the United Auto Workers to end the jobs bank in which laid-off workers get most of their pay.
Ford says consumers who order or purchase a new 2010 hybrid vehicle from the company by the end of March are eligible for a tax credit. Purchases or orders of new Ford Fusion and Mercury Milan hybrids made by March 31st will qualify for a $3,400 credit on their 2009 tax returns. The company unveiled its hybrid version of the Ford Fusion last November that can go up to 47 miles per hour on battery power alone. The Fusion gets 41 miles per gallon in the city and 36 on the highway. The Ford Escape and Mercury Mariner hybrids are still eligible for a $3,000 tax credit. The credits vary due to the performance of the vehicle. The Escape and Mariner get 34 miles per gallon in the city, and 31 on highways. Ford says its Fusion Hybrid would be in showrooms by March 31st, but did not offer pricing details.