Wednesday PM February 18th, 2009
by: Ed Mayberry, February 18, 2009 10:02:16 pm
Panicky depositors rushed to pull money from banks in the Caribbean and Latin America after U.S. regulators filed a fraud case against Texas financier R. Allen Stanford. Hundreds of people lined up for a run on two branches of the Bank of Antigua today. The Stanford-owned institution has been flooded with fearful customers since the Securities and Exchange Commission filed a complaint accusing Stanford of an $8 billion fraud. The SEC on Tuesday shut down Stanford Bank. Many of those waiting clutched portable radios to listen to financial news. Local regulators said the bank's finances are sound and appealed for calm. Although the bank is owned by the Houston-based Stanford Financial Group, it's not part of the U.S. complaint. Meanwhile, leaders of those nations urged calm amid concerns that their slumping economies could be harmed by the case.
Venezuela's top banking regulator says Venezuelans hold about $2.5 billion in Stanford Bank on the Caribbean island of Antigua, which is being investigated by U.S. authorities on fraud allegations. Venezuelan Superintendent of Banks Edgar Hernandez said many Venezuelans made investments in dollars in the bank in Antigua. But he said those investments are outside the purview of Venezuelan law. Hernandez also sought to reassure investors about Stanford Bank in Venezuela, saying an inspection in the fourth quarter of 2008 found no problems and that the bank appears "healthy."
Colombian banking authorities say they've suspended all activities of the local brokerage unit of Stanford International Bank, the object of the U.S. fraud probe. Authorities say they're acting to protect "clients and investors" and "preserve confidence in the stock market." The Colombian Finance Superintendency also says in a statement posted on its Web site that Stanford's local brokerage unit, Stanford Comisionista de Bolsa, increased its capital in Colombia by $3 million on Monday. It did not provide further information on Stanford's activities in Colombia.
PGA Tour Commissioner Tim Finchem says the Stanford St. Jude Championship will be played this year. That's even after the SEC accused the chairman of Stanford Financial Group of a fraudulent $8 billion investment scheme. Stanford Financial took over as title sponsor of the PGA tour event in Memphis, Tennessee, in 2007. It is to be played June 11th-14TH, a week before the U.S. Open. Stanford recently signed on as a title sponsor on the LPGA Tour. The Stanford International Pro-Am was held this year in South Florida. It was to move to the end of the 2009 schedule and be played in Houston as the Stanford Financial Tour Championship.
Energy Secretary Steven Chu says he's ready to push out some of the billions of dollars provided by the economic recovery plan within a couple of months. Chu told reporters there are shovel-ready projects to build and improve power lines that will quickly produce jobs. He said he will speed up processing energy project loan guarantees and expects money to flow quickly to help low-income families improve the energy efficiency of their homes. He told reporters "we're really looking at months" to get the first checks out. The Energy Department will manage $39 billion in grants, tax breaks and loan guarantees under the stimulus package, much of it to boost renewable energy and conservation programs.
Federal Reserve Chairman Ben Bernanke is pledging anew to do everything in his power to lift the country out of recession, while defending the extraordinary steps the Fed has taken to fight the worst credit and financial crisis since the 1930s. The Fed has slashed a key interest rate to record lows and has launched a series of radical programs in hopes of getting credit to flow more freely again to American consumers and businesses, and stabilize Wall Street. Such relief would help revive an economy that's been mired in recession since December 2007. In prepared remarks, Bernanke says the Fed "has done, and will continue to do, everything possible within the limits of its authority to assist in restoring our nation to financial stability and economic prosperity as quickly as possible."
The government says the 20 largest banks that received government rescue funds slightly reduced their lending to consumers and businesses in the last three months of 2008. The Treasury Department says the banks reduced their mortgage and business loans by about one per cent each, while credit card lending rose by two per cent. The department says lending likely would have fallen further without the roughly $200 billion that has been provided to banks so far, given the sharp downturn in the economy. The data is from the first in what the department says will be a series of monthly reports on the banks' lending.
President Barack Obama is unveiling a sweeping new plan to help millions of Americans who are threatened with foreclosure stay in their homes. The package includes a $75 billion fund with incentives for lenders to encourage them to cut mortgage payments to sustainable levels. The plan is more ambitious than initially expected — and more expensive. It aims to aid borrowers who owe more on their mortgages than their homes are currently worth, and borrowers who are on the verge of foreclosure. At the same time, the Treasury Department says it will double the size of its lifeline to Fannie Mae and Freddie Mac. The government now says it will absorb up to $200 billion in losses at each company.
The Federal Reserve has sharply downgraded its projections for the country's economic performance this year, predicting the economy will actually shrink and unemployment will rise higher. Under the new projections, the unemployment rate will rise to between 8.5 and 8.8 per cent this year, up from prior projections of 7.1 to 7.6 per cent. The bleaker outlook represents the growing toll of the worst housing, credit and financial crises since the 1930s. All of those negative forces have plunged the nation into a recession, now in its second year. According to documents on the Fed's updated economic outlook, central bank officials "generally expected that the recovery would be unusually gradual and prolonged."
General Motors and Chrysler want more federal money to stay alive. The automakers, which have received $17.4 billion so far, filed plans with the government more than doubling that request to $39 billion. The requests, made in government-required restructuring plans, were accompanied by plans for thousands more job cuts, slashing of models and brands, union concessions and the prospect of even further expense cuts. In a dramatic acknowledgment that conditions in the U.S. auto industry have grown significantly worse in just two months, GM alone said it would cut 47,000 jobs globally by the end of the year — 19 per cent of its work force. It also said it would close five more U.S. factories, although it did not identify them. Chrysler said it will cut 3,000 more jobs and stop producing three vehicle models. The grim reports came as the United Auto Workers Union said it had reached a tentative agreement with GM, Chrysler and Ford on contract changes. Concessions with the union and debt-holders were a condition of the government bailout.
The strong>Houston Advanced Research Center has created a collaborative research program promoting technology for low-impact oil and gas drilling. The University/National Laboratories Alliance will fund new technologies that can accelerate development of domestic reserves in an environmentally friendly way. With oil and natural gas still prominent sources of energy in the United States, HARC's Richard Haut says that can help in environmentally sensitive areas that are currently off limits to drilling and production.
"And yet over the past 30 years our access to federal lands has decreased from about 75 per cent for oil and gas activities down to about 17 per cent. If we want to look at energy security, creating jobs and all, we're going to have to look at what are some environmental tradeoffs compared to what are some cost-effective technologies that would enable industry to get into these areas."
Haut says the collaboration will lead to green jobs.
"Number one is cost-effective technologies to produce natural gas on environmentally sensitive areas. Number two is how do you actually measure the health of an ecosystem or the biodiversity, both onshore or offshore to understand the impact of human activities, not just oil and gas activities—shipping, for example, offshore. And then thirdly there's job creation. As we start developing these technologies, that we'll be looking at job creation, as well."
Participating groups include Texas A&M University, University of Wyoming, University of Colorado, Utah State University, Sam Houston State University, University of Arkansas, West Virginia University, the Argonne National Laboratory and the Los Alamos National Laboratory.
A new Associated Press poll shows the troubled economy is alarming more and more people. An AP-GFK poll found that people's fears about losing a job, not being able to pay bills or watching retirement funds evaporate are growing. Nearly half of those surveyed say they worry about becoming unemployed—and that's almost double last year's number. Nearly three-fourths say they know someone — be it a friend or relative — who lost a job in the past six months because of the economy. The poll also showed public support dipping slightly for the $787 billion economic package that President Barack Obama signed Tuesday. Support for the plan stood at 52 per cent, down from 55 per cent support last month.
Industrial production took a bigger-than-expected nosedive in January largely reflecting shutdowns at plants making automobiles and related parts. The Federal Reserve report shows that production at the nation's factories, mines and utilities fell 1.8 per cent last month. Many economists expected a 1.5 per cent decline. Adding to the bleak picture: December's performance was even weaker than initially reported with big industry production plunging 2.4 per cent. The two per cent drop originally reported in December was double the amount analysts expected and capped the worst year for manufacturers since 2001.
A AAATexas survey found that retail gasoline prices fell slightly in Texas from last week. An auto club statement says regular self-serve is averaging $1.82 per gallon in the 11 cities in the Texas survey. That's about 14 cents lower than the national average of $1.95 per gallon, which also fell a penny from last week. The state's cheapest gas is in Corpus Christi, where the average fell four cents to $1.75 per gallon. The most expensive is in El Paso, where the average remained unchanged at $1.97 per gallon.