Tuesday PM November 17th, 2009
by: Ed Mayberry, November 17, 2009 10:11:59 pm
The Internal Revenue Service says more than 14,700 U.S. taxpayers with offshore accounts in 70 foreign countries have come forward to settle their tax debts. IRS Commissioner Doug Shulman says a flood of people came forward as an October 15th deadline approached for the amnesty program. The program generally allowed people to avoid criminal prosecution if they agreed to pay taxes, interest and penalties. Shulman says those taxpayers represent billions of dollars in taxes returning to the U.S. The voluntary disclosure program was a major part of a U.S. crackdown on offshore tax havens. Swiss bank UBS earlier this year agreed to disclose names of some 4,450 taxpayers believed to be hiding income. Several UBS customers have been charged criminally.
Texas has 45 days to rework its plan to spend the second round of $1.7 billion in Hurricane Ike federal recovery funds. The Department of Housing and Urban Development says Texas did not provide enough chances for residents to comment on using disaster money on housing and infrastructure. The agency, in the November 10th rejection letter, also noted Texas did not update its 2003 plan to promote fair housing. The letter was cited by the Galveston County Daily News. Governor Rick Perry says the September 2008 hurricane was the costliest in Texas history and "this process should not stand in the way of assistance to disaster victims." Perry raised concerns about funding delays, saying Texas does not plan to update its fair housing practices before February.
Small non-farm businesses in 192 Texas counties are eligible to apply for low-interest disaster loans from the U.S. Small Business Administration. The loans are to offset economic losses because of reduced revenues caused by drought, above-normal temperatures and associated wildfires. The loans have an interest rate of four per cent.
The Texas population is expected to nearly double over the next 50 years, so lawmakers and water experts gathered in Fort Worth to convey an important message: we're running out of water. There is no shortage of alarming statistics to make that point. Texas' population of about 24.3 million is expected to hit about 45.5 million by 2060, but the water supply can't come close to keeping pace. Imagine the state were to experience a major drought with that many more people. Officials estimate almost every Texan would be without sufficient water and there would be more than $90 billion in economic losses. Lawmakers and water planners are trying to raise awareness about the issue and the importance of the 2011 legislature investing in changes called for in the state water plan. Among the moves the plan calls for are the construction of 19 new reservoirs, water reuse programs, more pipelines, desalinization plants and conservation methods.
Treasury Secretary Timothy Geithner says the global economy is moving toward a recovery but countries can't rely on U.S. consumers to serve as the engine of worldwide growth. In testimony prepared for the Senate Foreign Relations Committee, Geithner says that significant cooperation among the world's 20 major economies had helped countries to "put out the financial fire" and restart economic growth. But he says for the recovery to be sustained, nations will no longer be able to rely on U.S. consumers to drive global growth. He says countries with large trade surpluses such as China will have to foster policies to support domestic growth, while countries with large trade and budget deficits will need to boost savings.
Wholesale prices rose less than expected in October as a weak economy keeps inflation pressures largely in check. The Labor Department says its producer price index rose 0.3 per cent last month, after falling 0.6 per cent in September. Analysts had expected a 0.5 per cent gain last month. The index tracks the prices of goods before they reach store shelves and is considered an early read of price trends. In the 12 months ending in October, producer prices fell 1.9 per cent, the 11th straight month of declines. Excluding volatile food and energy costs, the core index dropped 0.6 per cent in October. In the past year, the core index rose 0.7 per cent, the smallest increase in more than five years.
The National Association of Home Builders says its housing market index remained unchanged in November, reflecting a cautious outlook from builders as they waited to learn whether Congress would extend a homebuyer tax credit beyond November. The Washington-based trade association said its index stood at 17 for the second month in a row. Readings below 50 indicate negative sentiment about the market. Lawmakers extended the tax credit earlier this month, after most of the 513 builders had responded to the survey. The reading for current sales conditions was unchanged at 17. Traffic by prospective buyers stood at 13. The index for sales expectations over the next six months rose two points to 28.
A government watchdog is raising questions about the way officials handled the multibillion dollar bailout of insurance firm American International Group. Special Inspector General Neil Barofsky says the officials mismanaged an initial rescue attempt and may have overpaid other banks to wind down AIG's business relationships. The Federal Reserve Bank of New York--headed at the time by now-Treasury Secretary Timothy Geithner--paid AIG's business partners full face value for securities. That was so they would cancel insurance contracts that AIG had written in order to ease the firm's liquidity crunch. But Barofsky says at least one of those partner banks offered to cancel the contracts for less. That means officials may have spent billions more than necessary to cancel debt insurance contracts with banks including Goldman Sachs Group and others.
Some mixed news on mortgage delinquencies. The good news is, the pace at which people fell behind on their mortgages slowed during the summer for the third quarter in a row. The bad news is, the overall delinquency rate hit another record. The credit reporting agency Transunion says for the three months ended September 30th, 6.25 per cent of U.S. mortgage loans were 60 or more days past due. That's up 58 per cent, from 3.96 per cent, a year ago. The rate was up 7.6 per cent from the second quarter. That's a much smaller jump than the 11.3 per cent rise in the second quarter from the first, and the 14 per cent leap seen in the quarter before that. A Transunion official says while the slowing growth rate is a positive sign, the increase shows there are still a lot of problematic mortgages out there. The company doesn't expect the figure to start declining until the middle of 2010.
Congressman Barney Frank says he wants to help unemployed homeowners struggling to pay the mortgage. He's pushing a proposal to use some of the interest the government collects from the financial industry bailout to provide loans to troubled homeowners. The lack of aid to jobless homeowners has been identified as a big weakness in the Obama administration's plan to tackle the mortgage crisis. A report by a Congressional oversight panel said last month that the $50 billion program "was not designed to address foreclosures caused by unemployment," which are now the main cause of default. Frank, chairman of the House Financial Services Committee, says that he favors providing government help in the form of federal loans to homeowners who have lost their jobs until they get another job.
It's crunch time for business and other groups trying to shape or scuttle a health care overhaul bill. Business foes of health care reform are outspending supporters at a rate of two-to-one for television ads as they grow increasingly nervous over a final measure. Led by the U.S. Chamber of Commerce, opponents of the Democratic health care drive have spent $24 million on TV commercials over the past month. That's compared to $12 million spent by labor unions and other backers. That's an abrupt reversal from the vast spending advantage supporters enjoyed most of this year, according to Evan Tracey, president of Campaign Media Analysis Group, which tracks political ads. More than half the opposition spending has been by the chamber. The outpouring of cash comes with the house narrowly approving its health overhaul on November 7th and Senate Majority Leader Harry Reid drafting his measure behind closed doors.
A Senate committee is hearing testimony about the need to change the way banks impose overdraft fees. In prepared remarks, consumer advocates tell the Senate Banking, Housing and Urban Affairs Committee it's an expense that hits young depositors and the poor particularly hard. They say last year, bank fees more than doubled to nearly $24 billion, with nearly half of them involving debit card and ATM overdrafts. The Federal Reserve last week also announced a rule, to take effect July 1st, under which banks would have to secure their customers' consent before charging large overdraft fees on ATM and debit card transactions. And Committee Chairman Chris Dodd of Connecticut is sponsoring a bill allowing consumers to "opt-in" for overdraft protection.
House Agriculture Committee members are blasting the Obama administration proposal to overhaul the financial system, saying it would give too much power to the Federal Reserve and change oversight of parts of the market unrelated to last year's meltdown. Committee Chairman Collin Peterson says the Fed has no experience regulating futures and derivatives, which are overseen by the Commodity Futures Trading Commission. The Minnesota Democrat asks: "why are we even thinking about giving more power and authority to the Fed?" The legislation is being debated by the House Financial Services Committee. Under the proposal, it would gain power while the Agriculture Committee would lose power.
Enrollment at the nation's largest agriculture schools is increasing, but most of the graduates seem focused more on science and environmental issues than harvesting crops. A survey by the U.S. Department of Agriculture shows enrollment in bachelor's degree programs in agriculture grew by nearly 22 per cent from 2005 to 2008. Last year, more than 70,000 students nationwide were enrolled in such programs. Educators say many students choose agriculture majors because of an interest in science and strong job prospects at companies producing seeds and chemicals for farmers. Companies such as agribusiness firm Monsanto say they can't hire enough. Monsanto spokesman Darren Wallis says the company has openings for 100 researchers at its St. Louis headquarters.
Tobacco companies are avoiding hundreds of millions of dollars a year in taxes by exploiting a loophole in President Barack Obama's child health law. And they're doing it with a simple marketing twist. Obama and Congress increased taxes on tobacco products earlier this year to pay for expanded children's health insurance. Tobacco for roll-your-own cigarettes saw an extra-big leap, from $1.10 to $24.78 per pound. Some predicted the tax would kill the roll-your-own industry. But tobacco companies quickly adapted. The Associated Press has found that as soon as the tax was on the books, companies all but shut down their roll-your-own brands and reinvented them under a less-restricted, less-taxed category: pipe tobacco. It's still destined to be rolled and smoked, but it's taxed at barely a tenth the rate. Retailers are steering customers to the new products, sometimes with a wink and a nod, sometimes with outright advertising.
Texas' insurance commissioner is ordering State Farm Lloyds to pay home insurance policyholders $310 million in refunds and interest for overcharges going back as far as 2003. Insurance Commissioner Mike Geeslin says in a statement that the order completes reforms started six years ago by Texas lawmakers. State Farm spokesman Kevin Davis says the company's rates have always been fair, adding the ruling "threatens the free market place." It has ten days to appeal. The order stems from a six-year-old case in which regulators ordered the company to cut its rates 12 per cent. State Farm is Texas' largest home insurer with about 1.2 million policyholders.
Foreign demand for long-term U.S. financial assets rose in September as China and other countries boosted their holdings of Treasury securities. Continued strong foreign demand for U.S. debt is critical to financing America's soaring budget deficits and keeping American interest rates low enough to support a recovery from the recession. The Treasury Department says foreigners purchased $40.7 billion more in assets than they sold in September, the biggest jump since June. The September gain compared with a revised $34.2 billion increase in holdings in August. China, the largest foreign holder of U.S. Treasury securities, boosted its holdings by $1.8 billion to $798.9 billion in September.
Fedex is introducing a new device that can track the temperature, light exposure and location of a package at any point in its journey. The package delivery company said the product, called SenseAware, will initially be targeted for customers in the healthcare and life sciences industries, for sensitive shipments including medications and test samples. SenseAware can be used for single shipments or a large group of packages on a pallet. The device is expected to launch in spring of next year. Fedex is based in Memphis.
Billionaire Warren Buffett's company has bought a nearly $60 million stake in ExxonMobil, and has cut holdings in oil rival ConocoPhillips. Berkshire Hathaway also nearly doubled its holdings in Wal-Mart stores during the latest quarter. Omaha-based Berkshire disclosed the changes to its $59.7 billion U.S. stock portfolio in a Securities and Exchange Commission filing. During the quarter ended September 30th, Berkshire Hathaway bought nearly 855,000 shares of ExxonMobil. Its stake in ConocoPhillips was cut from more than 64 million shares at the end of June to more than 57 million. Berkshire Hathaway's stake in Wal-Mart now stands at 33.6 million shares, up from nearly 20 million.
The first Near Northwest Community Job Fair is set for tomorrow at Advent Lutheran Church on Pinemont from 10 a.m. to 2 p.m. It's being sponsored by the Near Northwest Management District, Near Northwest Houston Weed & Seed Grant and the Community of Faith Church. Employers seeking applicants include Work Source, Aldine ISD, Maitrix Beauty College, Primerica, Avon, Staffmark, U.S. Census Bureau, the military, Metro, and others.
It could cost you even more to travel next spring and summer. US Airways said it will add a five per cent surcharge to all U.S. flights on or after May 8th. Spokeswoman Valerie Wunder says the surcharge will protect the airline in case fuel prices rise or other costs increase. Separately, Delta, Northwest and United have bumped the surcharge on some busy days next March to $30 each way from $20--and to $50 on the day after the Super Bowl--according to air fare expert Tom Parsons. Most major U.S. airlines have been losing money this year, and they're scrambling to add revenue with bag-handling fees and surcharges on heavy travel days.
Airtran Airways is installing ads on the bottom of seat-back tray tables on all its planes. Passengers have to keep the tray tables in their upright, locked position, during the beginning and end of their flights. That means an unimpeded view of the ads, which Airtran hopes will bring in new revenue at a time when much of the industry has been reeling. Airtran expects the ads to be on its 138 planes within weeks. Mother Nature Network, offering a chance to win a Royal Caribbean cruise, is its first advertising partner. US Airways has been placing ads on the tops of tray tables for years, but only on some planes.
Continental Airlines took top honors in Business Travel News' annual airline survey for the second consecutive year. Continental ranked highest in half of the ten survey categories including quality of airline communications, value of relationships with account managers and sales representatives, problem resolution and flexibility in negotiating transient pricing. This is the 12th year that BTN has conducted its annual airline survey that measures corporate travel buyer perceptions of airline performance.