Wednesday PM May 20th, 2009
by: Ed Mayberry, May 20, 2009 9:05:11 pm
Congress has sent President Barack Obama a bill with sweeping new rules for the credit card industry that will affect just about every American. The legislation that would impose sweeping new restrictions on the credit card industry. The bill includes a requirement that consumers receive at least 45 days' notice and an explanation before their interest rate is increased. The bill also would make it tough for anyone under 21 to obtain a card. The 361-64 vote paves the way for the bill to be sent to the president. The House still has to vote on an unrelated proposal tucked into the bill by the Senate that would allow people to bring loaded guns into national parks. President Barack Obama has said he wants to sign the bill by Memorial Day.
The head of the Senate Banking Committee brushed aside talk that credit will be more scarce from legislation cracking down on the credit card industry. Senator Christopher Dodd hailed Senate passage of the bill, calling it "a great day for consumers." Interviewed on CBS's The Early Show, the Connecticut Democrat said consumers still must handle their money responsibly. But he also said the measure, which restrains practices such as short-notice fee hikes and the lowering of credit limits without cause, was "a long time overdue." Dodd said any assertion that credit will be hard to get is absurd, "a little like chicken little."
Halliburton CEO Dave Lesar reassured shareholders that the oilfield services company has no ties to former subsidiary KBR. Lesar used the company's annual meeting in Houston to distance Halliburton from military contractor KBR. KBR's contracts to support U.S. troops in Iraq and Afghanistan have come under federal scrutiny for possible fraud and other improprieties. KBR defends its work. The two companies separated in April 2007. Lesar was asked by a shareholder if the separation was "legal fiction"--given Halliburton's disclosure it agreed to pay $559 million to settle U.S. corruption charges linked to KBR. Last September, former KBR chief "Jack" Stanley pleaded guilty over a scheme to bribe Nigerian officials--in return for contracts. Lesar says the payout was part of its separation agreement with KBR.
A U.S Senator says military contractor KBR was paid $83 million in bonuses for electrical work in Iraq. Much of it came after the military's contract management agency recognized the contractor was doing shoddy electrical work. Senator Byron Dorgan spoke before the Democrats' policy committee hearing examining electrocutions in Iraq. The North Dakota Democrat says $34 million in bonuses was paid three months after Green Beret Staff Sgt. Ryan Maseth was electrocuted while showering in his barracks in Iraq early last year. Maseth is among at least three troops killed while showering in barracks in Iraq. Others have been injured and killed in electrical incidents. An electrician hired by the army to help inspect electrical work at facilities where U.S. soldiers operate in Iraq says 90 per cent of wiring done in newly constructed buildings by one military contractor was done improperly. The inspector, Jim Childs, says that means electrical work in about 70,000 buildings by KBR wasn't up to code. Houston-based KBR says the company is not responsible for the deaths, and is cooperating.
The Houston Livestock Show and Rodeo awarded nearly $5 million in scholarships to Houston-area students at its 2009 Scholarship Banquet in Reliant Center. A four-year, $15,000 scholarship was awarded to each of the 317 high school seniors who will attend 38 Texas colleges and universities. Since 1932, the rodeo has committed more than $235 million to Texas youth.
The Port of Houston Authority has purchased nine diesel electric container cranes in a $16.5 million deal with a Finnish company. The commission is also accepting bids for the construction of a marine emergency building at the Bayport Container Terminal, which could cost between $1 and $5 million.
President Barack Obama says there is "impressive consensus" for getting the country out front on energy. The president commented at the White House as he closed the first meeting of his Economic Recovery Advisory Board. Obama and members talked about energy and so-called "green jobs." Obama maintains that reducing U.S. reliance on foreign energy sources and developing alternatives will boost the economy and job creation. Facing a troubled economy even before he took office, Obama created the advisory board and charged it with reporting to him on how federal policy affects everyday people as well as the economy. It's led by former Federal Reserve Chairman Paul Volcker.
Bank of America's CEO Ken Lewis expects consolidation in the banking industry to pick up as the economy stabilizes, but says his bank won't be participating. Lewis said in prepared remarks at a conference in London that the Charlotte, North Carolina-based banking company has "enough on our hands right now" after completing two major deals within the past year. Bank of America had acquired mortgage lender Countrywide Financial in July and brokerage Merrill Lynch in January. Lewis says the industry is on the cusp of what will turn out to be a slow, but sustainable economic recovery, with "the worst most likely behind us."
Bank of America's ability to sell $13.47 billion in common stock in less than two weeks is providing further support for the view that the bank is improving its operations. Bank of America said after the market closed Tuesday that it had recently completed the sale of 1.25 billion shares of common stock as part of its efforts to raise new capital. Stifel Nicolaus analyst Christopher Mutascio said the bank is moving quicker than expected in raising fresh capital to meet the government's recently disclosed requirement. The government had said the bank needs $33.9 billion to help cover potential additional losses if the economy worsens.
Treasury Secretary Timothy Geithner says banks identified in stress tests as having capital shortfalls have raised $48 billion of the $75 billion that the government said they needed to get through an adverse turn in the economy. Geithner told the Senate Banking Committee in written testimony that the government's review of the nation's 19 biggest banks has helped increase confidence in the financial system. He said nine of the banks without shortfalls have also raised about $8 billion that they will use to repay the government. The ten banks that were found to need more capital after the stress tests have until June 8th to develop such a plan and have it approved by regulators.
Treasury Secretary Geithner foresees a lengthy involvement with American International Group and is not ruling out more aid to the insurance conglomerate. Geithner said that untangling AIG's finances has proven to be more difficult than originally envisioned. The government holds about 80 per cent of AIG's assets and has injected $70 billion into the company from the $700 billion Troubled Asset Relief Program. Senators criticized the government for letting AIG pay off its top creditors the full value of their debt. Geithner said the government lacked the authority to negotiate a reduction.
The head of the Securities and Exchange Commission is objecting to a plan being considered by the Obama administration to create a new financial watchdog to protect consumers. SEC Chairman Mary Schapiro says such a new entity, which was discussed Tuesday night by Treasury Secretary Timothy Geithner and other officials, would reduce the SEC's authority and damage government protection of investors. Schapiro says: "I question pretty profoundly any model that would try to move investor protection functions out of the Securities and Exchange Commission." That couldn't be done "without really damaging the fabric of the entire investor protection regime," she says.
Federal regulators have proposed making it easier for shareholders to nominate directors for ballots of public companies. Such a change could give shareholders more say over compensation packages for executives and risk controls. The Securities and Exchange Commission, split 3-2 along party lines, opened the proposal to public comment. The plan would allow groups who own a certain percentage of a company's stock to put their nominees for director on the annual proxy ballot that is sent to all company shareholders. The change has been pushed by investors and governance advocates. The proposal would require different minimum levels of stock ownership according to the size of the company: one per cent for the 700 biggest companies, and three or five per cent for smaller ones. The shareholders would need to have held the stock for at least a year.
With tens of billions of dollars lost annually to Medicare fraud, federal officials are beefing up strike forces in key cities around the country, including Miami, Los Angeles, Detroit and Houston. Attorney General Eric Holder and Health and Human Services Secretary Kathleen Sebelius said in Washington the new interagency effort will increase manpower in those cities and train providers on Medicare compliance to prevent fraud. Miami accounts for more than $3 billion a year in Medicare fraud. The president's budget allows $311 million--a 50 percent increase since 2009--to combat fraud. Officials say strike forces have been the most effective tool. Since 2007, Miami's force has convicted 146 individuals and recovered $186 million.
Delta Air Lines, Air France and KLM have signed a deal to combine two separate joint venture agreements into one. That'll create a more integrated trans-Atlantic powerhouse they say will generate $12 billion in annual revenue. The airlines said today they'll share costs and revenues, as well as coordinate branding at airports and global advertising. Air France-KLM Group and Delta also will share governance of the joint venture. An executive committee consisting of the three CEOs and a management committee comprising representatives from the three carriers will work together on strategy. The joint venture represents approximately 25 per cent of total trans-Atlantic capacity. There's a pending bid by Fort Worth-based American Airlines and British Airways to cooperate on trans-Atlantic flights without fear of breaking antitrust laws. Regulators are looking at the issue. American and BA have been thwarted twice before, but prospects appear brighter this time because of changes in the airline industry over the past several years.
Milwaukee is joining the list of cities served by Southwest Airlines. Dallas-based Southwest announced plans to start service at Milwaukee's Mitchell International Airport later this year. No specific date was provided. Southwest currently serves 65 cities in 33 states. The carrier plans to add service at New York's LaGuardia Airport on June 28th and Boston's Logan International Airport on August 16th.
Amtrak is cutting fares by 25 per cent on some eastern trains this summer as the national passenger railroad looks to boost demand during the recession. The discount runs from June 2nd through September 3rd. It applies to those taking regional trains on the northeast corridor which runs from Washington to Boston. The discount also is available from Washington to Newport News, Virginia. In addition, Amtrak is extending a February price cut on its higher-speed Acela service, which runs from Washington to Boston. Passengers must make reservations two weeks in advance to get the lower fares. Amtrak carried a record 28.7 million passengers last fiscal year, but ridership is down this year as businesses cut back on travel and because of lower gas prices.
TV stations around the country will replace their analog broadcasts for a few minutes Thursday with reminders that those broadcasts will disappear completely in three weeks. The stations have to turn off their analog broadcasts on June 12th as part of a nationwide mandate to move to more efficient digital signals. For Thursday's "soft test," analog broadcasts will be interrupted for two to five minutes once in the morning, once just after noon, at once in the early evening, around 6:30 p.m. local time for most stations. Households that have all their sets hooked up to cable or satellite feeds will be unaffected by the analog shutdown--which already happened on many stations in February.
Target is reporting a 13 per cent decline in first-quarter profit as the discounter continues to confront sluggish consumer spending. But the results beat analysts' estimates because of cost-control measures. The Minneapolis-based retailer says that it earned $522 million for the three-month period ended May 2nd. Revenues was little changed at $14.83 billion, compared with $14.80 billion. Analysts, who usually exclude one-time items, were expecting revenue of $14.81 billion.