Tuesday PM February 24th, 2009
by: Ed Mayberry, February 24, 2009 10:02:55 pm
The White House says President Barack Obama still has confidence in Treasury Secretary Timothy Geithner, despite the withering criticism that has come Geithner's way over the government's plan to rescue the financial industry. Press Secretary Robert Gibbs said that Obama "absolutely, 100 per cent" has faith in his Treasury Secretary. Gibbs, interviewed on NBC's Today show, said that Obama's speech to Congress and the nation tonight will provide more details about the administration's financial stability plan to get banks lending and credit flowing again. That plan has so far been criticized as being too vague. Federal regulators said they will launch a revamped program to shore up the nation's troubled banks that includes the option of increasing government ownership in financial institutions.
A new government report on medical costs paints a stark picture for President Obama, who's expected to call for a health care overhaul in his speech Tuesday night to Congress. The Department of Health and Human Services says health care costs will top $8,000 per person this year, consuming an ever-bigger slice of a shrinking economic pie. The report says as the recession cuts into tax receipts, Medicare's hospital trust fund could become insolvent as early as 2016. At the same time, the government's already large share of the nation's health care bill will keep growing. Programs such as Medicaid are expanding to take up some of the slack as more people lose job-based coverage. And baby boomers will soon start reaching 65 and signing up for Medicare. Those trends together mean that taxpayers will be responsible for more than half of the nation's health care bill by 2016—just seven years from now.
KUHF will carry Obama's address tonight live at eight.
Federal Reserve Chairman Ben Bernanke has steadied Wall Street by telling Congress the recession could end this year. In his semiannual report to the Senate Banking Committee, Bernanke predicts the economy is likely to keep contracting in the first six months of 2009. But he also says "there is a reasonable prospect" the recession will end this year. He warns that a recovery will require getting credit and financial markets to operate normally.
Bernanke says the economy is suffering through a "severe contraction" and pledged to use all available tools to lift the country out of the recession that already has cost millions of Americans their jobs. In testimony to the Senate Banking Committee, Bernanke says the economy is likely to keep shrinking in the first six months of this year. Housing, credit and financial crises — the worst since the 1930s — plunged the economy into its worst downhill slide in a quarter-century at the end of last year.
Officials say nationalization is not part of the Obama administration's plans to prop up the country's ailing financial system. Appearing on ABC's "Good Morning America," White House Press Secretary Robert Gibbs said, "nobody imagines nationalizing banks." And Federal Deposit Insurance Corporation Chairman Sheila Bair is cautioning against rushing to the conclusion that Washington plans to take over the industry. Bank of America CEO Ken Lewis, meanwhile, is working to reassure employees that his company is not discussing a larger U.S. stake with the government. In a memo posted on the company's internal Web site, Lewis says the bank "does not need further assistance" now and that he doesn't believe it'll "need any more in the future."
The head of the FDIC says key decisions on shoring up the shaky financial system will hinge in part on a "stress test" to determine how the largest banks would perform if the economy weakens further. Federal Deposit Insurance Corporation Chairman Sheila Bair, at the same time, cautioned against rushing to a judgment that Washington intends to take over the industry, saying "I think there's ambiguity in the word 'nationalization.'" Bair said, "I think that is something that would be surprising." She said on CBS's The Early Show that the stress test must be done first, "before we determine what type of additional capital investments the government may need to make."
The Conference Board's consumer confidence index shows consumers have grown more fearful over massive job cuts and shrinking retirement accounts. The index plummeted more than 12 points in February to 25, from the revised 37.4 last month. That's well below the 35.5 level that economists surveyed by Thomson Reuters expected. The present situation index, which is consumers' assessment of current economic conditions, fell to 21.2 from 29.7 last month. The expectations' index, which is consumers' outlook over the next six months, sank to 27.5 from 42.5. Economists carefully monitor consumer confidence since consumer spending accounts for more than two-thirds of economic activity.
Discount carrier Airtran Airways launched a fare sale to all of its destinations for flights through the middle of the fall. American Airlines, Continental Airlines, United Airlines, US Airways and Delta Air Lines quickly matched on routes where they compete with Airtran, and JetBlue said it would do the same. The sale is seen as a sign of great uncertainty about demand for air travel this year amid the deep U.S. recession. Airtran's sale extends through the summer, normally a busy time for airlines when they have been able to reap premiums in the past as more people travel. But fewer people are taking vacations now with many hurting financially. Businesses are cutting back on corporate travel, and many who fly are waiting longer to book. What's also unusual is how far in advance Airtran has loaded its schedule. Before two weeks ago, Airtran showed its schedule for about 210 days. On Tuesday morning, the carrier was showing its schedule for the next 267 days. Dallas-based discount carrier Southwest Airlines is only showing its schedule for the next six months, while legacy carriers tend to show their schedule for about 11 months out.
Most Americans see the value in the country's space program, according to a survey by the Coalition for Space Exploration, as reported by the Houston Business Journal. Some 63 per cent were surprised to learn that NASA funding is less than one per cent of the federal budget. The coalition is a group of space industry businesses and advocacy groups.
The Southwest Regional Office of the U.S. Bureau of Labor Statistics has released its December changing compensation costs for Houston. Total compensation costs increased 2.5 per cent—above the national average of 2.4 per cent. Houston wages and salaries rose three per cent in December.
A government agency's index shows U.S. home prices fell by the steepest annual amount on record in the fourth quarter. The Federal Housing Finance Agency says the drop of 8.2 per cent from the prior year period beat the previous annual record of 6.2 per cent set in the third quarter of 2008. The index started in 1991. The index also fell 3.4 per cent from the third quarter of last year, which was a record quarterly decline. The government index is based on loans owned or guaranteed by mortgage finance companies Fannie Mae and Freddie Mac. It has declined less than other housing market measurements because it excludes the most expensive homes and some of the subprime loans that have fallen into foreclosure.
A widely watched index shows home prices tumbled by the sharpest annual rate on record in the fourth quarter and in December. The Standard & Poor's/Case-Shiller U.S. national home price index plunged 18.2 per cent during the quarter from the same period a year ago, the largest drop in its 21-year history. Prices are now at levels not seen since the third quarter of 2003. In the month of December, the Case-Shiller 20-city index plunged 18.5 per cent from December 2007 levels, while the 10-city index dropped 19.2 per cent. Prices in the 20-city index have plummeted 27 per cent from their peak in the summer of 2006, and the ten-city index has fallen more than 28 per cent.
Six months after Hurricane Ike struck the Texas gulf coast, hundreds of small businesses that provided services like transportation and portable toilets are still waiting to be paid. It's the result of a $134 million dispute between Texas and the federal government. Because of the delay, small businesses in Texas and elsewhere are struggling. And many of them say the next time a hurricane threatens the region, they might be reluctant to help. A California company called Central Coast Industries is owed nearly a million dollars for supplying water and portable showers after Ike and the smaller hurricanes Dolly and Gustav. The president of the company says he's now operating off of his lines of credit. And he says he's glad he secured that credit before the financial crisis hit. Texas Governor Rick Perry blames the Federal Emergency Management Agency for the delay. FEMA has said Texas should pay the businesses, and then seek reimbursement from the federal government.
Carrier plans to close its plant in Carrollton and cut 150 jobs from its east Texas facility in Tyler. The heating and air-conditioning systems maker will replace some Tyler positions with workers from the Carrollton plant in suburban Dallas. Tyler television station KETK reported that the job cuts in Tyler are in part due to the plant's small package placement line moving to Monterrey, Mexico.
AT&T is investing $1 billion this year in expansion, to bring more services and network-based applications to businesses. Verizon Wireless invested $298 million for enhancements and to expand coverage in Texas last year, adding 179 cell sites and increasing capacity. Sprint invested more than $33 million in the Houston area and $105 million in Texas in expansions and enhancements.
The court-appointed receiver for a disgraced Texas billionaire is asking national political committees to return campaign contributions. Robert Allen Stanford, accused in a Securities and Exchange Commission civil lawsuit of a "massive" fraud, was served with legal papers by FBI agents last week but has not been charged with any crime. Letters sent by the receiver also included a list of dozens of Senators and Representatives and the individual contributions, ranging from $250 to $45,900. The committee contributions ranged from $133,345 to $965,000. A Houston attorney representing some of Stanford's customers says it's unclear whether there's any legal requirement to comply. Phillip Stern, another attorney who has been a court appointed receiver, says he thinks it's a reasonable request.
Dell has announced plans to power its 240,000 square-foot Oklahoma City campus with 100 per cent wind energy. Dell Oklahoma City's Senior Manager of the Environment Chris Scully says the move should reduce the facility's carbon dioxide emissions by 5,100 tons per year. The company announced the deal with OG&E as part of a plan to reduce its worldwide facilities' greenhouse gas emissions by 40 per cent by 2015. OG&E officials say Dell is among the first large businesses in the area to be powered entirely with renewable energy. Dell is based in Round Rock.Earnings
RadioShack says its fourth-quarter profit fell 39 per cent as consumers pulled back on discretionary spending amid the recession. The decline was much more than Wall Street expected from the Fort Worth-based electronics retailer. Poor sales of GPS navigation systems, cameras and toys dragged down profit to $62 million. Revenue fell seven per cent to $1.26 billion for the quarter. Analysts surveyed by Thomson Reuters expected of $1.36 billion. Same-store sales at company-run stores and kiosks fell 9.2 per cent during the three months ending December 31st. For the full year, earnings sagged 19 per cent to $192.4 million. Full-year sales slipped one per cent to $4.22 billion, while same-store sales for company-operated stores and kiosks dipped 0.6 per cent. RadioShack has about 4,400 company-operated stores, 1,400 dealer outlets and nearly 700 wireless phone kiosks throughout the U.S. and approximately 200 company-operated stores in Mexico.