Wednesday PM October 21st, 2009
by: Ed Mayberry, October 21, 2009 9:10:33 pm
The Coast Guard says it has contained an oil spill in the Gulf of Mexico caused when two tankers collided near Galveston. The Coast Guard says the offshore supply vessel AET Endeavor collided Tuesday night with the 820-foot Liberian-flagged tanker vessel Krymsk, causing the Krymsk to leak oil. The ship's captain says about 18,000 gallons were spilled. The crew has been transferring oil from the ship's damaged tank to prevent further leakage. There were no injuries. The collision happened about 40 miles southeast of Galveston.
BAE Systems, which has built medium tactical vehicles for the military in its Sealy factory for 17 years, has filed a supplemental protest to the U.S. Government Accountability Office with additional concerns about the U.S. Army's source selection process. It's in response to the Army's response to the original protest, as well as documentation used in source selection, according to BAE's Dennis Morris.
"We have requested that a redacted version of the supplemental protest be made publicly available. But in order for this to occur, all the parties involved in the matter must agree to the release of that redacted version. At this point, we were not able to discuss the specifics until such time as the redacted version is made available."
BAE Systems contends the stated contract evaluation criteria was to be based on "best value," looking at all the factors. But Morris says they leveled everybody technically and decided to award a contract to a Wisconsin firm based on price. He says this competitor will have to start from scratch and outfit a facility to begin producing the trucks. More than 40 vehicles are produced each day at the plant on I-10—many of them bound for Iraq and Afghanistan. Existing commitments will keep the factor working through 2010.
Unemployment rates rose last month in 23 states and fell in 19 as the economy struggled to create jobs in the early stages of recovery. The Labor Department says Nevada, Rhode Island and Florida in September posted their highest jobless rates on records dating to 1976. Michigan reported the nation's highest unemployment rate at 15.3 per cent. It was followed by Nevada at 13.3 per cent, Rhode Island at 13 per cent, California at 12.2 per cent and South Carolina at 11.6 per cent. There were some bright spots: Ohio and Indiana, two states hit hard by the downturn in manufacturing, reported significant drops in unemployment. The jobless rate in the midwest fell to 9.8 per cent last month from ten per cent in August. It was the only region where the unemployment rate dropped.
Improvements in housing and manufacturing are driving the early stages of the economic recovery. The Federal Reserve's latest snapshot of business conditions nationwide finds "many sectors" of the economy either stabilized or logged modest improvements over the last six weeks. The pickups, though, often were from "depressed" levels of activity. Still, the new report adds to evidence that the worst recession since the 1930s is over and that a recovery has started. An $8,000 credit for first-time home buyers, which is slated to expired at the end of November, boosted the housing sector. Meanwhile, factories increased production as businesses restocked depleted inventories.
An automotive consulting firm is raising its forecast for 2010 U.S. auto sales, saying improved employment and auto lending numbers should translate to higher sales. CSM Worldwide raised its forecast Wednesday to 11.8 million vehicles from 11.2 million vehicles. Sales at that rate would represent the first year-over-year increase in U.S. vehicle sales since 2005, when automakers sold 16.9 million vehicles. By the fourth quarter, CSM forecasts the annualized vehicle selling rate will be 13.6 million vehicles. That rate shows what sales would be if they continued at the same pace for a full year. CSM's U.S. sales forecast for 2009 remains unchanged at 10.1 million units, down 23 per cent from 2008.
The former head of the Federal Auto Task Force says the shockingly poor financial management of General Motors and Chrysler weakened their case for a government bailout, but his team feared letting the automakers collapse would deal a devastating blow to the economy. Steven Rattner writes in a piece posted on Fortune's Web site that he was alarmed by the automakers' "stunningly poor management" and says GM had "perhaps the weakest finance operation" his team had ever seen at a major company. Rattner was critical of GM's management and board of directors and described the administration's decision to ask GM Chief Executive Rick Wagoner to resign. Rattner says Wagoner supported the decision to have Fritz Henderson run the company.
A Federal Reserve official says the administration's proposed financial overhaul should make it harder for companies to get so big that the government must bail them out to prevent damage to the financial system. In remarks prepared for delivery at the Exchequer Club, Fed Governor Daniel Tarullo says: "the reform process cannot be judged a success unless it substantially reduces…the too big to fail option." Tarullo says the problem arose as the financial industry was deregulated over the last 30 years. Besides the administration proposals, he says big finance companies should have to disclose more about how their businesses work.
The man who watches over the $700 billion in government money given to banks and other institutions to avert a financial collapse says it's too early to say how much will be repaid to the taxpayers. Neil Barofsky, Inspector General for the Targeted Asset Relief Program, said on CBS' The Early Show he believes "it's unrealistic" to think the government can get all of the money back. The Treasury has spent more than $454 billion through TARP programs. Forty-seven recipients have paid back nearly $73 billion. That means more than $317 billion remains unrefunded, with the program expiring December 31st. Asked how he would grade the program, Barofsky said, "I think right now it would have to be an incomplete."
The good news in a new government watchdog report is that the $700 billion financial industry bailout played a major role in rescuing the economy. The bad news is that the bailout may have cost the government credibility, sparking anger and distrust because of secrecy and confusion about the way it was handled. The Inspector General says saving the nation's financial sector came at great cost to taxpayers, to the integrity of the financial system and to the public's perception of the federal government. The blunt and mixed assessment comes from the Special Inspector General in charge of oversight for the bailout fund.
The House Financial Services Committee has voted to let states regulate large national banks when it comes to protecting consumers from fraud and abuse. The measure was approved by a voice vote. It's a blow to the banking industry, which doesn't want to have to comply with myriad state laws that are often tougher than federal regulations. Democrats are casting the proposal as a compromise because it would allow federal regulators to exempt banks from state laws on a case-by-case basis. The measure was an amendment to a broader bill to establish a consumer financial protection agency. That bill is likely to be approved later Wednesday or Thursday.
President Barack Obama wants smaller community banks to help small businesses that are still suffering from a prolonged credit crunch. To that end, he wants the banks to have greater access to the government's $700 billion financial rescue fund. The new effort comes as the administration is under pressure to shift the massive bailout fund's focus away from helping big financial institutions and toward homeowners and small businesses. But it also comes as Republicans press Obama to end the rescue program and use bank repayments to reduce the national debt. The Troubled Asset Relief Program, has about $320 billion still available to spend. The TARP is set to expire at the end of December, but the administration could extend it until October 2010.
Senate Democrats continue to be stymied in their effort to extend jobless benefits. Democrats are pushing a bill that would extend expiring jobless benefits for 14 weeks in all states and another 6 weeks on top of that in states were unemployment is high. Republicans have refused to allow it to move forward under unanimous consent. They want to offer amendments and use stimulus money to pay for it. The House passed its extension of jobless benefits more than a month ago. Senate Majority Leader Harry Reid says the aim is to help those who've been out of work for a long time.
Continental Airlines lost money in the third quarter as business travelers stayed home, causing a nosedive in airline revenue. But not everything was bleak for Continental. Traffic picked up in September, even if it took cheap fares to get them on board. And the financial results were much better than a year ago, although they were worse than what analysts expected. Houston-based Continental said it lost $18 million and revenue plunged 20.2 per cent in the July-through-September quarter. In the same quarter last year, Continental lost $230 million as it struggled with soaring jet fuel prices.
American Airlines knows that not enough of you are flying. American's parent, AMR Corporation, says it lost $359 million in the third quarter. The airline wooed customers with its "we know why you fly" advertising campaign. And it brought in extra money by raising fees on checked baggage. But in a recession, that wasn't enough. Traffic fell sharply, especially among business travelers. As a result, AMR said revenue tumbled 20.2 per cent from the same quarter in 2008, and the nation's second-largest airline lost money. The good news for AMR is that analysts no longer think it could go broke this winter. The airline raised more than $4 billion in cash during the third quarter and headed into the traditionally slow fourth quarter with a comfortable cash cushion.