Thursday PM May 20th, 2010
by: Ed Mayberry, May 20, 2010 4:05:00 pm
BP concedes that more oil than it estimated is gushing into the Gulf of Mexico from the April 20th rig blowout that left 11 workers dead. BP spokesman Mark Proegler says a mile-long tube inserted into a leaking pipe is now capturing 210,000 gallons a day--the total amount the company and the Coast Guard have estimated is gushing into the sea. Proegler says the 210,000 gallons--5,000 barrels--has always been just an estimate because there is no way of measuring how much is flowing. BP is checking equipment and doing tests ahead of a new effort to choke the flow. BP is conducting tests as it prepares its next line of attack: a procedure known as a “top kill,” which is pumping heavy mud into the crippled well, then permanently sealing it with cement. It hopes to start that by Sunday.
A live video feed that shows the oil gushing from the blown-out well is now available online. The video shows a large plume of oil and gas still spewing next to the tube that's carrying some of it to the surface. Congressman Ed Markey of Massachusetts pushed BP to make the video available to the public. It's now posted on the Web site of the Select Committee on Energy Independence and Global Warming.
As BP works on its next plan for stemming the oil leak in the Gulf of Mexico, a brown ooze has started clinging to marsh grasses along the Louisiana coast. Louisiana Governor Bobby Jindal says it's “the heavy oil that everyone's been fearing.” He says what's reached the wetlands at the mouth of the Mississippi River is the leading edge of a heavy slick. Another portion of the slick has drifted into a powerful current that could take it to Florida and beyond. The National Oceanic and Atmospheric Administration says some of the submerged oil has reached the so-called loop current, which circulates around the Gulf before bending around Florida and up the Atlantic Coast.
The Environmental Protection Agency has directed BP to use a less toxic form of chemical dispersants to break up the oil spill. Two Obama administration officials confirmed the order. Some lawmakers and environmental groups have criticized use of the dispersants, which shoot chemicals thousands of feet beneath the sea. The chemicals break apart the oil and keep it from reaching the surface. Safety data documents show that one of the chief agents being used, called Corexit 9500, is identified as a “moderate” human health hazard that can cause eye, skin or respiratory irritation with prolonged exposure. A spokeswoman for the EPA declined immediate comment.
The number of people filing new claims for unemployment benefits unexpectedly rose last week by the largest amount in three months. The big surge was a setback to hopes that layoffs were declining. The Labor Department says that applications for unemployment benefits rose to 471,000 last week, up by 25,000 from the previous week. It was the first increase in five weeks and the biggest jump since a gain of 40,000 in February. The forecast had been for claims to fall by around 4,000 from the previous week. The unexpectedly large rise in new claims underscored that even though the economy is growing, improvements in the labor market are coming in fits and starts.
Lawmakers have agreed on legislation to extend expanded unemployment benefits for the long-term unemployed through the end of the year. Laid off workers would also continue to get subsidies to buy health insurance through the Cobra program. House and Senate leaders announced the deal on a bill that would also extend, for a year, about 50 popular tax cuts that expired at the end of last year. Lawmakers had been negotiating a provision that would spare doctors from a scheduled 21 percent cut in Medicare payments. They agreed to delay the cuts an additional three years. House leaders plan to vote on the bill Friday, with the Senate voting next week.
Governor Rick Perry's office has rewritten three more contracts for companies that are struggling to create the promised number of jobs after getting millions of taxpayer dollars from the Texas Enterprise Fund. The Associated Press has been tracking troubled Enterprise Fund companies for more than two years. In response to questions from the AP, Perry's office said Lee Container, Albany Engineered Composites and Vought Aircraft all fell short on job creation goals and got their Enterprise Fund contracts amended this year. The governor had said in January that 11 other job creation contracts were changed. Perry's Democratic rival, Bill White, has this week become the latest of the governor's campaign opponents to criticize him over the money he doles out to businesses from the fund.
A private research group says its index of leading economic indicators dropped 0.1 percent in April, the first decline in more than a year. It was the first decline in the index since March 2009. Economists polled by Thomson Reuters had expected a gain of 0.2 percent. While the recovery from the recession has spread more broadly through the U.S. economy this spring, a big drop-off in plans to build homes and a debt crisis in Europe may have weighed on growth, discouraging employers from hiring. The Conference Board's index forecasts economic activity in the next three to six months. The research group also revised its March growth estimate to 1.3 percent, slightly less than the 1.4 percent growth it had previously estimated.
AAA says more Americans will hit the highways and airports over the Memorial Day holiday weekend, but they'll probably spend much less than last year. The travel group released a forecast that projects about 32.1 million people will go on trips during the final weekend in May. That's an increase of 5.4 percent. Most will travel by car, even though gasoline costs about 50 cents more per gallon than it did a year ago. AAA says travelers will spend much less than last year. The auto club estimates median spending on travel at $809 this Memorial Day. Last year, Americans reported spending about $1052 for Memorial Day travel. The forecast is based on research by IHS Global Insight.
President Barack Obama is set to announce new standards for fuel efficiency and greenhouse gas emissions for cars and trucks beginning in 2017. He also wants more vehicles to run on electricity. An Obama administration official says the president's announcement is set for Friday. The official says Obama will have the Environmental Protection Agency and the Transportation Department develop new vehicle standards to kick in after 2016. The official spoke on condition of anonymity to discuss the plan ahead of its public release. In April, the administration rolled out rules for 2012-2016 model year vehicles that were aimed at reaching a 35.5 miles-per-gallon average. That's up nearly ten miles per gallon from now.
House lawmakers investigating Toyota's massive recalls say the company is more focused on discrediting its critics than trying to solve problems of vehicles suddenly accelerating. Representative Bart Stupak of Michigan says Toyota has tried to damage the credibility of an Illinois engineering professor who testified at a February Congressional hearing that he had recreated sudden acceleration in a Toyota. Stupak says at a House hearing that Toyota hired a polling firm to learn more about what it could do to repair damage to the company's image. And he calls a Toyota consulting firm's report on the professor's research a “hit job, not solid science.”
A federal regulator says his agency is considering new rules governing where high-frequency traders can locate computers in response to the May 6th stock market plunge. Gary Gensler, chairman of the Commodity Futures Trading Commission, says in testimony for a Senate hearing that the agency is evaluating the location of the high-speed computers. Traders often position their computers close to the big exchanges' data centers, a practice called co-location, which can cut their trade times by milliseconds. Gensler and Mary Schapiro, chairman of the Securities and Exchange Commission, were appearing at the Senate hearing two weeks after the Dow Jones industrials dropped nearly 1,000 points in less than 30 minutes.
Property owners across the country who fear they'll be forced to buy expensive flood insurance under a push to draw up new floodplain maps may soon catch a break. U.S. Senator Dick Durbin of Illinois said this week that the Federal Emergency Management Agency is offering the coverage at sharply lower rates for two years. A southwestern Illinois levee official estimates an affected homeowner's yearly premium under the lower rate might be $300--four to five times less than what it might be otherwise. The new rates are available after the redrawn maps take effect. The insurance requirement applies to property owners with federally backed mortgages in what are deemed high-risk flood areas.
A Democratic aide says President Barack Obama is poised to ask Congress to agree to $9 billion more in loan guarantees for the nuclear energy industry--on top of $18 billion announced earlier this year. The president is pushing for a new round of construction of nuclear plants. At the insistence of Democratic House Speaker Nancy Pelosi of California, the request for more spending on nuclear energy would be coupled with $9 billion in loan guarantees for renewable energy such as wind and solar. The aide spoke on condition of anonymity before a formal announcement from the White House. The money would be tacked onto a spending bill for Haiti, Afghanistan and domestic priorities that Congress is expected to tackle after Memorial Day.
The Senate has rejected a proposal aimed at lowering credit card rates by making banks and other card issuers abide by state interest rate caps. The measure failed 60-35. Democratic Senator Sheldon Whitehouse of Rhode Island offered the amendment to a broad financial regulation bill that is making its way through the Senate. The amendment would have barred financial institutions from charging interest rates based on what is allowed in the states where they are headquartered.
The government says the number of troubled banks kept growing last quarter even as the industry as a whole had its best quarter in two years. The Federal Deposit Insurance Corporation says the number of banks on its confidential “problem” list leaped to 775 from 702 in the January-March period. But banks overall posted net income of $18 billion. That was up from $5.6 billion in the same quarter a year earlier. The biggest improvement was at the largest banks, but a majority of institutions posted gains in net income. In another sign of health, the FDIC's deposit insurance fund, which fell into the red last fall, posted its first improvement in two years. Its deficit shrank by $145 million to $20.7 billion.
A Federal Reserve official says Europe's debt crisis poses serious risks to the unfolding economic recoveries in the United States and around the globe. Federal Reserve Governor Daniel Tarullo, in prepared remarks to a House subcommittee, says the timing of Europe's problems on the heels of the global financial crisis is a “potentially serious setback.” If the crisis were to crimp lending and the flow of credit globally that would endanger both the U.S. and global recoveries, he says.
Mortgage rates fell to the lowest level of the year this week, as rates fell on U.S. government securities. Fixed mortgage rates closely track interest rates paid on long-term Treasury bonds. The mortgage financier Freddie Mac says that the average rate on a 30-year fixed rate mortgage dipped to 4.84 percent this week from 4.93 percent a week earlier. It was the lowest level since mid-December, when rates averaged 4.81 percent. Bond yields sank after Germany's move this week to curtail certain kinds of short-selling spooked investors, who shifted money from risky European debt to safer U.S. securities. That also lowered mortgage rates. Demand for safe investments is high on debt concerns in parts of Europe.
Continental Airlines and United Airlines have named executives from each airlines to lead merger integration. And integration management office will oversee the daily integration planning and make recommendations to a steering committee led by the CEOs of the two airlines. The committee is expected to begin work in June.
American Airlines parent AMR says its labor costs are $600 million more than they would be under contracts at other large carriers. The claim by Fort Worth-based AMR has been disputed by a flight attendants union. American is locked in difficult contract talks with pilots, flight attendants and some ground workers. Flight attendants have asked federal officials for the right to start a countdown toward a strike, although the request has not been granted so far. Flight attendants voted overwhelmingly to support a strike if union leaders authorize one. AMR has reached tentative agreements with small pay increases for some ground workers. Also, American says it expects to see at least $500 million in extra revenue and cost savings in 2011 and 2012 from joint ventures with British Airways and Japan Airlines and other moves. American is seeking antitrust immunity.
The Cactus Café in Austin won't be closing after all. A business plan is being put together as the University of Texas FM radio station KUT and the Student Union join forces to keep the campus music venue and bar open. The nearly 30-year-old Cactus Cafe drew scrutiny with its $66,000 in annual losses, as the state faces a potential budget shortfall of up to $18 billion. Most state agencies were required, earlier this year, to submit proposed five percent budget cuts, which Texas leaders ordered implemented. Juan Gonzalez, who is UT's Vice President for Student Affairs, says KUT's marketing and fundraising ability should help the Cactus Cafe have a stronger financial foundation. The partnership is expected to take effect by September.