Thursday PM September 23rd, 2010
by: Ed Mayberry, September 23, 2010 8:09:00 pm
Blockbuster filed for Chapter 11 bankruptcy protection today, after the troubled video-rental chain says it amassed more than $1 billion in debt. The company is based in Dallas, but filed for bankruptcy in the Southern District of New York. Blockbuster's lawyers say the company plans to recapitalize its balance sheet and transform its business model. It will keep it stores and kiosks open, but says it's evaluating its operations. Once a home entertainment powerhouse, Blockbuster has seen its business and profit shrink as more Americans watch videos online or rent DVDs from subscription service Netflix. The company had warned investors it might file for bankruptcy protection. It was delisted in early July by the New York Stock Exchange.
Amid continued public confusion over what's in it, some provisions of President Barack Obama's health care overhaul began taking effect today, including an end to lifetime caps on medical costs. The overhaul allows parents to keep their adult children on their health plans until age 26. And insurers can no longer deny coverage to children with pre-existing conditions. Also, some preventive care will no longer require copayments. Consumers whose insurance plan year begins January 1st will have to wait until then for these changes. Meanwhile, a new Associated Press poll finds more than a third of the people who were surveyed think incorrectly that it contains panels of bureaucrats to make decisions about people's care. Two-thirds think Congressional budget analysts said it would increase the government's debt. In fact, the analysts say the opposite.
A new analysis of government data finds that millions of seniors face double-digit hikes in their Medicare prescription premiums next year unless they shop for cheaper coverage. The analysis of Medicare data comes from a private research firm, Avalere Health. Premiums will go up an average of ten percent among the top ten drug plans that account for about 70 percent of enrollment. Marketing for next year's drug plans gets under way October 1st. Seniors will see some of the biggest changes since the Medicare prescription benefit became available in 2006. More than 17 million are signed up in private drug plans offered through Medicare.
Billionaire Warren Buffett says the economy remains in a recession, by his definition, because most people and businesses still aren't doing as well as they were before the financial crisis. Buffett talked about the economy and his Berkshire Hathaway businesses in an interview on CNBC. Buffett's assessment of the economy contradicts the view of experts who announced this week that the recession officially ended in June 2009. But Buffett says he uses a commonsense standard to evaluate the economy. Buffett gets insight into the health of the economy through the performance of Berkshire's subsidiaries. Buffett's Omaha-based company owns clothing, insurance, furniture, utility, jewelry and corporate jet companies.
A private research group says its gauge of future economic activity rose modestly in August, suggesting that slow economic growth will continue this winter. The Conference Board says its index of leading economic indicators increased 0.3 percent last month after rising 0.1 percent in July. The index had grown steeply starting in April 2009 thanks to a comeback in the stock market, record-low interest rates and the rebound in manufacturing. But the rate of increase leveled off this past summer as U.S. economic growth slowed. Some analysts are worried that the economy could fall back into recession. The Conference Board says the index is not currently predicting another steep downturn in the U.S.
The tally of newly laid-off workers requesting unemployment benefits rose last week after four weeks of flat or declining figures. The Labor Department says initial claims for jobless aid rose by 12,000 to a seasonally adjusted 465,000. Many economists had expected a flat reading or a small drop. The rise suggests that jobs remain scarce and some companies are still cutting workers amid sluggish economic growth. Initial claims have fallen from a recent spike of more than half-million last month. But they have been stuck above the 450,000 level for most of the year. The four-week average of claims, a less volatile measure, declined by 3,250 to 463,250. That's the lowest level since the end of July, but down by only 4,000 since January.
Sales of previously occupied homes rose last month, but not enough to keep August from being the second-worst month for sales in more than a decade. The National Association of Realtors says sales rose 7.6 percent in August to a seasonally adjusted annual rate of 4.13 million. Sales were down 19 percent from the same month a year earlier. July was the worst month for sales in 15 years. That was changed by the slightly upward revision to a pace of 3.84 million. High unemployment, falling home prices and tight credit have kept people from buying homes. The industry received a boost this spring when the government offered home-buying tax credits, but has struggled since those expired in April. The median sale price was $178,600, up 0.8 percent from a year ago.
Rates on 30-year mortgages this week were unchanged from the previous week, staying slightly above the lowest level in decades. Mortgage buyer Freddie Mac says the average rate for 30-year fixed loans this week was 4.37 percent. Earlier this month, the rate dipped to 4.32 percent, which was the lowest level on records dating back to 1971. The average rate on 15-year fixed loans also was unchanged at 3.82 percent. That is the lowest on records dating back to 1991. Rates have fallen since spring as investors poured money into the safety of Treasury bonds, lowering their yield. Mortgage rates tend to track those yields.
Texas is suing the federal government over $830 million in aid for schools that has been tied up in political wrangling. A state-specific provision in the federal law requires Governor Rick Perry to promise Washington that Texas will maintain certain state education spending levels through 2013. Perry has said the requirement is unconstitutional because the Texas constitution prohibits him from committing future state spending. Texas applied for the money anyway, but was rejected because the application included a caveat that the state would not violate its own constitution. Attorney General Greg Abbott filed the petition with the 5th U.S. Circuit Court of Appeals on behalf of Perry and other Republican state leaders. The challenge seeks to overturn the decision to deny the Texas application.
Texas is dropping a proposal to increase the ratio of adults to children in day care centers over concerns about how much parents can pay. The Department of Family and Protective Services earlier this year recommended, to an advisory council, that the state lower the number of children that each worker at a day care center be allowed to supervise. Texas proposed one adult per nine two-year-olds, rather than the current 11 children. The Austin American-Statesman reports that the agency received hundreds of public comments criticizing the plan, including from day care owners and parents worried about the higher cost. Department spokesman Patrick Crimmins says the overriding concern is what's the effect would be on working parents who may be struggling now to pay for child care.
The Education Department is giving school districts and nonprofit organizations from across the country $442 million to create merit pay programs for teachers and principals. The Teacher Incentive Fund is aimed at attracting and rewarding quality educators and encouraging them to work in the country's highest need schools. The programs will create performance pay systems based on evaluations of educators, among other incentives. Winners include school districts such as Wake County, North Carolina, and the New York City Department of Education. State Education Departments in Indiana, Tennessee, Ohio and Louisiana also won grants, as did private companies such as uplift education, which has five charter schools in Texas. This is the first phase of the larger program, which has $1.2 billion in funding over the next five years.
The Federal Communications Commission is opening up unused airwaves between television stations for wireless broadband networks that will be more powerful and can travel farther than today's wi-fi hotspots. The five-member FCC voted unanimously to allow the use of so-called “white spaces” between TV stations to deliver broadband connections that can function like wi-fi networks on steroids. The agency is calling the new technology “super wi-fi” and hopes to see devices with the new technology start to appear within a year. Although the commission first voted to allow the use of white spaces for broadband nearly two years ago, the vote resolves several critical technical details to ensure that the new technology does not interfere with TV signals or wireless microphones.
Safety reviews have been held at BP's Texas City plant after two workers were seriously burned in a steam release. BP spokesman Michael Marr says all nonessential personnel spent most of Wednesday in meetings as part of the safety stand-down. He says no units were shut down during the safety meetings over Tuesday's accident. The Galveston County Daily News reports the reviews after incidents in which personnel are hurt are part of an overhaul of safety procedures at the Houston-area plant, where a 2005 explosion left 15 people dead and more than 170 hurt.
Officials say oil-producing countries at a meeting in Norway have dismissed a German proposal for a possible moratorium on deep-water drilling in the northeast Atlantic. Germany suggested that offshore nations consider a temporary halt to the “drilling of new complex deep-water oil exploration wells” in the wake of the massive oil spill in the Gulf of Mexico. Greenpeace says offshore oil nations including Norway, Denmark and Britain opposed the draft at the meeting of 15 European countries and the European Union in the west coast city of Bergen. Norwegian environment ministry spokesman Gard Nybro-Nielsen says the German proposal is now off the table at the two-day conference ending Friday.
President Barack Obama says U.S.-China cooperation has helped to ease global financial problems, but that the two countries have more work to do on the economy. The president sat down with Chinese Premier Wen Jiabao on the sidelines of the U.N. General Assembly in New York, meeting at a time when the two powers have been quarreling over military, trade and diplomatic matters. Obama said that cooperation between the U.S. and China “has been absolutely critical,” praising Chinese leaders for working on issues such as the economy, nuclear nonproliferation and regional security. But the president says economic challenges remain.
Two leading Democrats say a Senate vote to extend sweeping tax cuts that expire in January might have to wait until after the November Congressional elections. Senate Finance Committee Chairman Max Baucus of Montana said he is ready to take action, but other Democrats are eager to start their election season recess, leaving little time to address the tax cuts. Democratic Senator Tom Carper of Delaware said the political climate “is not conducive” to addressing the tax cuts before the election. The most sweeping tax cuts in a generation, enacted in 2001 and 2003, are due to expire in January.
Democrats controlling Congress are sending President Barack Obama a long-delayed bill to help struggling small businesses with easier credit and give them other incentives to expand and to hire new workers. The legislation passed by a 237-187 vote that split along party lines. It establishes a $30 billion government fund to help main street banks lend to small businesses and cut taxes on both big and small businesses. The legislation is aimed at easing a small-business credit crunch that worsened dramatically after the financial crisis two years ago. It's a modest victory for Democrats, whose jobs agenda has otherwise mostly been stalled by Senate Republicans opposed to new spending programs.
A proposal that would let the public get details on the government's oversight of financial services firms has cleared the Senate. The legislation would repeal Freedom of Information Act exemptions given to the Securities and Exchange Commission in the nation's new financial services law. The exemptions had allowed the SEC to keep secret a range of information collected during inspections of hedge funds and other financial services firms. The SEC argues the records should be withheld from the public because firms would be less willing to provide information voluntarily if their rivals could use the open records law to obtain it. The proposal is now pending in the House, which is expected to vote on it in coming days. The Senate approved it Tuesday night.
Avis is increasing its offer for Dollar Thrifty by more than $5 per share in cash, as it continues to woo the rental car company. The increase had been expected after Dollar Thrifty accepted a bid from rival Hertz earlier this month. That offer was worth $1.56 billion including restricted stock and stock options. Avis is also offering .65 shares of Avis stock, on top of the new bid of $45.79 per share for Dollar Thrifty, up from its previous bid of $40.75 per share. Avis budget stock, which was worth $11.02 at closing Wednesday. Avis' prior offer was worth $1.36 billion and included $40.75 per share in cash. Shares of Dollar Thrifty soared on the news, setting a new 52-week high of $53.
The chairman of ConocoPhillips is donating $15 million to the University of Texas to build a new liberal arts building. UT announced the donation from ConocoPhillips CEO James Mulva and his wife, Miriam. The structure, including a floor for the Austin school's ROTC programs, will be built on the site of Russell A. Steindam Hall, which is being demolished this fall. Steindam hall has been home to ROTC for more than 50 years. Mulva, who's a Navy ROTC graduate, earned a business administration degree from UT in 1968, then a master's degree the following year. He met current UT President William Powers, Jr., while both were serving overseas in the Navy.